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



 
                 DEPARTMENTS OF LABOR, HEALTH AND HUMAN
               SERVICES, EDUCATION, AND RELATED AGENCIES
                        APPROPRIATIONS FOR 1999

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

                                HEARINGS

                                BEFORE A

                           SUBCOMMITTEE OF THE

                       COMMITTEE ON APPROPRIATIONS

                         HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND 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, Carol Murphy, Michael K. Myers,
                and Francine Salvador, Subcommittee Staff
                                ________

                                 PART 6

                            RELATED AGENCIES
                                                                   Page
 Railroad Retirement Board........................................    1
 United States Institute of Peace.................................  181
 Corporation for Public Broadcasting..............................  391
 National Labor Relations Board...................................  515
 National Commission on Libraries and Information Science.........  769
 National Council on Disability...................................  827
 Medicare Payment Advisory Commission.............................  919
 Institute of Museum and Library Services.........................  977
 Social Security Administration................................... 1047
 Corporation for National Service................................. 1309
 Occupational Safety and Health Review Commission................. 1413
 Federal Mine Safety and Health Review Commission................. 1499
 Federal Mediation and Conciliation Service....................... 1553
 National Education Goals Panel................................... 1757
 National Mediation Board......................................... 1829
 Armed Forces Retirement Home..................................... 1935
 Railroad Retirement Board Justifications......................... 1982
                                ________

         Printed for the use of the Committee on Appropriations
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        ESTEBAN EDWARD TORRES, California   
HENRY BONILLA, Texas                   NITA M. LOWEY, New York             
JOE KNOLLENBERG, Michigan              JOSE E. SERRANO, New York           
DAN MILLER, Florida                    ROSA L. DeLAURO, Connecticut        
JAY DICKEY, Arkansas                   JAMES P. MORAN, Virginia            
JACK KINGSTON, Georgia                 JOHN W. OLVER, Massachusetts        
MIKE PARKER, Mississippi               ED PASTOR, Arizona                  
RODNEY P. FRELINGHUYSEN, New Jersey    CARRIE P. MEEK, Florida             
ROGER F. WICKER, Mississippi           DAVID E. PRICE, North Carolina      
MICHAEL P. FORBES, New York            CHET EDWARDS, Texas                 
GEORGE R. NETHERCUTT, Jr., Washington  ROBERT E. (BUD) CRAMER, Jr., Alabama
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 1999

                              ----------                              

                                           Tuesday, April 21, 1998.

                       RAILROAD RETIREMENT BOARD

                               WITNESSES

JEROME F. KEVER, MANAGEMENT MEMBER
V. M. SPEAKMAN, JR., LABOR MEMBER
MARTIN J. DICKMAN, INSPECTOR GENERAL

                       Introduction of Witnesses

    Mr. Porter. The subcommittee will come to order.
    We continue our hearings on the fiscal year 1999 budget 
request with the Railroad Retirement Board, and we are pleased 
to welcome Jerome F. Kever, the Management Member, V.M. 
Speakman, Jr., the Labor Member, and Martin J. Dickman, the 
Inspector General. Gentlemen, it is good to see each of you. 
Mr. Kever, why don't you proceed and then Mr. Speakman and then 
Mr. Dickman.

                           Opening Statement

    Mr. Kever. Thank you very much. Good afternoon, Mr. 
Chairman and members of the committee. I am Jerome F. Kever, 
the Management Member of the Railroad Retirement Board and with 
me today, as you pointed out, presenting joint testimony is 
V.M. Speakman, Jr., to my right, the Labor Member. As you know, 
Ms. Cherryl T. Thomas has been nominated by the President to 
become Chair of the Board. We have submitted a written 
statement which we ask to be made a part of the record. Joining 
us today, as you point out, is the Board's Inspector General to 
my left, Mr. Martin J. Dickman, who will also make a statement.
    During fiscal year 1997, the Board paid $8.3 billion in 
railroad retirement and survivor benefits to nearly 800,000 
beneficiaries. We also paid unemployment and sickness insurance 
benefits of $104 million to 35,000 claimants.
    We appear before you today to ask for an increase in the 
fiscal year 1999 appropriation of $4 million or 4.65 percent to 
get to $90 million. This $90 million is $3.8 million less than 
the agency's original request to the Office of Management and 
Budget of $93.8 million and reflects our continuing efforts to 
reduce costs. The President's request for the Board's 
administrative budget, however, is only $86 million, which is 
$1.2 million less than the amount appropriated for fiscal year 
1998. In combination with the $3.7 million we expect to receive 
as reimbursement from the Health Care Financing Administration 
for Medicare activities, the President's requested budget of 
$86 million will support a total of 1,095 FTEs. That is 135 
FTEs, or 11 percent, less than we expect to expend this year. 
The President's budget also proposes legislation to allow 
voluntary separation incentive payments, or buyouts, through 
December 30, 1998.

                     Request for Additional Funding

    We estimate that in fiscal year 1999 the Board will need an 
additional $4 million, as well as the proposed buyout 
authority, for a total administrative appropriation of $90 
million. Over the last several years, the Board has undergone 
dramatic reductions in both staffing and funding which affect 
our ability to withstand deeper cuts at this time. In 
conjunction with the buyout authority, an additional $4 million 
will allow us to avoid a major reduction-in-force and proceed 
with special automation initiatives that will enable the Board 
to make a successful transition to operating at a lower cost on 
a long-term basis. Our rationale for requesting this additional 
$4 million is as follows:
    Approximately $2.66 million of the additional funding is 
needed to avoid an immediate reduction-in-force of 97 
employees. Because actual buyouts and net attrition for fiscal 
year 1998 have been substantially less than anticipated, we 
will enter 1999 with more employees than we can accommodate at 
the President's $86 million appropriation level. In addition, 
recently adopted occupational disability regulations are 
expected to increase our estimated fiscal year 1999 fees for 
consultative medical examinations by $700,000, an increase 
which we could not and did not anticipate in the original $86 
million appropriation request.
    This agency simply cannot afford a reduction-in-force of 
this magnitude at this time. Since fiscal year 1993, we have 
conducted reductions-in-force resulting in 58 separations. We 
have offered buyouts on 4 separate occasions, which resulted in 
a total of 177 separations. We have also restricted our hiring, 
allowing attrition to decrease our staffing levels by an 
additional 242 positions as of March 1, 1998. Despite these 
reductions in our salary costs, we were only able to pay 50 
percent of the dollar amount of the annual performance awards 
in fiscal year 1997.
    According to the Analytical Perspectives published as part 
of the President's proposed budget for fiscal year 1999, our 
staffing reduction from fiscal year 1993 through 1999 is 
projected to be 34.8 percent. This is more than double the 
reduction of 15.4 percent projected for total civilian 
employment in the executive branch, and nearly 4 times the 
reduction of 8.8 percent projected for non-defense employment. 
Further, while total governmentwide discretionary outlays are 
projected to rise about 2.4 percent in fiscal year 1999 as 
compared to fiscal year 1998, the Board's administrative budget 
would undergo a 1.4 percent cut. Thus, under the proposed 
budget, we would be required not only to absorb an actual cut 
in spending, but also to pay for an expected 3.1 percent 
January 1999 pay increase.
    Moreover, in fiscal year 1999, approximately $5.4 million 
of our total administrative budget, which represents 6.3 
percent of the proposed budget, will fund Year 2000 project 
costs. In view of these internal and external funding 
constraints, it is important to remember that the Board 
administers entitlement programs established by Congress. These 
are not subject to discretionary spending. In order for us to 
manage further significant cuts in staffing, our agency must 
have the information technology tools in place to help maintain 
an adequate level of customer service.

                     information technology funding

    For this reason, the remainder of our request for the 
additional $4 million is for funding technology initiatives and 
system evaluations that will allow us to accomplish 
ourstrategic vision. Regarding our customers, this vision anticipates 
that they will be able to contact the Board, not only in person or by 
telephone, but through a host of new choices, such as interactive voice 
response system, video conferencing, or through the Internet, knowing 
that in almost all cases their business will be concluded during that 
initial contact.
    The Board's Information Technology Capital Plan was 
developed in concert with our Strategic Information Resources 
Management Plan. Both these plans support the agency's 
Strategic Plan which we prepared in accordance with the 
Government Performance and Results Act. These plans outline a 
comprehensive approach toward maintaining our customer service 
at future lower costs, and cannot be achieved without closing 
the near-term gap between our planned initiatives and those 
which a reduced level of funding would permit. Accordingly, we 
are requesting additional funding of $1.34 million to cover a 
broad range of technology investments needed to help ensure 
adequate customer service by improving our efficiency.
    Now, in concluding my testimony, I wish to stress the 
Board's continuing commitment to improve our operations and to 
provide quality service to our beneficiaries in the face of 
tight budgetary resources. We believe that the performance of 
the Board over the last few years has earned us a level of 
trust with this subcommittee. We therefore ask that you 
continue your confidence in our administrative ability and 
grant us the additional $4 million necessary to ensure the 
efficiency of our operations into the future.
    Now my colleague, Mr. Speakman, would like to make a brief 
statement after which we would be happy to answer any questions 
you may have. Thank you.

                        Remarks by Mr. Speakman

    Mr. Speakman. Thank you, Mr. Chairman. As Labor Member of 
the Railroad Retirement Board, I would like to express my full 
support for the testimony of my colleague, Mr. Kever. It is not 
my intention to offer redundant testimony. However, there are a 
few brief points I would like to emphasize in support of the 
request for a $4 million increase in the agency's budget for 
fiscal year 1999.
    First of all, we have made significant strides in recent 
years in reducing staffing levels, while maintaining and even 
improving service levels. We have improved processing times and 
increased accuracy rates for many types of benefits. We have 
managed to accomplish this largely through expanded use of 
automation and we fully intend to continue this direction and 
have developed the necessary plans to assist us. However, our 
ability to implement these plans and to maintain service to our 
customers would be seriously jeopardized at the proposed level 
of $86 million.
    Mr. Chairman, we want to emphasize that the Railroad 
Retirement Board clearly understands, we clearly understand 
that financial resources are limited, and that this resource 
will continue to be limited. However, by making some short-term 
investments in information technology, we believe that we will 
reap the long-term benefit of continuing to provide adequate 
customer service with fewer staff and to see these plans 
through with the goal of providing adequate customer service in 
a more proficient and efficient manner, and to avoid a 
significant reduction in force, we are seeking an additional $4 
million in fiscal year 1999.
    We believe, given our track record, that our proposal is a 
reasonable one, and that concludes my remarks, Mr. Chairman.
    [The prepared statements of Mr. Kever and Mr. Speakman 
follow:]


[Pages 5 - 12--The official Committee record contains additional material here.]



    Mr. Porter. Thank you, Mr. Kever and Mr. Speakman.
    Mr. Dickman.

                 Inspector General's Opening Statement

    Mr. Dickman. Good afternoon, Mr. Chairman. My name is 
Martin Dickman and I am the Inspector General at the Railroad 
Retirement Board. I am here to ask for your support for our 
fiscal year 1999 budget request of $5.4 million. I wish to 
submit my testimony for the record and summarize our priorities 
for next year. After my formal statement, I would like to 
discuss our request for $200,000 of additional funding to avoid 
a RIF of 4 FTEs.
    We will continue the audit of the RRB's 1998 financial 
statements and perform the preliminary work for the 1999 
financial statements. Each of the previous 5 audits of the 
agency's financial statements have included a disclaimer of 
opinion. We will continue to provide recommendations to agency 
management to address the identified weaknesses.
    We will conduct monitoring reviews of the RRB's actions to 
meet strategic and performance goals as required by the 
Government Performance and Results Act. We have formed a 
special unit to evaluate the RRB's performance similar to that 
used in our monitoring of the 5-year RRB-OMB Special Management 
Improvement Plan. We will conduct reviews to monitor the RRB's 
Year 2000 project management for conversion of 166 mainframe 
computer systems. We have also established a special audit 
group to monitor the agency's Year 2000compliance.
    We will evaluate agency efforts to improve coordination 
with the Department of Treasury, the Internal Revenue Service, 
and the Social Security Administration. The financial statement 
audits have cited the RRB's inability to verify the accuracy 
and timeliness of railroad payroll taxes as a material 
weakness. We will also monitor the agency's progress in 
achieving additional system-to-system access with the Social 
Security Administration. We will continue our reviews of the 
agency's investment committee and its practices and policies. 
This committee is responsible for the investment of over $15 
billion in trust fund monies. We will conduct audits relating 
to benefit payment accuracy and provide management with 
recommendations to reduce the number of administrative and 
adjudicative errors. We will also monitor the agency's debt 
collection activities as outstanding receivables continue to 
remain high at $65.7 million.
    In fiscal year 1999, our Office of Investigations will 
focus its resources on cases with the highest fraud losses, 
which usually involve the RRB's disability benefit program. Our 
active investigations currently total about 1,000 fraud cases 
with losses of approximately $7.4 million. We will continue to 
cooperate with other Inspectors General and law enforcement 
entities. We will work closely with agency managers to ensure 
that all fraud matters are appropriately referred to our 
office.
    This concludes my remarks, Mr. Chairman, and I will be 
happy to answer any questions that you may have concerning our 
request for additional funding. Thank you.
    [The statement of Mr. Dickman follows:]


[Pages 14 - 18--The official Committee record contains additional material here.]



                         Remarks by Mr. Porter

    Mr. Porter. Thank you, Mr. Dickman. I want to thank each of 
you for traveling to Washington and being with us both this 
morning and this afternoon, and we understand that Cherryl 
Thomas has no opposition and it is only a matter of scheduling 
the floor time in the Senate for her to be confirmed, and so we 
look forward to working with her when those administrative 
matters are taken care of.
    You preside over a, what we consider to be a very well-run 
agency. You deserve credit for the great progress that has been 
made over the last several years, and I hope you will continue 
in the direction the Board has set of improving productivity, 
limiting FTEs and expenditures, and providing top quality 
service to your customers. You have done a very good job also 
of implementing the Government Performance and Results Act, and 
in this area you are ahead of most of the agencies that we 
oversee. I believe you have a good understanding of the value 
of outcomes assessment and performance measurements.
    The budget hearings necessarily focus attention on the 
things we think could be improved, so I want to make clear that 
my questions are in the context of an agency that is doing a 
very good job already.

                 rrb performance objectives under gpra

    Mr. Kever and Mr. Speakman, the President is requesting a 
reduction for the agency below the fiscal year 1998 
appropriation of about 1 percent. The agency, however, is 
asking for an increase of about 3 percent over fiscal year 1998 
and about 5 percent above the President's request. The 
justification for the requested increase is in part the desire 
to avoid reductions in force and in part to avoid deterioration 
in productivity and service. However, if we look at the GPRA 
plan included with the President's request, the agency 
indicates that at the funding level requested by the President, 
service delivery and productivity for each GPRA indicator will 
be maintained at fiscal year 1998 levels or will, in fact, 
improve.
    That raises 2 issues. First is the issue of data 
significance. Many of your performance targets are expressed as 
percentages exceeding 95 percent and many are set at 99 
percent. A decline from 99.4 percent payment accuracy, for 
example, to 98.5 percent would reflect a significant 
deterioration of service, representing substantial sums of 
money that would be reflected in the GPRA report as 99 percent 
for each year, no change. So let me suggest as a future 
standard that all GPRA submissions to the subcommittee provide 
percentage data to 1 decimal place for any percentage indicator 
for which either the actual data or the target data equals or 
exceeds 95 percent. Please report 2 decimal places when actuals 
or targets equal or exceed 98 percent.
    The second issue is the more serious one. Not every 
variance in service levels between the GPRA plan and the impact 
statement can be explained by data significance. Clearly the 
information you have reported to our staff regarding service 
levels under the President's request are not fully reflected in 
the GPRA report in the budget justification. You may comment on 
the reasons for this disconnect, but let me indicate to you 
that GPRA is a budgeting tool and your performance targets must 
reflect the budget request.
    Do you want to comment on that?
    Mr. Kever. I certainly do, Mr. Chairman.
    Mr. Porter. Please proceed.

              agency performance at proposed funding level

    Mr. Kever. I would like to clarify first what was contained 
at least in our view in the budget justification package. The 
cover letter on this package suggested that the President's 
budget request of $86 million would, in fact, fund 85 fewer 
FTEs in 1999 than was called for in the justification book. We 
would be very unlikely to reduce staff to that extent without 
incurring a reduction-in-force. A reduction-in-force would, of 
course, further negatively impact our level of performance. 
Also, the $86 million does not reflect the impact of the new 
occupational disability standards which were negotiated between 
rail management and labor and implemented January 1, 1998, and 
we also had a switch in the medical contractors due to the poor 
performance that we received on the prior contractor.
    Also, the introductory statement in our annual performance 
plan states that administrative funds of $86 million for fiscal 
year 1999 will have a negative effect on trust funds and 
customer service. It further points out that these negative 
effects may not be readily apparent when you review the plan.
    Now, in preparing the budget justification, we developed 
various scenarios depicting the impact of an $86 million budget 
on our staffing levels. We chose to conservatively estimate the 
impacts on performance levels at that time because we did not 
want to risk overstating any quantifiable impacts on 
performance. Since that time, we have learned that our 
estimated net attrition level has significantly decreased, and 
we have learned that the additional dollar amount, some 
$700,000 that will be needed to implement our new occupational 
disability standards and to cover our increased outside medical 
contractor costs. So although we are still unable to measure 
precisely how staffing will impact each of our performance 
levels, we can say that there is an even stronger likelihood 
that the agency's performance will slip in areas such as 
timeliness and accuracy. And given what we know now, we can say 
that the impact statement that we have provided to support our 
request for an additional $4 million is the result of our best 
and most recent attempts to quantify the negative effects of a 
reduction in staffing on our performance levels.
    Mr. Porter. Anyone else want to comment on that?
    Mr. Speakman. Mr. Chairman, that basically states the 
point. I think the point you also made with regards to the 
decimal point inclusion to increase--to identify the impact 
more clearly is a good point and it is certainly one that we 
will do in the future. It offers the opportunity to enlighten 
the committee with regards to the impact of the service.

             reports of actual and planned performance data

    Mr. Porter. Let me also ask you in the future to provide 
GPRA data that includes one year of actual performance data in 
addition to current year and future year projections. And for 
the record, could you please provide a table which indicates 
for each performance indicator the fiscal year 1998 
projections, the fiscal year 1999 President's budget 
projection, and the fiscal year 1999 RRB request levels. Please 
include FTE in this table as well.
    Mr. Kever. We will be happy to provide you with that.
    [The information follows:]


[Pages 22 - 30--The official Committee record contains additional material here.]



               special management improvement plan goals

    Mr. Porter. Are all of the SMIP targets and goals included 
in the GPRA plan, and if not, which ones are not and why are 
they not included?
    Mr. Kever. All of the targets are included in the GPRA plan 
that we have.

                       goals for full cycle times

    Mr. Porter. I want to congratulate you on a generally very 
good performance plan in service delivery matters that focuses 
on the outcomes we are interested in; for instance, processing 
times and backlogs. Generally, your indicators focus on the 
front end of the process, initial decisions, those that affect 
most people. However, the plan does not seem to set targets for 
full cycle times to include processing times for appeals.
    Why haven't you set goals for full cycle times since you 
intended to do this for fiscal year 2000?
    Mr. Kever. Thank you, Mr. Chairman. That is a very timely 
request, because we are discussing that very issue at the Board 
amongst the managers at this point. In fact, over the last 
month I believe we have been getting reports from our Hearings 
and Appeals department that include the final adjudication of a 
claim. So we will be able to provide you within the next year 
information in that area.
    Mr. Porter. Thank you.

                         customer waiting times

    Another area that we have looked at with the Social 
Security Administration is customer waiting times, whether for 
office visits or for telephone calls. We would like you to 
measure how many callers to RRB, both the offices or automated 
systems are connected on their first try and how many are 
served within 5 minutes. Would you be willing to do this?
    Mr. Kever. We are willing to do that, and I believe we have 
statistics that would show you where we are at in that regard, 
if I am not mistaken, by field office.
    Mr. Porter. We would also like to have some measure of 
waiting times for individuals coming into RRB offices both with 
and without appointments. Would you do that for us for fiscal 
year 2000?
    Mr. Kever. We in fact capture that information today and 
could report to you now on that.
    Mr. Porter. Good.

                     recommendations for the future

    Last year I asked Chairman Bower for his recommendations 
for the future of the Railroad Retirement Board. He gave us 
those recommendations. If the new Chairman is confirmed 
shortly, I would like her for the record to take those 
recommendations and break them into 2 categories: those that 
the agency can act on without Congressional action and those 
that could be undertaken--and others that could be taken within 
legislative authority of the subcommittee as opposed to the 
authorizing committees. In each case I would like the Chairman 
to offer her thoughts regarding the recommendationsand her 
intentions regarding implementation. And I would also be interested in 
hearing your comments, Mr. Kever and Mr. Speakman, on those 
recommendations.
    [The information follows:]


[Pages 33 - 48--The official Committee record contains additional material here.]



                       RECONCILIATION OF TAX DATA

    Mr. Porter. The justification indicates a target of 
completing all reconciliations within 26 months of the end of 
the tax year. Why do these reconciliations take so long to 
perform, and why do you feel 26 months is an adequate target 
date?
    Mr. Kever. Mr. Chairman, while we don't believe that 26 
months is an adequate target date, we are unfortunately stuck 
with that time because of the slowness in receiving the 
information from the Internal Revenue Service, and I am not 
knocking the Internal Revenue Service, but it is a very 
complicated process that they go through to get us the 
information, and then we have to reconcile it to the records 
that are reported to us by each of our employers. We have, in 
fact, if I am not mistaken, cut that time down substantially in 
the past. I think when I came on board 5 or 6 years ago we were 
like 4 or so years behind. So we have closed the gap. We are 
not happy with it, and we continue to try to get it done 
quicker, but this is the best we can do today.
    Mr. Porter. Is there anything the subcommittee can do to 
help you get that information more quickly?
    Mr. Kever. Let me get back to you on that. I don't know for 
sure, but we would be happy to solicit your help if it would be 
worthwhile, which I am sure it would.
    [The information follows:]

      Statement by Mr. Kever Concerning Reconciliation of Tax Data

    Railroad employers are required to file Annual Railroad 
Retirement Tax Returns by February 28 of the year following the 
tax year, unless a filing extension is requested and granted. 
The Internal Revenue Service (IRS) processes the returns, 
accumulates all the relevant information, and provides us with 
a computer disk containing all the required tax information, 
generally by early October of that year.
    We compare the compensation reported by railroad employers 
for tax purposes with compensation reported for benefit 
calculation purposes. Over 80 percent of our reconciliations 
are completed within 12 months after we receive the tax 
information from the IRS. All are completed within 2 years 
after the original filing deadline which is 1 year before the 
statute of limitations expires to take action on the tax forms. 
The IRS, therefore, has adequate time to take action to resolve 
any issues that we report to them before the statute of 
limitations expires or to take action to extend the statute of 
limitations for individual tax filers.
    Our target dates are consistent with those established 
under the Special Management Improvement Plan. We believe the 
target dates are reasonable and allow us to work efficiently 
with the IRS to resolve issues within the statute of 
limitations time frames.

                   RECOMMENDATIONS BY FORMER CHAIRMAN

    Mr. Porter. Will you, Mr. Kever and Mr. Speakman, comment 
on the recommendations made by Chairman--former Chairman Bower?
    Mr. Kever. Mr. Chairman, we actually have not sat down and 
had a dialogue about the recommendations, other than probably 
amongst our own staff. We are primarily waiting for a new 
Chairman to come on board and to try to get a consensus of how 
we should respond, and your request that Ms. Thomas should 
delve into those immediately. Mr. Speakman and I, I am sure, 
will be happy to sit down with her and walk through it and get 
back to you on that.

                         RETURN ON INVESTMENTS

    Mr. Porter. The performance plan indicates that the market 
rate of return for the Railroad Retirement Account will exceed 
the Bloomberg index of Treasury notes and bonds with one year 
of maturity. Why did you choose the Bloomberg as your 
benchmark? Please provide a table indicating the rate of return 
of the Railroad Retirement Account and the Bloomberg index for 
each of the last 5 years.
    Mr. Kever. Mr. Chairman, we chose the Bloomberg primarily 
because it is the most recognized authority on bond 
performance, and in fact we have beat that level each year 
since we have used it. But we will be happy to provide you with 
the statistics you asked for to the extent we can. I don't know 
if we can go back 5 years.
    [The information follows:]

    The following table provides a comparison of the market 
rate of return earned by the Railroad Retirement Account and 
the Bloomberg index of Treasury notes and bonds with more than 
1 year to maturity. The Railroad Retirement Board began to 
measure the market return on investments in July 1996.

----------------------------------------------------------------------------------------------------------------
                                                                                 Railroad          Bloomberg    
                      Fiscal year                          Period covered       retirement       treasury index 
                                                                            account (percent)      (percent)    
----------------------------------------------------------------------------------------------------------------
1996...................................................     7/1/96-9/30/96               1.97               1.49
1997...................................................    10/1/96-9/30/97               9.79               9.09
1998...................................................    10/1/97-3/31/98               5.22               4.99
----------------------------------------------------------------------------------------------------------------


    Mr. Porter. Thank you.
    Mr. Dickman, we are asking all of the IGs to participate in 
the GPRA process in 2 fundamental ways. We would like you first 
to act as a management consultant to review the GPRA plan 
comprehensively and suggest modifications or improvements which 
will give us a better picture of agency performance. Second, we 
would like you to act as an auditor to provide some assurance 
regarding the process by which GPRA data is collected and 
reported to the subcommittee. If you would like to comment on 
this now, you may, but we would like you to submit a plan for 
the record to undertake this initiative. And please feel free 
to put a price tag on the plan.

                 GOVERNMENT PERFORMANCE AND RESULTS ACT

    Mr. Dickman. Mr. Chairman, as I stated in my opening 
statement, we have in place a special audit group to audit the 
GPRA plan of the Railroad Retirement Board. We do have an audit 
report which I can provide to the committee of the plan. Again, 
this is part of our request for the additional funding of 
$200,000. It relates to the money that we would need to provide 
the necessary resources to audit the GPRA plan; to monitor the 
agency's Year 2000 compliance; and also to perform the 
financial statement audit along with the regular audits that we 
do in the ordinary course of business.
    [The information follows:]

                         Preliminary Audit Plan

  review of procedures and controls for measuring rrb performance in 
        meeting the annual performance plan goals and objectives

    In accordance with the Government Performance and Results 
Act of 1993, the Retirement Board submitted a five year 
strategic plan which identified the following four strategic 
goals:
    Provide Excellent Customer Services,
    Safeguard Customer's Trust Funds Through Prudent 
Stewardship,
    Align Resources to Efficiently and Effectively Meet the 
Agency's Mission, and
    Expand the Agency's Use of Technology and Automation to 
Achieve its Mission.
    The Railroad Retirement Board also developed an annual 
performance plan based on its strategic goals; the plan is 
designed to ensure the agency's continual, measurable progress 
on its objectives. The agency released its first annual 
performance plan to the Office of Management and Budget and 
Congress along with the agency's fiscal year 1999 budget 
submission in September 1997. This plan contained 16 
performance goals with 52 performance indicators.
    The Office of Inspector General has formed a special unit 
to evaluate the agency's actions to meet its strategic and 
performance goals. In fiscal year 1999, this unit will review 
the adequacy of agency procedures and controls for accurately 
measuring the agency's performance in meeting the goals 
established in the annual performance plan. Four auditors have 
been assigned to this unit on a rotational basis, with each 
focusing on one strategic goal and a sampling of its 
performance goals and indicators. Because this audit will not 
include a validation of each of the 52 indicators, the scope of 
all audits in progress is being expanded to include the 
agency's performance goals and measures. In fiscal year 1999, 
this practice will be continued for all newly initiated audit 
work.
    Review of the agency's compliance with the Government 
Performance and Results Act is an additional function that the 
Office of Inspector General will be required to assume.
    In November 1997, the Office of Inspector General conducted 
a review of the agency's compliance with the basic requirements 
of the Act. Auditors identified some performance indicators and 
goals in the Annual Performance Plan which required 
improvement. Some indicators promote the status quo, not 
program improvement. Agency management rejected all report 
recommendations for improvement. We will again act as 
management consultant through the review of the updated Annual 
Performance Plan to identify any ongoing deficiencies and make 
recommendations to management. We will consult with the newly 
appointed agency head and Congress to determine the priority 
and exact number of indicators to be tested.
    Auditors will determine if the agency's internal control 
structure ensures that data supporting specific performance 
measures are properly measured and recorded to permit the 
preparation of reliable and complete performance information in 
the financial statements. Policies and procedures will also be 
reviewed to assess their effectiveness in providing reasonable 
assurance that the agency will meet its strategic objectives.
    During the performance of the audit of the fiscal year 1997 
financial statements, auditors reviewed the agency's annual 
performance goals/indicators for two strategic goals (Provide 
excellent Customer Service and Safeguard Customer's Trust Funds 
through Prudent Stewardship). Auditors will continue their 
monitoring of performance measures during the audits of the 
fiscal years 1998 and 1999 financial statements.

    Mr. Porter. Thank you, Mr. Dickman.
    Mr. Wicker.

                           agency downsizing

    Mr. Wicker. Thank you, Mr. Chairman. I moved over here to 
get closer to the microphone.
    Let me just back up and ask something that the Chairman 
touched on about how we are doing in downsizing the number of 
employees at the Railroad Retirement Board. How many FTEs did 
we have last fiscal year and how many do we anticipate having 
this year and next year?
    Mr. Kever. Did you want 1997 or 1998?
    Mr. Wicker. Well, I would like to have the last fiscal 
year, this fiscal year and the next fiscal year.
    Mr. Kever. The expected usage of FTEs in 1998 is 1,230, and 
at the budget level of $86 million we would have 1,095 FTEs.
    Mr. Wicker. So that is what you are proposing to actually 
reduce the amount to, 1,095 in fiscal year 1999?
    Mr. Kever. No. We would like not to RIF 97 people, so we 
would add the 97 to the 1,095. That is the level that we would 
like to have.
    Mr. Wicker. And that would put you at what?
    Mr. Speakman. 1,192.
    Mr. Wicker. That is hardly any reduction at all, isn't it?
    Mr. Kever. It is a 34.8 percent reduction.
    Mr. Wicker. Well, at a time when the number of railroad 
beneficiaries is declining for any number of reasons, how can 
you justify that?
    Mr. Kever. We believe we have done a tremendous amount of 
work with our constituents, both the labor side and the 
management side and industry, and they concur with us that this 
is the amount of people we need. Most of the increase that we 
are asking for today is so that we can stop and catch our 
breath in our maturation process at the Board to make sure that 
the reorganization that we put in place 2 years ago is exactly 
what we need to get us into the future.
    Now, another justification that we have is that if we are 
going to continue to reduce FTEs at the pace we have, and we 
have done it like quadruple what every other agency has done--
we have to have technology in place to replace these people. 
And that is what we are asking for as well, specific technology 
to allow us to get to the future with fewer FTEs. It is simply 
a matter of the 5 or 6 years that we have downsized 
tremendously, I think in the testimony we will go down about 
34.8 percent over the last 5 years. That is a pretty tremendous 
hit for an entitlement program like ours, at least in my view. 
And we are not kidding ourselves that we will probably have to 
reduce in the future because of the appropriation, but we need 
to stop now and see where we are at and get the technology in 
place in order to be able to effectively reduce FTEs in the 
future.
    Mr. Wicker. How much trouble would it be for you to provide 
me and how quickly could you provide me with the number of 
beneficiaries, Railroad Retirement Board beneficiaries for the 
past several years?
    Mr. Kever. We can do it within a week, no problem.
    [The information follows:]

  Benefit Program Beneficiaries Compared with Agency Staffing Fiscal 
                            Years 1993-1997

    The following chart shows the number of beneficiaries under 
the Railroad Retirement Act (RRA) and the Railroad Unemployment 
Insurance Act (RUIA) compared with the agency's staffing for 
fiscal year 1993 through 1997.

----------------------------------------------------------------------------------------------------------------
                                                    RRA              RUIA                          Beneficiaries
                 Fical year                  beneficiaries.\1\  beneficiaries    Total     FTE's      per FTE   
----------------------------------------------------------------------------------------------------------------
1993.......................................        833,600           40,011      873,611    1,654         528   
1994.......................................        811,800           40,917      852,717    1,571         543   
1995.......................................        789,200           35,834      825,034    1,439         573   
1996.......................................        765,197           35,712      800,909    1,357         590   
1997.......................................        741,905           34,520      776,425    1,253        620    
----------------------------------------------------------------------------------------------------------------
\1\ Amounts reflect the number of beneficiaries on the roll as of September 30 each year.                       


    Mr. Wicker. Okay. Well, I would just say, Mr. Chairman, 
that to say that this agency has reduced its FTEs more than 
other agencies is an interesting fact, but it does not take 
into account the fact that the number of people served by the 
agency is declining and some agencies, the people served by 
those particular functions is increasing. So I don't know if it 
is particularly instructive to compare FTEs of this agency to 
other ones. I really would like those figures, and so I 
appreciate the fact that you can get them to me.
    Mr. Kever. We will have them.

                        medicare administration

    Mr. Wicker. If I might continue for a few more minutes, Mr. 
Chairman. In the past I have questioned the sensibility of 
having railroad retirees' Medicare claims processed by the RRB. 
To me it seemed more sensible for HCFA to run all claims 
processing activities. Recently the HHS Inspector General 
reported that savings could be as high as $40 million per year 
if RRB claims were processed by HCFA.
    In light of that fact, do both of you agree that these 
duties should be shifted to HCFA?
    Mr. Kever. Mr. Wicker, I can only speak for myself. 
Intuitively, I believe it makes sense for us to switch there 
with a $40 million price tag. There are a lot of things that go 
into making a decision like that; the fact that we have done it 
a different way all of these years, the fact that we have 
legislative authority to do it, all of these things needto be 
changed, and I guess intuitively again my reaction would be yes, I 
would be for it, but I would like to see a plan that makes sure that 
our constituents are not affected in any way.
    Mr. Wicker. Mr. Speakman?
    Mr. Speakman. Mr. Wicker, we have addressed ourselves to 
this question in the past and quite candidly, the labor people 
that I represent have expressed themselves on this issue and 
have expressed opposition to the change of the Medicare 
contract. We believe that we are best positioned to administer 
the contract, and quite candidly, we would like to be able to 
speak in more detail and offer for the record some comments on 
this so-called $40 million savings. We believe that those 
numbers may not be in fact as valid today as they were when 
they were first developed. So we would like to have an 
opportunity to speak to those and give you the benefit of our 
comments.
    Mr. Wicker. Certainly I would appreciate having the benefit 
of those comments.
    [The information follows:]


[Pages 54 - 58--The official Committee record contains additional material here.]



    Mr. Wicker. You are not suggesting that claimants would be 
disadvantaged by having HCFA process these claims, simply by 
having----
    Mr. Speakman. I am not suggesting that they necessarily 
would be disadvantaged, I am not suggesting either that they 
would be advantaged by HCFA. I believe that we are positioned 
well, we have a good track record with regards to our Medicare 
administration, and we have done it in a very cost-effective 
way. We have good service standards which we have used, and I 
believe our service standards probably exceed HCFA's standards. 
So if you want to quantify whether you would be advantaged or 
disadvantaged, I believe that you could make a very good case 
that service levels would be enhanced through the Railroad 
Retirement Board administering Medicare.
    Mr. Wicker. Well, I look forward to a future discussion 
about that particular issue.
    If I might direct a couple of questions to Mr. Dickman. 
Could you tell me how much money was deposited into the Federal 
Treasury during fiscal year 1997 due to your activities?

                        investigative activities

    Mr. Dickman. Due to our activities? Excuse me. Let me see 
if I have the information available to me. The problem we run 
into is we are an investigative agency and not a collection 
agency, as is any Inspector General. We investigate cases, 
fraud cases, and present them to the appropriate authorities, 
whether it is a local prosecutor, whether it is a local United 
States Attorney, Department of Justice, whether it is a 
criminal matter or whether it is a civil matter under the Ace 
program.
    After we present the case to them, it is up to them to 
prosecute the matter. If there is a prosecution, an 
adjudication and a judgment against those individuals, then it 
is up to the Debt Recovery Division of the Railroad Retirement 
Board to monitor those cases to make a determination whether 
those monies are actually paid or the individuals might be in 
default.
    I cannot give you an accurate number today as far as what 
are the total deposits that are put into the United States 
Treasury due to our efforts. All I can tell you is what the 
judgments were that we obtained from the cases that we had in 
1997.
    Mr. Wicker. Very fine.
    Mr. Dickman. The recoveries from in fiscal year 1997 for 
Medicare were $5,985,000, those are old cases that we are still 
involved in. Other programs were $500,988. This is 
substantially lower than the 1996 number from all other 
programs, which was $3,296,000, and the reason for that is we 
had to close our Houston office in our reduction of force. We 
had a tremendous turnover both in our main office and in our 
surviving office in Philadelphia, so there was a tremendous 
amount of transition that went on with special agents. There is 
a lag time in the cases that are building up, and I believe 
that for fiscal year 1998 we should be up to about $2.5 
million. There won't be any Medicare money--monetary 
accomplishments for Medicare cases--I don't think. There might 
be a few that are still outstanding, but I think from all other 
sources, it should be about $2.5 million. But again, I cannot 
tell you the----
    Mr. Wicker. Okay. And those are judgments?
    Mr. Dickman. Those are judgments.
    Mr. Wicker. And what I am understanding from your testimony 
is that RRB has a recovery division which is separate and apart 
from your shop.
    Mr. Dickman. Correct, exactly.
    Mr. Wicker. And you can't speak to how much of that 
judgment----
    Mr. Dickman. No, because in some of these cases the 
individual might be on a payment plan that might last for 5 
years, and then sometimes an individual might be in default on 
it.
    Mr. Wicker. And one final question to the Inspector 
General, Mr. Chairman.
    For the past several years this committee has included 
language in the bill to prevent the IG from working on Medicare 
fraud cases. Do you believe this decision should be reversed?

                           medicare activity

    Mr. Dickman. Mr. Wicker, as I have stated previously, I 
have always thought it should be reversed because as long as 
the Part B Medicare contract is administered by the 
RailroadRetirement Board as a program responsibility of the Railroad 
Retirement Board and if it is a program responsibility, then it comes 
under the jurisdiction of the Inspector General's Office. And----
    Mr. Wicker. How much effort are you expending to obtain a 
reversal in the contents of this decision?
    Mr. Dickman. The only effort that we have expended, as we 
have every year, is to make an effort, and put it down in our 
request. We have gone to the Senate side also, which has been a 
little more receptive, and said we would like to maintain--to 
continue to do Medicare fraud contracts and we will do the 
same, make the same recommendation to the Senate side again. 
That is as far as our efforts go.
    Mr. Wicker. Your formal submission?
    Mr. Dickman. Correct.
    Mr. Wicker. Have you visited individually with Members of 
the House or Senate to request that they vote to reverse this?
    Mr. Dickman. No. Just staff people. In fact, this afternoon 
I will meet with staff on the majority and minority side to 
make our presentation at that time. Other than that, I have 
never spoken personally to any Senator regarding that request.
    Mr. Wicker. Has your office submitted letters to Members of 
the House or Senate individually?
    Mr. Dickman. In the past, we have, yes.
    Mr. Wicker. About this decision. Have you done so in this 
cycle?
    Mr. Dickman. No.
    Mr. Wicker. Mr. Chairman, thank you for indulging me on the 
time.
    Mr. Porter. Thank you, Mr. Wicker.

                           RRB Field Offices

    Last year Chairman Bower testified that the number of field 
offices would decline to 55 in fiscal year 1997 and 53 in 
fiscal year 1998.
    Was the goal achieved for fiscal year 1997 and do you 
expect it to be 53 at the end of this year?
    Mr. Kever. Mr. Chairman, I am happy to report that we are 
now at 53 offices.

              Update of Charts Prepared for FY 1998 Budget

    Mr. Porter. If they have not been included with your 
statements for the record, please update each of the tables 
included with the Chairman's fiscal year 1998 budget statement.
    Mr. Kever. We would be happy to do that.
    [The information follows:]


[Pages 62 - 75--The official Committee record contains additional material here.]



                   Financial Statement Audit Results

    Mr. Porter. Mr. Dickman, last year we discussed the audit 
of the Board's financial statements. Outside auditors were 
unable to issue even a qualified opinion on the statements, 
citing concerns about accuracy of benefit payments, overall 
control environment, and railroad tax deposits. I think we had 
all hoped to make progress at least on payment accuracy and 
perhaps on IRS information.
    What is the current status of the audit and what is the 
prospect for obtaining either a qualified opinion or a clean 
audit in the future? In answering the question, please indicate 
the status of the rule on administrative finality and the 
status of the MOU with the IRS that Chairman Bower testified 
would be completed by the end of calendar year 1997.
    Mr. Dickman. We have completed our financial statement 
audit and the 3 material weaknesses still remain. Let me take 
the material weakness concerning the reconciliation of the tax 
receipts. That will be implemented, as far as the information, 
by December of 1998, so by February of 1999, when we will be 
reconciled I think in June of 1999, we will have a complete 
reconciliation of the tax receipts, and for the first time the 
Railroad Retirement Board will be able to reconcile the 
receipts on the CT-1s with the deposits made with the IRS. That 
is my understanding. So that material weakness should disappear 
in the future.
    As far as the other 2 material weaknesses, as far as the 
benefit payment accuracy, that is a more complex matter which I 
think will take a longer period of time. I think if the Board 
has the additional resources for claims processing going into 
automation with less manual handling, going into imaging with 
the administrative finality in place at the present time, then 
I think the benefit payment accuracy will be reduced [Clerk's 
note.--Later changed ``reduced'' to ``increased]. But I think 
there is always going to be some portion of it out there. In 
the future, it might become so minimal that it may be a 
reportable condition, but not a so-called material weakness.
    As far as the last material weakness, the control 
environment, I think that can only be changed by a dramatic 
change in the way the Board does business. I would have you 
recall my first reinvention proposal which, although I don't 
consider it a panacea, that it is the proposal that has to be 
done, I think that it is a material weakness that has been 
brought out by the prior audits, by the independent auditing 
companies; also by GAO in their review of the government 
performance results plan of the Board that the overall control 
environment of the Board must be changed dramatically.
    Now, my plan might be a very draconian type of plan which 
would reduce the 20 bureaus into 5. I believe you know, that is 
the way to go to reduce the amount of bureaucracy, the layers 
of administration, the lack of some direct control, the lack of 
a fine line of control, and a chain of command, and to 
eliminate the micromanagement that is involved in the day-to-
day operations. Again, while I believe this is a very good 
plan, I don't say it has to be the plan. I look forward for the 
new chairperson to come on board and for the Board to revisit 
this reinvention proposal.
    Mr. Porter. Gentlemen, do you want to comment on that at 
all?

                        Benefit Payment Accuracy

    Mr. Kever. Oh, yes, I would like to comment on that, if you 
don't mind.
    [The information follows:]

    Statement by Mr. Kever Concerning Audit of Financial Statements

    For the record, I would like to clarify that the Office of 
Inspector General's report on our fiscal year 1997 financial 
statements included a disclaimer of opinion because (1) the 
auditors were unable to obtain sufficient audit evidence to 
determine what adjustments, if any, are required to properly 
account for and report benefit payments and (2) information was 
not yet available for the auditors to apply sufficient 
procedures to the receivables, payables and revenue amounts 
related to the financial interchange with the Social Security 
Administration.
    In a separate evaluation of internal controls, the Office 
of Inspector General reported material weaknesses in the areas 
of (1) accuracy of benefit payments, (2) overall control 
environment, and (3) railroad retirement tax deposits. The 
existence of material weaknesses, however, is not always 
relevant to the type of audit opinion rendered as indicated by 
the omission of the overall control environment in the audit 
opinion.

    I would like to make one clarification. I think for the 
last 2 years, if I am not mistaken, the audits have shown that 
the accuracy of the payments that we have made show virtually 
no errors being made, and Mr. Dickman, is that a fair 
statement?
    Mr. Dickman. No errors?
    Mr. Kever. Virtually no errors being made in the 
computations that we have made on benefits for the last couple 
of years, versus what we might have incurred in the previous 
years, 3, 4, 5 and 6 out.
    Mr. Dickman. I don't have the figures in front of me, but I 
will be happy to provide them to you.
    [The information follows:]

                        Benefit Payment Accuracy

    Independent public accountants performing audits of the 
Railroad Retirement Board's fiscal years 1995 and 1996 
financial statements performed limited testing of the benefit 
payment accuracy and concluded that the error rate was in 
excess of 5% for all benefit payments and ``current year 
awards'' (these were cases adjudicated in fiscal years 1995 and 
1996 respectively and tested separately). Tests applied to 
``current year awards'' did not indicate improved performance.
    In connection with the Office of Inspector General's audit 
of the agency's fiscal year 1997 financial statements, we 
performed tests of benefit payment accuracy as a whole. We did 
not test cases adjudicated in 1997 and nothing about the 
accuracy of ``current year awards'' can be inferred from our 
data. However, our sample of cases, taken from the entire 
population of cases in current pay status, indicated an error 
rate in excess of 5%.
    Based on these results, we do not see any evidence of 
improvement in the accuracy of benefit payments.

       Statement by Mr. Kever Concerning Benefit Payment Accuracy

    The point I was making was that, as a part of the financial 
statement audit, virtually no errors were found for those cases 
initially adjudicated during the past 2 fiscal years. As part 
of the 1997 financial statement audit, our Bureau of Quality 
Assurance recomputed benefits being paid to 93 annuitants. Four 
of these were awards initially adjudicated in fiscal year 1997. 
All four were accurate. In the previous year, the audit 
included 59 cases with awards initially adjudicated in fiscal 
year 1996. Of this group, errors that will result in reopening 
cases were found in only 2, or 3.4 percent, of the cases 
reviewed.
    Increased automation has led to a high level of benefit 
payment accuracy during the past few years. For each year from 
fiscal year 1992 through fiscal year 1996, the overall benefit 
payment accuracy rate for initial claims processing (new 
entrants on the retirement rolls) has exceeded 99 percent. For 
fiscal year 1996 initial claims processing, we achieved an 
overall payment accuracy rate of 99.45 percent. We will 
conclude our review of 1997 initial claims processing within a 
few weeks and would be pleased to share those results with the 
committee. Further planned automation will continue to improve 
accuracy.

    Mr. Kever. I believe that that is the case, and I think 
that strengthens the fact that we need to continue the 
technology initiatives that we have had to improve the accuracy 
of our benefits. I really look forward to a new Chairman coming 
in so that we can discuss another way to manage this agency. It 
is difficult for me to believe, in view of the fact that we 
have had such great improvements that we are doing something 
wrong.
    I am very pleased with what our managers have been able to 
accomplish, in spite of the FTE reductions. I think it is a 
matter of personal management style as to how we run this 
agency, but we always look forward to receiving other input and 
trying to figure out if there is a better way to run the 
agency. So you can rest assured when the new Chairman comes on 
board we will revisit this issue again.
    Mr. Porter. Thank you.
    Mr. Speakman. Mr. Chairman, if I might just elaborate a 
moment on that.
    Mr. Porter. Yes, please.

            Detailed Response Concerning Material Weaknesses

    Mr. Speakman. I share the points raised by both Mr. Dickman 
and Mr. Kever with regards to the areas of material weakness 
that the IG has alluded to. I think these are important issues 
that warrant a thorough discussion, and I think we need to 
elaborate on those in the form of an answer to you that allows 
not only just myself to respond to them, but for you to have 
the benefit of the new Chair and Mr. Kever with regards to 
these issues, and let us present a very detailed response to 
that question. We clearly appreciate the areas that have been 
identified. We may have an area or 2 that we may have a 
disagreement on, and I think we need to articulate and identify 
those areas for this committee.
    Mr. Porter. All right. Why don't you do that then for the 
record.
    Mr. Speakman. Thank you, Mr. Chairman.

            compliance with debt collection improvement act

    Mr. Porter. Will the RRB fully comply with the provisions 
of the Debt Collection Improvement Act, which requires that all 
payments be made electronically by January 1, 1999, except in 
certain limited circumstances? What percentage of payments do 
you estimate will be made electronically by the end of fiscal 
year 1999?
    Mr. Kever. Mr. Chairman, right now we are in compliance 
with the electronic funds transfer requirement, and what 
percent are we at now? We are up to 70 percent at this point.

                       claims processing redesign

    Mr. Porter. All right. What is the status of claims 
processing redesign?
    Mr. Kever. My goodness. I am not sure I understand the 
question. Redesign?
    Mr. Porter. We will make it more specific and you can 
answer it for the record.
    Mr. Kever. Okay. Thank you.
    [The information follows:]

      Statement by Mr. Kever Concerning Claims Processing Redesign

    The Board does not have a specific ``claims processing 
redesign'' initiative. We have, however, made certain 
organizational changes to improve the overall efficiency of the 
Board's benefit programs.

               recommendations by reinvention task force

    Mr. Porter. For the record, please indicate the status of 
the 34 recommendations made by the reinvention task force. I 
think you can answer that entirely for the record.
    [The information follows:]


[Pages 80 - 83--The official Committee record contains additional material here.]



                    lease of field service vehicles

    Mr. Porter. Last year, Chairman Bower testified that he did 
not believe the field services needed to lease 8 vehicles.
    What is the status of this practice in the field?
    Mr. Kever. There has been no change in that status. 
However, on the recommendations, the reinvention 
recommendations that you had mentioned, we have substantially 
implemented almost all of those recommendations at this point. 
I think there may be 2 or 3 that are still in the process, or 
we have decided that we could not do them, but we are 
substantially complying with those.
    Mr. Porter. All right. If you will indicate the 2 or 3 for 
the record, please.
    Mr. Kever. Sure.

                 outsourcing data processing operations

    Mr. Porter. What is the status of the agency's effort to 
outsource all data processing activities? Does the current 
Board still consider this initiative a priority and have 
security issues been resolved with the IRS?
    Mr. Kever. Each year we are asked by the Office of 
Management and Budget whether we can outsource our data center, 
and each year the response is basically that the Internal 
Revenue Service, under the Privacy Act, would not allow us to 
do that. We have not had formal discussions with any other 
Federal agency that would be able or be capable under the terms 
of the Privacy Act to allow them to operate or to run our data. 
It would certainly be our intention to look into that. I 
believe I am speaking for myself, I would think I would ask our 
managers to look into that and to start a dialogue with other 
Federal agencies.
    The Treasury Department does of course do our check writing 
for us, and so that is an outsource that we did many, many 
years ago. So we would be happy to look into that and report 
back to the committee.
    [The information follows:]

   Statement by Mr. Kever Concerning Outsourcing Computer Operations

    No further actions have occurred regarding outsourcing our 
data center operations. The Railroad Retirement Board (RRB) is 
prohibited by the Internal Revenue Code from employing outside 
contractors to process tax data for a purpose other than tax 
administration. The Internal Revenue Service (IRS) has informed 
us that the RRB may disclose this information only to officers 
and employees of the RRB, and then only for the purpose for 
which it was received. This need to safeguard the tax data 
which is embedded throughout our systems and files effectively 
precludes us from contracting out our data center.
    In light of the legal issue involving safeguarding the IRS 
tax data used by the RRB, we do not plan to take any further 
action at this time on data center consolidation. However, 
after we have successfully concluded our Year 2000 project, 
which impacts on virtually every mainframe system, we will 
pursue the possibility of using or sharing the data center 
resources of other Federal agencies, to the extent that this 
could be accomplished without violating the safeguarding 
requirements specified in the Internal Revenue Code, or 
adversely affecting the mission of our agency

    Mr. Porter. Thank you.

                           recurring reports

    Last year, Chairman Bower testified that Federal statute, 
regulatory and other directives required the RRB to produce 110 
recurring reports. Can you provide a list of the reports, the 
law and the regulation or organization that requires them, 
identify specific committees and subcommittees that require 
congressional reports? Please tell us generally whether this 
problem is a serious one, and whether it is getting better or 
worse.
    Mr. Kever. Mr. Chairman, I don't believe that the problem 
is a serious problem for our agency, but I will have to get 
back to you with the detail of the 110 reports and who requests 
them and where they go.
    [The information follows:]

    Recurring Reports Required by the Congress and Federal Agencies

    The number of recurring external reports required by the 
Congress and Federal agencies has increased to 119. The 
following list provides the report title, the directive that 
requires the report, and the organization for which the report 
is compiled.
    Collectively, the reporting burden is significant. 
Individually, it is generally understandable why the requesting 
organization is gathering the information. Little change has 
occurred in the recurring reporting burden.


[Pages 86 - 100--The official Committee record contains additional material here.]



    Mr. Porter. Gentlemen, thank you very much. You have 
answered all of our questions. As I said, they are in the 
context of an agency that we feel is doing a very good job and 
we appreciate very much your coming in to testify this 
afternoon, and Robert Rose, your CIO coming in to testify this 
morning. Thank you so much.
    The subcommittee will stand briefly in recess.
    [Brief recess.]
    [The following questions were submitted to be answered for 
the record:]


[Pages 102 - 179--The official Committee record contains additional material here.]



                                          Thursday, April 23, 1998.

                    UNITED STATES INSTITUTE OF PEACE

                                WITNESS

DR. RICHARD H. SOLOMON, PRESIDENT, USIP

                        Introduction of Witness

    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the Fiscal Year 1999 budget, and are 
pleased to welcome Dr. Richard Solomon, the President of the 
United States Peace Institute.
    Dr. Solomon, I am obviously sympathetic to your budget 
request and to the additional funds you are requesting for the 
Bosnia initiative and would like to learn more about it and, as 
you know, I am a long-time fan of the Peace Institute. But I 
remain a greater fan of what the Institute could be perhaps 
than what it is.
    I have discussed my vision of the Institute as a 
professional degree granting institution that would be a 
counterpart to the War College. Obviously, given current 
resource levels, that is no more than a vision at this point in 
time. But I believe that within current constraints, the Peace 
Institute can play an enormously important role in providing 
practitioner training worldwide, and I believe that the 
Institute could be doing a lot more within current constraints 
than it is doing in that regard.
    At last year's hearing, Dr. Solomon, you testified that the 
Institute had hired a top-flight individual to develop 
practitioner training at the Peace Institute. That individual 
did not serve out the fiscal year. The Institute apparently has 
not even advertised for a permanent replacement, and does not 
intend to do so in the near future.
    I asked staff to obtain a list of practitioner training 
activities conducted and planned, including the number of 
people trained. I also asked for a list of requests for 
training that were not accommodated by the Peace Institute.
    According to the information we received, the Institute has 
trained about 200 individuals in 1997. You are requesting about 
$1,500,000 for education and training in 1999. For that amount 
of money, I hope that we will see a dramatic expansion in the 
number and scope of training sessions and the number of people 
trained. I also hope that you will not turn down requests in 
the future.
    I am obviously going to give you a chance to comment on 
this shortly, but I would like to see three things happen--one, 
fill the Training Director's position with a permanent top-
flight person, dedicate more resources to training within your 
existing budget constraints and, thirdly, produce more with the 
funds that are already being dedicated to training.
    And with that, please let me hear your opening statement, 
and then we will go to questions.

                           Opening Statement

    Dr. Solomon. Thanks very much, Mr. Chairman, I am really 
honored, along with my colleagues, to have another chance to 
discuss with you the work of the Institute, to review our 
annual budget, and to talk about our future programs. And I 
appreciate the candor and the directness with which you have 
raised a number of very serious issues which we have given a 
great deal of thought to. This opportunity today to go into 
some detail, I think, is a very healthy thing. I look forward 
to answering all of your questions because I share many of the 
same concerns that you do about the quality and the scope of 
our training activities.
    With that said, let me read a very brief, truncated version 
of my formal testimony which I have submitted to you.
    As you know, today we have come prepared to discuss our 
Fiscal Year 1999 budget request of $12,595,000. This amount is 
$1,100,000 more than the President's Fiscal Year 1999 budget 
request for the Institute, reflecting our proposal to you for 
additional support for our proposed Special Initiative on 
Bosnia, which you have already referred to.

                     new level of institute effort

    Let me say, Mr. Chairman, that our budget request reflects 
a new level of Institute effort in areas that are central to 
America's foreign relations. Our programmatic work, as you 
know, is designed (1) to support policy makers in developing 
new approaches to managing international conflict, (2) as part 
of that to train practitioners, both within and outside the 
U.S. Government, in practical conflict management and 
resolution skills, and (3) to prepare the next generation of 
young Americans to understand and be able to act on the 
international conflicts that we anticipate will be what they 
will encounter in the 21st century.
    We are, as you know, approaching a new millennium, at the 
end of what has been the most violent era in human history. 
Traditional diplomacy, the foreign affairs institutions which 
served us well during the Cold War Era, are frequently proving 
to be ill-suited to meeting the contemporary challenges of 
securing stability and human justice abroad.
    To meet these challenges, the Institute has been working to 
develop new approaches and new instrumentalities for managing 
the political turmoil and the human suffering that result from 
failing nation states, ethno-religious conflicts, and the 
ambitions of local tyrants.
    I believe if we are going to make this coming century and 
the coming millennium less destructive than the current one, 
the United States, as a country, must take the lead in 
developing a new culture and a new practice of international 
conflict management.
    Today's professionals must be rapidly trained to meet the 
complex new challenges of the post-Cold War Era; and the next 
generation of Americans, now at secondary and college-levels of 
education, must be equipped to manage international conflict as 
they will encounter it in the coming decades.
    Success in preventive diplomacy, in ameliorating conflicts, 
and in post-conflict reconciliation means not just saving 
lives, but also saving U.S. taxpayer dollars.
    With each passing year since the end of the Cold War, Mr. 
Chairman, we have found growing demand for the Institute's 
training programs, for our publications and inventive 
approaches to diplomacy--from Congress and such Executive 
Branch agencies as the National Security Council, the 
Department of State and the U.S. military. The Institute, I 
believe, is a highly cost-effective national center of 
innovation that is helping our country to translate such 
concepts as preventive diplomacy and war crimes accountability 
into operational reality.

                           bosnia initiative

    Responding to your earlier invitation, I want to highlight 
our Bosnia initiative, which provides an especially clear 
illustration of the cumulative effect of our work on a high-
priority national security commitment. The Institute's Bosnia 
activities, led by my colleague Harriet Hentges and with 
important leadership as well from Ambassador John Menzes, who 
is with us here today, these activities are designed to support 
the U.S. Government in stabilizing the Dayton peace process and 
facilitating reconciliation in that society.
     Building on more than ten years of Institute work on peace 
settlements, and two years of activity in support of the 
implementation of the Dayton Accords, our proposed Special 
Initiative on Bosnia and the Balkans is designed to foster a 
culture of peace and reconciliation in that country, and to 
build on the work we and others have done there to make the 
Dayton Agreements stick.
    We have laid the foundation for these proposed expanded 
efforts through the Institute's special expertise in matters of 
war crimes accountability, led by Neil Kritz--who also is with 
us here today--the Director of our Rule of Law Initiative. Our 
work also reflects past activities on the role of religion in 
conflict, and conflict resolution skills training and 
education. These areas of expertise allow us to fill the gaps 
in implementing the Dayton Accords, to complement the efforts 
of other U.S. Government agencies, and to support the work of a 
variety of private sector humanitarian assistance activities in 
the region.
    In light of the nearly $10,000,000,000 already expended on 
peacekeeping in the Balkans, our proposed budget increase of 
$1,100,000 for the Institute's Special Initiative is a modest 
and cost-effective approach to increasing the chances for 
successful implementation of the Bosnia Accords. These efforts 
have special urgency, of course, in light of the 
Administration's plan to extend the U.S. military presence in 
Bosnia.
    We are working today with key religious leaders in Bosnia 
to support their efforts in promoting reconciliationprograms.
    Our work with Bosnian justice officials has led to our 
being requested to design a Truth and Reconciliation Commission 
for the country to deal with the human rights abuses of almost 
five years of conflict. Such a commission would complement the 
efforts to prosecute war criminals through the Hague Tribunal 
and domestic courts in Bosnia.
    The Institute's conflict resolution skills training program 
continues to be an integral part of our work in Bosnia. We are 
planning to incorporate this training into work with the 
religious leaders, media, NGOs, educators, and community 
leaders. In addition to these training sessions conducted by 
the Institute staff, we also support the efforts of other 
training organizations through our grant program. So some of 
the numbers of people trained that you mentioned are, in fact, 
substantially expanded through our grant programs I will 
comment on shortly.
    Our varied work in Bosnia led a number of NGO organizations 
there to request in 1997 that the Institute organize a policy 
forum, now called the Bosnia Working Group, that Harriet 
Hentges heads, for purposes of policy development and 
coordination of public and private sector efforts in support of 
the Dayton process. The Bosnia Working Group enables 
administration and private sector personnel to share 
information and helps articulate needs and identify gaps in the 
implementation process.
    I focused on this activity in Bosnia, Mr. Chairman, not 
only because of its urgency in operational terms, but also 
because it demonstrates the effective integration of the 
Institute's varied programs of analysis, training, education, 
and action in support of the Dayton accords.

                         practitioner training

    Let me, in particular, focus on our training programs for 
practitioners because practical training is, and will remain, 
the heart of our mandate and our work.
    The Institute's conflict resolution skills training 
programs are aimed at increasing the operational effectiveness 
of those on the front lines of conflict. Each training session 
we have conducted has generated new demands for such training, 
and has identified new forms of support for practitioners. For 
example, one participant in a training session we conducted in 
collaboration with the U.S. Army's Peacekeeping Institute at 
Carlisle, Pennsylvania, was almost immediately assigned to head 
the office of a major NGO in Sarajevo. This individual then 
asked us to offer a similar training program to some 60 NGOs 
now working in Bosnia. So our activities are clearly generating 
a lot of interest and demand for more of this activity.
    Participants in this earlier session also identified the 
need for a military-NGO handbook that would help these two 
cultures work together more effectively in Bosnia. The 
Institute has then developed this handbook in collaboration 
with the U.S. Army's Peacekeeping Institute.
    As another example, a U.S. Army officer, who was recently 
in residence as a senior fellow at the Institute, has just been 
named commander of the U.S. Brigade in Tuzla, and has requested 
that we provide him the handbook and other materials developed 
by the Institute to enable his troops to work more effectively 
with NGOs and other organizations in Bosnia. So this activity 
is not academic. It is very much practical, and it is feeding 
right into, in this case, the Bosnia peace process.
    We have conducted conflict resolution training sessions 
over the past three years in the Balkans for foreign affairs 
professionals, diplomats and NGO workers from the various 
states of the region. And from those sessions have come 
additional requests for training that, given our resources, 
frankly, are just too numerous for us to fulfill.
    We have been asked by a participant in one of those 
sessions to conduct conflict resolution and negotiating 
training for a team named by President Rugova of Kosovo, to 
prepare his team to negotiate with Serbia if, and when, talks 
between the two sides take place. And, of course, the 
successful completion of those talks could lead to the 
resolution of a serious conflict in the Balkans which otherwise 
might escalate into massive violence and upset the efforts of 
the Dayton Process effort to stabilize that particular country.
    This experience demonstrates the need for our conflict 
resolution skills training to be tailored to the requirements 
of a specific conflict, which would then have a direct and 
positive impact on its resolution. We are now making plans to 
conduct this training in Kosovo, and will offer a similar 
training program to Serbia, if they request. Harriet Hentges, 
who has been taking the lead on this training activity, will be 
glad to describe it in more detail.
    Apart from the Bosnia work, Mr. Chairman, in Fiscal Year 
1997, the Institute directly trained over 200 foreign affairs 
professionals, including U.S. and foreign military officers, 
U.S. Government officials, U.N. representatives, and the staff 
of major NGOs in conflict resolution skills.
    In addition, the Institute supported through its grant 
program conflict resolution training of an additional 350 
individuals, including Cambodian diplomats, government and 
community leaders in the former Yugoslavia, and refugee camp 
workers.
    These training programs are practical, they are hands-on, 
and they emphasize understanding of particular international 
conflicts. Their practical nature is assured in three ways: the 
trainers are professionals with real-world experience; the 
participants include individuals who have experience in dealing 
with real-world conflicts; and the training programs include 
practical examination and role-playing exercises based on 
actual situations.
    I particularly want to highlight the Institute's 
collaboration with the U.S. Army's Peacekeeping Institute. For 
the fourth year in a row, the Institute is collaborating with 
PKI on a week-long workshop dedicated to improving negotiating 
and mediating skills, as well as coordination among civilian 
and military organizations involved in peace operations such as 
Bosnia. Following the Institute's contribution of sections to 
the 1995 Joint Commanders Field Handbook, the Institute and PKI 
have collaborated, as I mentioned earlier, in developing a 
military/NGO handbook to improve cooperation in peacekeeping 
operations.

                   ethnic violence in central africa

    A further example of the practical relevance of our work, 
Mr. Chairman, could be illustrated by the horrendous ethnic 
violence that we are all too much aware of in the Great Lakes 
region of Central Africa--Rwanda, Burundi, and Zaire--which 
was, of course, highlighted during the President's just-
concluded trip to that region.
    The Institute has done considerable work, again with Neil 
Kritz in the lead, in areas of transitional justice and 
assessing the impact of the current turmoil in Zaire and its 
nine regional neighbors.
    In addition, the Institute continues to fund the Great 
Lakes Policy Forum which, much like the Bosnia Policy Forum,is 
a coordinating body for planning and operations conducted by the U.S. 
Government together with NGOs in the countries of Central Africa.
    Well, that is a very compacted version of the Institute's 
various training activities. Let me just conclude with some 
comments about a longer-term vision for the Institute.
    I believe that the sum of our current activities and the 
significance of the Institute's mandate to the Nation's foreign 
affairs needs underscores the relevance of our efforts to move 
to a new level of institutional capacity.
    The Institute is working hard to pioneer new approaches to 
training foreign affairs professionals, to help the government 
and the NGO community become more effective collaborators in 
international peace and conflict management efforts. And I 
believe we are also serving a fundamental U.S. national 
interest by educating new generations about the international 
landscape they will face in the new century.

                    permanent headquarters facility

    This leads me to the concluding point I want to make 
regarding the future of the U.S. Institute of Peace, and that 
is our project to build a permanent headquarters facility here 
in Washington.
    As you know, in the fall of 1996 Congress set aside for the 
Institute a three-acre tract of land next to the National Mall, 
at the northwest corner of 23rd Street and Constitution Avenue, 
as the site of our permanent home.
    In addition, legislation passed in 1992 authorized the 
Institute to accept private donations for the purpose of 
building a headquarters facility. We are now in the process of 
organizing a capital campaign to raise the construction costs 
of the building from the private sector, thus making the 
headquarters project a true public-private partnership.
    From a functional point of view, a building at this 
location will significantly enhance our professional training 
and policy development work, given the ready access of the site 
to the State Department--which is just across the street--as 
well as to the Pentagon, the White House and Congress, which 
are not very far away.
    This facility will give us unprecedented opportunities for 
public education in view of the large numbers of students and 
citizens who visit the Mall each year.
    We intend the new headquarters facility to be equipped with 
state-of-the-art electronic capabilities for video-
conferencing, Internet connectivity, and interactive computer 
teaching, thus giving the Institute national and global 
outreach for training activities, educational programs, policy 
seminars and research work.

                        appreciation for support

    Mr. Chairman, in closing I just want to stress the 
appreciation of the Institute for Congress' support of our 
work, and for your support in particular.
    As the committee deliberates our Fiscal Year 1999 budget 
request, I would again stress the Institute's hands-on efforts 
to train professionals in the skills needed to prevent, 
ameliorate, or resolve conflicts such as those in Bosnia, 
Central Africa and East Asia, which I have noted here either 
today or in prior presentations.
    With your continuing support, I believe we are maturing 
into a true national asset in the on-going striving to build a 
less violent world.
    Again, I appreciate your consideration of our testimony. My 
colleagues and I will be glad to answer all your questions, 
including the ones you have already put on the table. Thank 
you.
    [The prepared statement follows:]


[Pages 188 - 212--The official Committee record contains additional material here.]



    Mr. Porter. Thank you, Dr. Solomon. That is an excellent 
statement that does address a lot of my concerns. Please 
understand that these questions come from a friend and a fan of 
the Peace Institute, although they are fairly tough questions, 
but I think by our looking deeply into these matters, we are 
going to get a greater understanding of what you are doing and 
see if we--I am sure we want to move in the same direction.

                   responding to request for training

    Dr. Solomon, the Peace Institute turned down requests for 
training by Albania, Cambodia, Kosovo, the Tanzanian Embassy, 
the Tunisian Ambassador, and the Turkish Ambassador. You turned 
down the Foreign Service Institute, the State Department, the 
USIA, the Peace Corps Crisis Corps, the Bosnian Task Force, the 
Army Peacekeeping Institute, although you talked about both, 
and other U.S. Government agency requests. You turned down the 
OAS, the OAU, and the OSCE. And this is information that we got 
by specifically asking our staff to get it from yours.
    Dr. Solomon. Correct.
    Mr. Porter. I am concerned that we have lost these 
opportunities to impact international conflict, and concerned 
that you have not redirected funds from more academic and 
library work to respond to these requests. And I am also 
concerned that we were not aware that these specific 
opportunities were being missed.
    Why has this happened, and why have not resources been 
redirected?
    Dr. Solomon. First, let me say I share many of your 
concerns, but what I would like to do in responding to your 
fair and tough questions--I would not expect you to be anything 
less than as frank as you have been--let me try to put the 
turn-downs in a broader perspective, because we are not a 
``turn-down'' organization. We are, in fact, running to catch 
up with a demand which, in fact, is being stimulated by the 
other side of the ledger, which is all that we are doing.

                  importance of practitioner training

    First, let me say that this is a new area of activity for 
just about everybody. We began our training programs in 1994. 
So this is about a four-year-old effort and so it is very much 
a work-in-progress. But it is an area of activity that is 
absolutely central to our mission. And much of the work that we 
sponsor in the way of background research through our grant 
program and our policy development work is laying the 
groundwork that makes our training programs effective. We are 
not an academic organization, even though we draw on the 
analytical work of the universities and the think-tank 
community. Our purpose is to bridge the gap between analysts 
and practitioners and to raise the level of practical hands-on 
training for the people who are at the front lines of these 
conflicts, as I have mentioned.
    Now, in that context, if you were to graph the number of 
people we are training, it is clearly taking off--it is an 
exponential curve. In 1997 we trained 200. This year we are 
training 400. In 1999 we are scheduled to train almost 500. So 
the curve is clearly up.
    What are the constraints on doing more--to respond 
specifically to some points you raised at the outset? It is 
essential, as we pick up on this area of activity--which has 
been pursued by a number of academic centers--that we produce 
something of the highest quality and practical value because, 
again, this is not just academic training.
    You mentioned a management position that has been vacant. 
All I would say on that point is that we have not been 
satisfied with the quality of leadership in terms of it being 
practical and as effective as it should be. For that reason, we 
are in a period of taking a very serious look at the special 
requirements and attributes of our training program, and making 
sure that we are providing practical training that makes the 
kind of sense that I think you and I would agree is not just 
designed for university communities separated from practical 
application.
    We also felt that after three, three and a half years of 
this training it was prudent to step back and assess what we 
were doing. For that reason--and I should add that our Board of 
Directors, concerned as we are with having the highest quality 
training, wanted to make sure that they were comfortable with 
the assumptions and the approaches of training that we were 
pursuing--led by a very competent member of our staff, Pamela 
Aall, who is with us today, we have been doing a reassessment 
of our place in this training universe. That is who the targets 
of our training should be; the intellectual assumptions of our 
work; and the best methodologies for making our training truly 
practical. And I think we have made significant progress in 
that regard. It was our feeling until we had thought through 
exactly what we were after, to go out and hire an individual 
who might not meet our needs, frankly, did not make a lot of 
sense. But I and my other colleagues, Harriet Hentges in 
particular, and Pamela Aall, are spending a great deal of time 
focusing on an issue that otherwise might be dealt with in a 
somewhat different way organizationally. This is only my way of 
saying that this activity has the highest level of attention 
within the Institute, precisely because we take it so 
seriously.
    Let me talk about the issue of more resources. One of the 
things that we have found as we have gotten more deeply into 
this area of activity is that the number of individuals capable 
of doing effective training is not as large as we would like. 
Therefore, we did not want to just throw money at an activity 
if we could not guarantee the quality of the work that we are 
doing.
    And we are now in a process of training more trainers and, 
therefore, making it possible to do the increases in numbers 
that I mentioned earlier. So, to some degree, just putting more 
money into this activity is not going to solve the problem.
    In Bosnia it is clear we can do some very significant 
things with added resources, and we will detail that more for 
you. But what I want to give as my bottom line to you is--I 
want to assure you that we at the leadership of the Institute 
see our training activity as central to our mission. We are 
determined to take the start that we have begun over the last 
four years and build on it and turn it into an absolutely 
first-quality activity. Frankly, I would just say that the 
level of requests that we continue to get as we do these 
training programs, I think, indicates that we are generating a 
kind of activity that already is highly in demand. But, again, 
if we were to make a false start--and there has been criticism 
of some of the other training activity that is carried out that 
is not quite as plugged-in to the operational aspects of 
implementing policy that ours is--I think you might be asking 
me other kinds of questions. And so we want to make sure we get 
it right.
    I think we should spin out a little more in our discussion 
of our Bosnia work, how we intend to put more resources into 
this activity in support of the numbers of trainees that will 
increase because, again, I want to reassure you that our 
objective, and yours, are exactly the same, not just for the 
short-run in training the practitioners, but for the longer-run 
in terms of building a broad training program that, in the 
fullness of time, could grow into, let us say, a degree-
granting level of training.
    Mr. Porter. Well, Bosnia represents, obviously, a very 
immediate need. On the other hand, if you think of the training 
that you might be able to do that would head off, rather than 
just direct at immediate conflict, head off potential 
conflicts, there is so much good you can do that--obviously you 
are as frustrated as we are--that it cannot all be done and 
done immediately.

                         reimbursable training

    Let me ask you, have you considered offering your services 
on a reimbursable basis? I am going to discuss with you the 
Federal Mediation and Conciliation Service in a minute.
    I was, frankly, surprised to learn that they did any 
international work, but I found out last year that they 
provided over 1,000 hours of training and education services 
around the world on a totally reimbursable basis. These 
included sessions in Bosnia and with the OAS, for example. In 
addition, over 300 foreign nationals spent time in the U.S. 
learning from FMCS employees. Have you considered trying to 
expand your training activities through fully or partially 
reimbursed projects of this type?

                           training in kosovo

    Dr. Solomon. In the immediate future, the reimbursable 
approach, again, does not solve the current problem, which is 
to get the focus right and to have trainers who we have 
confidence in. I think over time this could well be an 
approach, but to go back to your earlier point of trying to get 
involved in training activities that would really prevent a 
conflict, I think the work that is now just being put together 
in terms of Kosovo is a good example of training negotiators 
and could be an absolutely critical negotiation to head off a 
real confrontation between Serbia and Albania.
    Harriet, I do not know whether you would like to add 
something to that activity.
    Dr. Hentges. Yes, because the request for the training in 
Kosovo grew out of an earlier training that we did. And I think 
it is fair to characterize the training that was done in the 
first couple of years as a period of testing, a period of 
investment, and a period of growth. And we are beginning to see 
the effects of that investment and of that testing because it 
was out of two trainings--three trainings, actually--that we 
did in Southeastern Europe that the two requests for training 
in Kosovo came.
    We have learned a great deal in this period of how to 
organize and package the trainings in a way that they are very 
specific to the needs of the participants. In this case, in 
Kosovo, we know the kinds of training that they think would be 
helpful, and we are assembling the team that would be able to 
provide that.

               federal mediation and conciliation service

    I want to relate this to your question about the FMCS. What 
we have discovered is that there is not a great deal of 
appreciation for conflict resolution training within the 
budgets of foreign governments, not even within ours. So, there 
are no funds available to do training on a reimbursable basis. 
And in this period where we have gone to key members of the 
State Department or Department of Defense, and have identified 
the people that we think need training, there are not the 
budgets to reimburse for that training. And so we did not want 
to withhold that training because they did not have the funds. 
And the same is true of Kosovo; it would be out of the question 
that the government of President Rugova would have the funds to 
pay for training.
    We have had a number of exchanges with the Federal 
Mediation and Conciliation Service over the last year. We got 
insight into how they craft their training and why they are 
able to do this on a reimbursable basis. Some foreign 
governments are trying to ward off bigger expenditures by 
having some of the training in mediation and arbitration that 
FMCS provides.
    We would hope sometime in the future that our own 
Government would have budgets for training that would recognize 
the importance of this, put a value on it, and that we would 
receive reimbursement for training. But right now the audience 
is one that we need to bring in, train, convince, market, and 
so we are giving our services.
    Mr. Porter. Well, I think that their international 
experience would be different than yours, in that they might be 
working with European countries, for example, where they have 
resources available for these kinds of things, and you are 
working in areas that may be much more tenuous as far as their 
resources are concerned. But they are working in certain areas 
also that you would not think would have resources for this.

                          earmarking aid funds

    I think your idea about perhaps putting into our aid 
packages a kind of earmark for conflict resolution training 
might be a very good one. In other words, put the money in 
their budgets, do not try to get it into a mode where you have 
the resources, but have them have the resources, and then you 
get reimbursed for offering the service.
    Dr. Solomon. That is an excellent idea because we find 
increasingly American Ambassadors abroad come to us and say, 
``Can you help us''. For example, the Ambassador to Cyprus 
called me about four months ago and said, ``We want to promote 
a dialogue among the Greek and Turkish communities, we have 
seen your writings about power-sharing structures, could you 
send some folks over''.
    We did send over two of our staffers, and they began what 
could be a very interesting ``Track-2'' kind of dialogue among 
those communities.
    Mr. Porter. Well, I knew Ambassador Brill was very smart. I 
was there earlier this year, with a congressional delegation, 
and spent a lot of time with the Ambassador, and I was very 
impressed with him. And, obviously, he is one who is really 
trying to get two communities that have been at loggerheads for 
a long time together in some sense, and I am glad to know that 
he was tapped-in to the Institute and seeking your services.
    Dr. Solomon. Maybe you suggested it to him.
    Mr. Porter. Well, we did talk about some things. No, I 
think he probably----
    Dr. Solomon. Let me make one other comment that I think 
underscores what, for me, is the critical importance of this 
work. This was the comment in my formal statement that I think 
we, as a country, have to take the lead in developing culture 
and a practice of managing conflict by nonviolent means.
    And in my meeting with Dr. Wells, of the FMCS, we came up 
with one very important thing that I am trying to interest the 
State Department in. That is, in China today they are starting 
to put large numbers of workers out on the streets because they 
are downsizing their state-owned enterprises.
    One of the things that came out of Jiang Zemin's visit here 
last fall was a rule of law initiative in the China 
relationship. It seems to me that getting the FMCS people to 
work with the Chinese in thinking about how to deal with 
workers who are out on the streets, not with troops with guns 
but through a mediation process, is precisely the kind of 
``technical assistance'' that we have a leg up on given the 
experience we have had in this country. That, in the broadest 
sense, is the mission I see for the Institute. We are blessed 
with over 200 years of history of politics where our conflicts 
are played out politically, not violently. That is an 
experience we should be making available around the world. It 
is the focus of all that I try to bring to this job as we build 
the Institute.
    And I would, again, only say that our programs are very 
much a work-in-progress. Our training activity really only 
blossomed with the end of the Cold War, but I believe that the 
very numerous examples of the requests for training demonstrate 
that what we are doing, while it is not enough to meet the 
need, is in the right direction.
    Mr. Porter. I agree with that, and somehow we have to find 
how we can meet the need because unfulfilled need means 
untapped opportunities and missed opportunities.

           more on federal mediation and conciliation service

    Let me ask about your meetings with Dr. Wells and the FMCS. 
You have had some exploratory kinds of meetings, and you just 
mentioned that you had some talks about what is going on in 
China. How do you view the opportunity to work together with 
this Institute that is engaged in conflict resolution of a 
different type than yours, and can you really learn from one 
another, and is this a positive experience that you can build 
on?
    Dr. Solomon. We have worked already with one of their 
staffers in a training program that we ran in Greece for Balkan 
area diplomats, and that is just the start. As you know, there 
has been a turnover in the senior leadership at the FMCS, but 
we see this as a relationship that should be developed with the 
new Director.
    Harriet has had several other meetings with them. You 
should comment in more detail.
    Dr. Hentges. Yes. At our first meeting, Mr. Chairman, we 
were interested to find that each of us had expertise that the 
other would have found useful at a certain time. When they 
first started going overseas, responding to requests, they 
lacked expertise that we had in particular areas; they said, 
``We wish we had known of that''. They in turn have done some 
training and have packages and materials that are very useful 
to us.
    The individual with whom we collaborated and we asked to be 
partof our team, is a specialist in mediation and he fit in 
very nicely with our team, and we were able to identify some follow-on 
programs for further collaboration. In fact, we have had some recent 
meetings on that as well.
    At one of the last meetings we had before the recent 
personnel change there was agreeing to look for an opportunity 
where we might jointly do a training program. That will take 
some special planning and care because it will have to meet the 
strengths that we each have and fit the needs of the particular 
circumstance. But it was a very exciting exchange that we had 
among the staff. I think simply being aware of that resource 
was already important input for our own planning.
    Mr. Porter. I personally see this as a tremendous 
opportunity for the United States to impact a lot of other 
societies in very positive ways. These other societies look to 
us for having this kind of expertise in both the domestic 
labor-management area and in terms of resolving international 
problems. And George Mitchell and the Northern Ireland 
situation is a very good example.
    If we can provide those kinds of skills and that kind of 
training, it seems to me that in the long run it is going to 
save not only a lot of resources, but a lot of lives probably. 
So I think it is a very, very high priority. And while I 
realize that the development of the academic side--that is, the 
credibility on an academic basis of what you do is very 
important, that gives you standing and credibility that is 
necessary to have impact.
    I hope that you can see your way clear to emphasizing, as 
you said you are doing and going to do, the training side even 
more heavily. It seems to me extremely important.

                           bosnia initiative

    How specifically would the $1,100,000 requested for the 
Bosnia initiative be allocated? Is it funding primarily for 
salaries, for travel, for consulting fees, or exactly what?
    Dr. Hentges. I would be happy to address that, Mr. 
Chairman. The overall objectives for our work in Bosnia have 
been to enhance and create a culture of peace and 
reconciliation. That has been our focus.
    And there is a second part to this: to ``Bosnia-ize'' the 
process as quickly as possible so that it is not something that 
is dependent on the U.S. We are in the process of transmitting 
expertise and building capability and in each stage want to be 
able to withdraw that support because of what we have put in 
place there.
    The emphasis will be in our areas of strength--education, 
conflict resolution training, rule of law, religion--and the 
categories, if you look at the budget for the additional 
request on page 21, about 30 percent is for a dedicated staff 
full-time. This is labor-intensive work. It requires a lot of 
connecting of wires and follow-up; 40 percent for grants and 
fellows, and this is to stimulate expert and targeted work both 
to complement our efforts, and to extend our reach and build 
some capability on the ground; and then 30 percent is for 
special projects which includes our conflict resolution 
training, work with educators to be able to build on a 
successful models that we have for working with teachers here, 
to do that and adapt that to Bosnia. In that category is some 
of the travel money. I think we have allocated about $184,000 
for travel, because we have projects on the ground, or we may 
be bringing individuals from Bosnia and the region here. We 
would do, for instance, some training of religious leaders in 
conflict resolution, or in the media for the support for the 
Truth and Reconciliation Commission that was begun through our 
work in the Rule of Law. This would be in the category of the 
special projects as well.
    Mr. Porter. I am going to have a series of questions for 
the record that are very important. I am going to ask you to 
answer them as quickly as you can, but let me say, as far as 
FMCS is concerned, you are going to decide what you are going 
to do with them or not do with them----
    Dr. Hentges. Yes, the specific projects to follow-up on 
earlier conversation.
    Mr. Porter. And I am certainly not the expert that could 
tell you that there is a great deal that could be done, but I 
would ask that you explore this very deeply and see whether 
there are opportunities that really make a lot of sense for 
both agencies. Other than that, I obviously think very highly 
of the Institute and of the job you are doing.
    I just worry greatly that we are missing opportunities that 
I do not want to miss and I know you do not want to miss, and I 
think the suggestion that perhaps we could empower some of 
those who want the opportunity to get the training with some 
funds from our foreign assistance programs, and an earmark 
might be a very, very good way of addressing that and getting 
people into the programs. Obviously, you have some preparation 
that you have mentioned you need to do. I am sure you can do it 
even more efficiently if you have a lot of demand built up out 
there, especially those who can pay their way. And it seems to 
me that that approach might help everyone.

                     time for developing responses

    Dr. Hentges. Mr. Chairman, I would just like to correct the 
characterization of the list that we provided you of 
``approaches for the training.'' I would like to characterize 
it differently than ``turn-downs'' because these were requests 
that were made that we could not respond to at the moment, but 
which we are either now working on or in the future we may go 
back to. The timing was not right, or we had made prior 
commitments that had fully engaged our staff.
    So they are not lost opportunities yet. One that is on that 
list, Kosovo, it was a more general invitation the first time 
from Kosovo. The one most recently is more specific and, 
because of the nature of the conflict there, we thought 
important to respond to. So I want to give you confidence that 
these are not off the screen.
    Mr. Porter. Well, I assumed that. In fact, several of the 
ones that were on the list--Dr. Solomon had mentioned the Army 
Peacekeeping Institute--you had mentioned that you are working 
with, so the turn-down obviously was then picked up at a later 
point.
    Dr. Solomon. Well, it may have been another problem. We do 
a lot with them, so it may have been two different activities.
    Mr. Porter. Let us look forward a year from now to seeing 
what can be accomplished in terms of working much more and 
emphasizing much more the training aspect, and impacting all of 
these countries that need this kind of help.

                      training by teleconferencing

    Dr. Solomon. I appreciate the way you have put in neon 
lights the priority you attach to this issue. It is, again, 
something we share with you. We are looking for ``force 
multipliers'' to increase the impact of what we are doing. We 
will be moving into a new facility--a temporary arrangement in 
the fall that has a teleconferencing capacity. One of the 
things that is being made possibleby the information revolution 
is the capacity to run a training program via a teleconference link 
anywhere in the world where the opposite party has the capability to 
dial us up.
    So we will be looking at that as one example of how we can 
do a training program and get many more people involved than 
otherwise might be the case. We will be experimenting with 
these approaches.
    Mr. Porter. Are you on the Internet, by the way? I assume 
that you are.
    Dr. Solomon. Oh, yes.
    Mr. Nelson. Like gangbusters.
    Mr. Porter. Pardon me?
    Dr. Solomon. Like gangbusters, he said.
    Dr. Hentges. Visit our Home Page.
    Dr. Solomon. That is another way to broaden our outreach. 
We are putting our library facilities on the Internet so that 
people will have access to our material through the Net. It is 
a natural extension of this work.
    Mr. Porter. Thank you very much, Dr. Solomon. Thank you, 
Dr. Hentges and Mr. Nelson. Appreciate very much your 
appearance. We will stand briefly in recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 221 - 390--The official Committee record contains additional material here.]



                                         Wednesday, April 22, 1997.

                  CORPORATION FOR PUBLIC BROADCASTING

                                WITNESS

ROBERT T. COONROD, PRESIDENT AND CHIEF EXECUTIVE OFFICER
    Mr. Porter. The subcommittee will come to order. I 
apologize to everyone in the room for starting late. I was 
chairing a congressional human rights caucus briefing 
downstairs and was held over.
    We continue our hearings on the fiscal year 1999 budget for 
the Corporation for Public Broadcasting. We are very pleased to 
welcome Robert T. Coonrod, President and CEO of CPB, and I hope 
that you will take a few moments, either in the course of your 
prepared remarks or immediately following, to give us a sense 
of the direction you would like to take the Corporation for 
Public Broadcasting, the opportunities and obstacles that you 
face, and your personal priorities as the new CEO. And with 
that, I will ask you to proceed with your opening statement and 
then we will take questions.
    Mr. Coonrod. Thank you, Mr. Chairman, and I would welcome 
the opportunity to respond to those questions that you put to 
me. But first, just let me say it is an honor to be here, and I 
have submitted for the record written testimony, and I would 
like to summarize that briefly. But before I do summarize that, 
I would like to acknowledge your leadership, Mr. Chairman, and 
the support that this subcommittee has provided us in securing 
the increase for the fiscal year 2000 appropriation. For that, 
we are extremely grateful.

                           Opening Statement

    As you know, Mr. Chairman, under current law, all 
broadcasters must make a transition to digital broadcast by the 
year 2003. Public broadcasting does more than simply accept 
this Federal mandate. We are enthusiastic about it. It is an 
opportunity to expand dramatically the services public radio 
and television stations provide to every community across this 
country.
    A committee of public broadcasters has now been at work for 
16 months preparing for the transition, providing a central 
clearinghouse for the latest information about digital 
technology, acting as a sort of think tank to public 
broadcasting strategic planning, and providing a public service 
perspective to the broadcast industry at large.
    The Public Broadcasting Service and the Harris Corporation 
have launched the DTV express. It is a technological road show 
that will travel the country to educate broadcasters, civic 
leaders, educators, and the business community about digital TV 
and the promise that it offers to the American public.
    CPB is also working with public broadcasters, educators, 
and the creative community, to develop the innovative new 
programs and services that will make the promise of digital 
broadcasting a reality. We will see video, audio, and data 
converge into a new medium that can benefit all viewers and 
listeners, especially underserved and minority audiences.
    And to ensure that the vision of Congress becomes a reality 
for every American, CPB is requesting $340 million for its 
regular 2001 appropriation. And it supports the 
administration's allocation of $450 million for a digital 
transition fund. This multiyear digital transition fund will 
help stations finance the cost of new equipment associated with 
digital broadcasting. The administration's request represents 
approximately one-quarter of the total DTV conversion cost for 
public broadcasters. The remaining funds will be raised by 
stations from State and local sources, from the corporate 
sector, and from private donations.
    In summary, Mr. Chairman, the two requests support public 
stations in the following ways. The digital transition fund 
will get stations off to a good start in raising the $1.7 
billion that they need to bring public broadcasting fully into 
the digital era, and the 2001 appropriation request addresses 
both public broadcasting's ongoing needs and the new costs 
associated with digital broadcasting. Support for these two 
requests will help ensure public broadcasters make the 
transition to digital and make the digital vision a reality for 
the American people.
    But I note too, Mr. Chairman, this committee is interested 
in the CPB support for minority programming; it was mentioned 
in the conference committee report last year. [Clerk's note.--
Later changed from ``conference committee'' to ``committee''.] 
I would just like to say that the CPB board shares 
thatinterest. It is committed to sustaining and to increasing the level 
of support we are able to provide for programming which celebrates and 
explains our Nation's rich cultural and ethnic diversity.
    CPB currently supports five minority consortia. It also 
provides significant direct support for minority programs. We 
have been able to maintain support for the consortia at pre-
recision levels. We have offered consultative assistance to the 
consortia to help them update their business practices and to 
explore new revenue sources, and we have provided additional 
assistance to two of the consortia for special fund-raising 
efforts.
    In addition, CPB has directly funded programs such as Plaza 
Sesamo, which is the Spanish version of Sesame Street; Rock 
with Wings, a 2-hour documentary about a Navaho girls' 
basketball team; an American experience called Africans in 
America; a special 90-minute documentary on the Scottsboro 
boys. These and many others were all funded through CPB's 1997 
general program fund. And with your permission, Mr. Chairman, I 
would like to make the complete list of those programs 
available to the committee.
    That concludes my prepared remarks.
    [The prepared information and statement of Mr. Coonrod 
follows:]


[Pages 393 - 405--The official Committee record contains additional material here.]



                   The Future of Public Broadcasting

    Mr. Coonrod. But I would, Mr. Chairman, like to respond to 
the question that you raised at the beginning. It has been 
about 6 months since I have been the President of the 
Corporation for Public Broadcasting, and a number of the topics 
or issues which impelled me to accept the job--or to seek the 
job would be a better way to put it--are the kinds of things we 
will be talking about today in the course of the questioning.
    I think there are three issues I focus on. One is a growing 
cohesiveness within public broadcasting, a common sense of 
purpose among the various groups and organizations and stations 
within public broadcasting.
    Another thing, Mr. Chairman, as I noted, is a rededication 
to the principles of public service and the whole notion of 
public service telecommunications, and especially the 
educational roots of public broadcasting.
    And, finally, and perhaps most significantly, given what we 
are facing now, is the digital revolution that we are about to 
go through and the genuine opportunity and promise it offers 
for public broadcasters to be able to provide the kinds of 
services to their communities around the country that the 
technology didn't permit in the past. And I decided when I 
spoke with our board last October, that I would like to be part 
of that digital revolution, and the board agreed they would 
like to have me be part of it, and that is why I am here today, 
to describe to you why I think that significant congressional 
support for the transition to digital is an important thing for 
all of us.

                   Digital Conversion Funding Options

    Mr. Porter. Mr. Coonrod, this is your first appearance 
before our subcommittee as President of CPB, but you are well 
acquainted with the subcommittee by reason of your prior 
service. And I think that you know that a large number of 
Members of the Subcommittee are great friends of public 
broadcasting, and are very supportive of what CPB does. That 
also means that our questions get tougher, and so let me play a 
little devil's advocate here and challenge some of the thinking 
that you have raised about digital and I will let you respond 
to it.
    Perhaps public broadcasting is getting the cart before the 
horse. Obviously you have to respond to the regulatory 
deadlines laid out by the FCC, but I don't believe those 
deadlines are going to be met. In fact, the regulations contain 
a huge escape clause that requires 85 percent of households to 
have digital receivers before analog signals can be turned off. 
Your own justification indicates manufacturers can't even keep 
up with the current demand for digital transmitters, let alone 
deal with the coming tidal wave of demand we would see if 
broadcasters attempt to meet the FCC guidelines.
    More importantly, I don't think CPB or anyone yet has a 
good grasp of what the actual cost of converting to digital 
transmission will be. Again, in several places, justification 
indicates costs for various elements of the conversion effort 
cannot yet be estimated. In addition, the approach to obtaining 
funding seems to be haphazard.
    On the one hand, you have testified to the need for a new 
digital conversion fund that is not authorized in law and would 
require a new authorization to be implemented. On the other 
hand, you indicate another large increase is required in the 
regular CPB appropriation to help meet the requirement of 
digital conversion, and you are requesting an additional 
funding in the existing Public Television Facilities Fund, 
which is appropriated in the Commerce-Justice bill.
    Other evidence that the industry's desire for funding has 
outstripped its analytical capability is the fact the budget 
does not propose the authorizing language necessary to 
implement the digital grant program, nor is such a proposal 
available today.
    You have described generally how such a system might work, 
but neither the CPB nor the industry has done the analysis or 
generated consensus principles that would be needed to produce 
such a proposal. In fact, you are even asking us to put the 
cart before the horse legislatively, since you do not intend to 
obtain the prerequisite authorization to the regular 
authorizing process; rather, we would have to authorize and 
appropriate the digital program in the same bill.
    I think the greatest danger in rushing to get some digital 
funding in the pipeline is we will fail to consider many 
alternatives which might provide better solutions. I want to 
suggest several alternatives and get your response to them; and 
could you indicate whether you have seriously considered these 
options and please provide for the record the analysis upon 
which you base your rejection of them, if so.
    First, CPB or stations could borrow money for digital 
conversion in private financial markets.
    Second, the Federal Government could provide an interest 
subsidy or interest guarantee for funding borrowed in private 
markets.
    Third, the Federal Government could loan capital funding 
directly to CPB or to individual systems or stations.
    Fourth, CPB could be granted statutory authority to reserve 
some portion of regular appropriations for digital conversion 
grants. Specifically, the CPB could use the $50 million 
increase provided for operations in fiscal year 2000 for the 
first year of digital conversion activities.
    Fifth, CPB could be granted other revenue-enhancing 
authorities, such as those proposed by Representative Fields in 
his reauthorization bill.
    Sixth, CPB could request all facilities funding through the 
PTFP fund, which is the existing Federal capital program for 
public broadcasting.
    Seventh, stations and systems could be allowed to enter 
into cooperative agreements with commercial entities in which 
digital upgrades could be exchanged for unneeded spectrum.
    I wonder if you would comment on each of the options and 
tell us why we ought to disregard all other options in the 
short-term to embrace a concept which has not yet been 
authorized.
    Mr. Coonrod. Perhaps we can go through the options first 
and then maybe we could talk to the premise of your question, 
because I think there are a number of points in the premise of 
your question I would like to discuss.
    In the list of alternatives that you have mentioned, the 
first one, private borrowing, or a Federal Government interest 
subsidy, we have done some preliminary--taken some preliminary 
looks at those, and the basic problem is that that would 
require, at this point, some guarantee that the digital 
spectrum would generate a certain amount of revenue over and 
above the revenue that could be--that would be required to 
operate the stations and produce the programming or purchase 
the programming that would be required. And there are no 
reliable estimates of revenue that would make those first two 
options, in our view, realistic at this point.
    The third option is one that has a lot more promise because 
it, in effect, is a public-private partnership, and it would 
offer, in effect, as I understand it, Mr. Chairman, a 
government guarantee for the loans that might be available.
    Mr. Porter. Well, it would be Federal loans directly either 
to the corporation or individual systems or stations that would 
have to be repaid in the normal course.
    Mr. Coonrod. But the entity providing the loan would not be 
a bank or a--you know, someone else, so the terms could be 
worked out with the committee or with the Congress, and--
    Mr. Porter. Presumably the terms would be more liberal than 
might be obtained in the private marketplace, presumably.
    Mr. Coonrod. And could take into account the fact that in 
some cases, for example, in rural areas, or in other smaller 
markets, there would need to be a certain leniency in how these 
things would be considered, because we recognize the economics 
of public broadcasting in the rural areas, and recognize, also, 
the need to maintain universal service. So because there would 
be some flexibility to discussions, it would certainly have 
more potential than the first two.
    Your fourth question was reserve to a portion of the 
regular appropriation. While that is possible, that would be a 
kind of Hobson's choice, because what we are trying to do now 
is trying to balance the need for the capital expenditures--
those things that are required by public broadcasters to make 
the transition to digital--balance that need against the 
potential that digital offers and how do we develop the 
services and the programs whereby we can demonstrate to the 
public the value of the digital spectrum.
    So if you were to say to us you can use the money to build 
infrastructure, we would be put in a position where we would 
say we are limited in our abilities to develop the programming 
and related educational services that could be used, that 
infrastructure could be used for. So while that is a 
possibility, it is far less attractive than the previous one.
    Other revenue enhancements, like the ones that were looked 
at in the Fields' bill, there are two elements to that. One is 
the revenue projections. And we could provide you with some 
analysis that has been done of the amount of revenue those 
kinds of things could produce, and essentially they would not 
produce revenues that would adequately capitalize the digital 
transition.
    [The information follows:]


[Pages 409 - 421--The official Committee record contains additional material here.]



    Mr. Coonrod. The other part of that, though, Mr. Chairman, 
and it is not an insignificant part, is currently there is no 
consensus within public broadcasting about the wisdom of 
certain of those revenue enhancements, and one of the things we 
have managed to do in these last several months is to maintain 
a cohesive, coherent public broadcasting community, and I think 
if we went down that road, we might begin to see some of the 
tensions come to the surface.
    As to your question about putting all of the money through 
the Public Telecommunications Facilities Program, that is 
certainly an option. I would have to defer to others to know 
how realistic an option it is. What we did when we were 
developing our thinking within the public broadcasting 
community, we developed what we described as a ``two pots'' 
strategy for lack of a better word, and the notion here was to 
try and make the case in those two appropriations, which have 
traditionally supported capital development in public 
broadcasting.
    The satellite interconnection systems have been 
traditionally supported through CPB, and this has some of the 
aspects of an interconnection system built into it; and the 
individual capital equipment accounts have traditionally been 
supported through the PTFP. So while I believe the authorizing 
legislation for PTFP would permit that, it does not have a 
history of appropriations of a significant size to accomplish 
that.
    Mr. Porter. Can I interject at that point and simply say 
that logically, since this is a capital program and since this 
is a Commerce jurisdiction, that would be the place where the 
money should be provided. What you are saying, Ithink, is 
practically speaking, there isn't the same strong support on that 
subcommittee for public broadcasting as there might be on this one. Is 
that correct?
    Mr. Coonrod. There is strong support on that subcommittee 
for public broadcasting. That subcommittee has perennially 
provided money for programs. Up until this year, there has not 
been support from any administration for the PTFP program, 
however. This is the first time, in my memory, at least, an 
administration supported funding, and the amounts of money that 
are made available have never been anywhere near enough to meet 
the needs. So, yes, you are right, Mr. Chairman; logically that 
would be the place.
    Mr. Porter. Logically, wouldn't the request for digital 
conversion come right there? Shouldn't your request be before 
that subcommittee instead of this one, logically?
    Mr. Coonrod. There is a logic that impels us in that 
direction, and that is part of the reason that we chose to 
follow a two-pronged strategy. But there is also a logic that 
impels us at this direction, Mr. Chairman, because it is the 
appropriation for the Corporation for Public Broadcasting that 
has been the account that funded the major, the significant 
changes in public broadcasting.
    When the interconnection system was first established in 
the seventies, that was through an appropriation to the 
Corporation for Public Broadcasting. When it was redone again 
in the late eighties, when both the new satellites for public 
radio and public television were purchased, in effect, and the 
attendant equipment was purchased, that was done through an 
appropriation to the Corporation for Public Broadcasting.
    This is of that scope and of that magnitude. We are not 
talking here about individual pieces of equipment that--you 
know, like changing a tape machine or something else--we are 
talking about a wholesale conversion of broadcasting from 
analog to digital. It is of that other magnitude.
    Mr. Porter. All right. That was number 6. Then there is 7.
    Mr. Coonrod. Number 7, co-op agreements with commercial 
broadcasters, Mr. Chairman. There are a number of initiatives 
underway seeking to find, at the local level, cooperative 
arrangements with public broadcasters. In fact, one of the 
reasons that I would argue that it is important for the 
Congress to make funds available in fiscal year 1999 is so that 
public broadcasters can fully pursue those cooperative 
arrangements with commercial broadcasters. But it is important 
to bear in mind that in a lot of the markets, below the top 25 
markets, commercial broadcasters face challenges that are 
nearly as daunting as the ones public broadcasters face in 
terms of making the conversion to digital. And the natural 
partners are the people who share, for example, broadcast 
towers; commercial broadcasters and public broadcasters often 
share broadcast towers. They are natural partners in this 
conversion, and very often that is the avenue that is being 
pursued. But we can't look to the commercial broadcasters to 
finance the cost of the public broadcasters conversion; we can 
look to them to share the costs.
    Mr. Porter. But they can get something in return. That is 
the unneeded spectrum. They finance it, in effect, by getting 
something in return through a cooperative agreement.
    Now you wanted to comment on the premises to the question. 
I am running over my time and I want to recognize Mrs. Lowey, 
but why don't you comment on the premises of the question, too?
    Mr. Coonrod. We think that we have done--you talked about a 
number of things, the timing, the cost, and that. The timing is 
driven by a requirement, by an FCC requirement. Regardless of 
when this all plays out with the 85 percent rule, unless 
stations make the conversion to digital, they will lose their 
licenses. So at this point it is a requirement that all 
broadcasters convert to digital. That is an important 
consideration.
    We would argue, Mr. Chairman, that our analysis has not in 
the least been haphazard, and we would be happy to share with 
you and other members of the subcommittee all of the underlying 
data that we have, which I think will be very convincing. And 
as we have compared our analysis to the work that has been done 
by commercial broadcasters, we find in terms of the basic 
costs, there is significant congruence.
    On the other hand, you are absolutely correct in noting 
that this is an area that is speculative to some degree; there 
are some unknowns. And we would expect to be analyzing this and 
revisiting this regularly and amending our needs accordingly.
    One of the reasons for a multiyear request is recognizing 
precisely that uncertainty, and we would expect to be able to 
refine that as we get further down the road. But certainly we 
know that regardless of the amounts of money that would be 
required, they would be far more than what we are requesting in 
year one.

                      digital conversion timeline

    Mr. Porter. Let me ask, what is the FCC timetable for 
commercial conversion? What is the date; 2003, is it?
    Mr. Coonrod. The stations in the top 10 markets have to 
convert by November of this year, I believe it is.
    Mr. Porter. November of this year?
    Mr. Coonrod. Then the next tier, by November of the 
following year. All stations must have converted by 2003.
    Mr. Porter. How many have converted?
    Mr. Coonrod. How many commercial stations?
    Mr. Porter. In the top tier, how many have actually 
converted?
    Mr. Coonrod. I can't say with any precision, but it is a 
handful.
    Mr. Porter. There aren't many at all?
    Mr. Coonrod. Right.
    Mr. Porter. And it is fairly clear a lot are going to miss 
the deadline; right?
    Mr. Coonrod. I wouldn't speak for them, sir.
    Mr. Porter. To us uninitiated observers, it seems like it 
is very clear that the deadlines are too tight for the amount 
of investment and technological change involved and that the 
FCC is going to have to back them off, and that the conversions 
won't in fact occur by the deadlines for those reasons. But I 
wondered if you had any insight on that or feeling for it?
    Mr. Coonrod. I have a feeling for it, but I don't have any 
particular insight.
    Mr. Porter. I don't either, I have a feeling.
    Mr. Coonrod. My feeling is based on the conversations that 
took place around the National Association of Broadcasters 
meeting a couple of weeks ago, where there was only really one 
topic and that topic was the conversion to digital [Clerk's 
note.--``Months'' was later changed to ``weeks'']. Digital is 
here. And that was, if you will, almost a mantra. No one was 
talking about delay, they were all talking about going forward, 
so that is the feeling that I have.
    Mr. Porter. Thank you, Mr. Coonrod.
    Mrs. Lowey.

               the promise of digital public broadcasting

    Mrs. Lowey. Thank you, Mr. Chairman, and I want to join 
Chairman Porter in welcoming you to the committee. You do have 
friends on the committee and I share the Chairman's strong 
support for the Corporation for Public Broadcasting. We 
certainly have been advocates and continue to wish you well.
    I have been very intrigued by the questions the Chairman 
posed. I certainly haven't looked into them, but I look forward 
to pursuing your responses to those as options that can be 
considered. However, I want to make it clear that I do support 
the administration's request, although I am interested in 
pursuing the various options the Chairman has posed.
    A very basic question. Perhaps you can tell us for the 
record how public broadcasters will gain from digital 
technology; specifically, what type of services and educational 
programming can the public expect? I think at this point, the 
public knows it is going to cost a lot of money for a lot of 
new equipment. I think it would be very helpful for them to 
know the great advantages, if there are any.
    Mr. Coonrod. Mrs. Lowey, there are two parts to that 
answer. One is what we know now what will be possible. We have 
actually got an illustration of that, and I think copies of 
this have been made available to the subcommittee. It is a 
mockup of what would be possible on Maryland Public Television 
today if it were broadcasting in digital.
    What you can see from the chart is that there would be four 
simultaneous streams of programming that would be available. 
During the day, you could have a children's channel and the PBS 
ready-to-learn service. Simultaneously, you could be 
broadcasting a Maryland Public Service channel. What we have 
done here in doing this mockup, Mrs. Lowey, is we have used 
programs that are currently available, so while it isn't 
happening today, with the conversion to digital, it could 
happen. These are programs that are currently available.
    You could have a third educational and instructional 
channel, and then, finally, a business and information channel. 
These could run during the day. Then in the evening it would be 
possible to broadcast the kinds of programs that are--that are 
PBS's signature programs in high-definition television. And 
high-definition television, if you haven't seen it, it is 
beyond imagination that that is what television could look 
like.
    There is a Benjamin Britten opera on PBS this evening. 
Imagine watching that in high-definition television. It would 
be a stunning experience for all of us. And that is the kind of 
thing that would be possible, given current programming, and 
the technology that we can anticipate, that we know is coming 
down the line.
    But what you have here is a compression ratio of 4 to 1. In 
effect, you can have four channels where you currently have 
one. We were looking at demonstrations 2 weeks ago, where the 
compression ratio was 10 to 1, where you could have 10 
channels, all of which provided a better picture and better 
sound than current television in the space where you now have 
one. So that is the service that could be provided to a general 
audience.
    In addition, we have been doing a lot of work with 
educators to see how we might use this more effectively. One of 
the things we have been talking about is how it can be used in 
medical education, for instance, education for doctors. There 
is a specific project that we are looking at now in North 
Dakota, where they need to train physicians in rural 
communities. They haven't been able to use analog television 
because the pictures have not been clear enough and precise 
enough for the medical applications. They are convinced that 
with digital technology, the pictures would be precise enough 
that they would be able to do the medical training that they 
can't now do through distance learning. And with the 
possibility of providing additional data screens, they could be 
providing the physicians with the kinds of information they 
need for their in-service training and that sort of thing, 
making sure that physicians in rural communities, you know, are 
current on the latest techniques and everything else.
    Those are the kinds of possibilities that we have only 
begun to explore, but which we think are absolutely realizable 
with the digital technology.
    Mrs. Lowey. Well, I thank you and I think it is very 
important, that we educate not only the members but the public 
as to the incredible possibilities of digital technology.
    You talked before about the cohesiveness. Were you talking 
in terms of management, or were you talking about cohesiveness 
in terms of planning and programmatic possibilities?
    Mr. Coonrod. All three. And one example of that is the DTV 
road show which will be a national--I mean, these are large 
trailer trucks that will go around the country and they will 
provide information to educators, business leaders, and others 
about what the possibilities of digital television are. In 
fact, the DTV road show had its inaugural stop here at the 
Capitol. But it does exactly that. It helps people sort of 
visualize about what the possibilities are, because this is a 
dramatic change. This is not like taking a black and white 
picture and turning it into color; it is more profound than 
that, and we don't know yet fully what the implications will 
be.

                 the federal role in digital conversion

    Mrs. Lowey. Mr. Coonrod, in another area in your testimony, 
you state that the total cost of converting all public 
television stations to digital will be $1.7 billion. Could you 
just tell us again, what percentage of this cost are you 
seeking from the Federal Government? Can you please talk about 
how the stations will raise the remaining funds, and, also, the 
role that the Federal funds play in leveraging private 
contributions and State funding?
    Mr. Coonrod. The administration has requested $450 million, 
which is about 26 percent of that total. And the Corporation 
for Public Broadcasting is supporting the administration's 
request. The public television stations are requesting a larger 
amount, they are requesting a total of $600 million, but they 
are requesting $375 million; that is the same as the 
administration's request for the Corporation for Public 
Broadcasting.
    We have been working with stations around the country, 
particularly the trade association, America's Public Television 
Stations and PBS have been working with stations around the 
country to help them develop their own capital campaigns. There 
are, at this point, two major types of capital campaigns 
underway. For those stations that are State networks or get 
State funding, they are preparing their requests to their State 
legislatures. Forcommunity stations that don't have--don't get 
State funding, they are preparing major capital campaigns and we have 
helped them develop kind of a tool kit, for lack of a better word, of 
materials they can use to develop the capital campaigns. These are 
multiyear capital campaigns.
    It would be significant, both in terms of securing State 
funding and in securing funding through capital campaigns, it 
would be significant for the stations to be able to say that 
the Federal Government has made a major commitment to the 
conversion to digital and that's what we are looking at, in 
effect, at the national level, we are challenging the State, 
local governments, and the communities to raise a portion of 
it. It is, I think, a tribute to the public broadcasters that 
there has been no strong call to come in here and ask for 100 
percent of the funding.
    When the interconnection systems were put in place, both in 
the seventies and eighties, those were 100 percent financed by 
congressional appropriations. In this case, we see this as a 
public-private partnership and we see this as a shared 
responsibility and commitment of all of the stakeholders in 
public broadcasting. One of those stakeholders is the Congress 
and the Federal Government, but there are other stakeholders, 
and we would challenge all of the stakeholders to do their 
part.
    Mrs. Lowey. The FCC is requiring public television stations 
to be on the air with a digital signal by 2003. Shouldn't we be 
providing funds over 4 years rather than 5 years, as the 
administration has requested? Can you explain the timing?
    Mr. Coonrod. Four years would be preferable to 5 years, 
because we would have about 8 months in the last--in other 
words, we wouldn't have a full year in the last year, we would 
have about 8 months. So if we could get the funds over 4 years, 
rather than 5 years, that would certainly help our procurement 
and our funding; yes.

                          relocation of towers

    Mrs. Lowey. I understand from phone calls I have received 
that public radio stations will also be impacted by 
television's transition to digital. In fact, it was WNYC in New 
York that did call me because they were concerned about the 
cost associated with the relocation of towers and possible 
broadcast interference.
    Specifically, WNYC is concerned the proposed new digital TV 
towers on top of the World Trade Center could force them and 
others to relocate because of interference problems. If forced 
to move, the cost to WNYC would be at least $1 million. At 
least that is what they indicate.
    The scenario is likely to be repeated across the country. 
And I know the bell went off, but I will just finish quickly 
and maybe you can answer quickly. What plans is CPB making to 
assist radio stations like WNYC and others?
    Mr. Coonrod. As part of our analysis, we included our best 
estimates of what it would cost for the conversion to digital 
for radio. But at this point, there is no agreed-upon standard 
for radio, so that is speculative. However, it is absolutely 
necessary that public radio make the conversion to digital for 
digital as well, but once that standard is established, and it 
hopefully will be in the next year, we can refine the 
estimates.
    The tower problem is a real problem, both in radio and in 
television. By our estimate, 83 percent of the stations, radio 
or television, would have some kind of a tower adjustment that 
would be required.
    Mrs. Lowey. Thank you.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey. Mrs. Northup.

                         the cost of equipment

    Mrs. Northup. Thank you. I have a couple questions about 
changing to the digital, too.
    First of all, I mean, realistically, I think there is an 
anticipation that as more stations adopt this technology, 
particularly a part of it that is available very incrementally, 
that it will get cheaper as it is mass produced. Do you 
anticipate that to be true?
    Mr. Coonrod. In the long run, yes; that is absolutely true. 
At this point, it is not possible to predict how that curve 
will look. In the short run, it is a seller's market, however.
    Mrs. Northup. As I understand, there is only one maker, it 
is in Germany, and they make 400 a year or something; is that 
right?
    Mr. Coonrod. I am not sure what we are talking about, but 
there are certain pieces of equipment that will be required 
that there is a single manufacturer; that is right.
    Mrs. Northup. And the anticipation is this will be mass 
produced in a very short time; in fact, people are gearing up 
to take on that responsibility.
    Mr. Coonrod. That is true. And in working up our estimates 
when we did our analysis, we included two what you might call 
deflation factors. All of the estimates that we did we 
discounted by 10 percent, based on the notion that we thought 
costs would come down. Then, in addition to that, we put in 
what we described as an efficiency factor. By group purchases 
and those sorts of things, we assumed we could drive the cost 
down even further; in other words, negotiate agreements with 
manufacturers and everything.
    So in doing our estimates, we have included both of those 
considerations; yet the estimates that we worked from were 
based on the current cost. Should those costs come down, 
obviously we would adjust our estimates. That is one of the 
reasons why a multiyear procurement would be certainly to our 
benefit, because we could take advantage of the reduced cost.

                    fcc digital conversion timetable

    Mrs. Northup. Well, having some background in electronics, 
I guess what my question would be is: As the commercial market 
begins to make the switches and as the production gears up, it 
seems to me like maybe the kindest thing we could do is maybe 
delay by 2 years, for example, the implementation of this for 
public television in anticipation of the cost decreasing and 
the availability of the technology. And, also, with the 
understanding that it is very unlikely we are going to meet the 
2003 deadline, maybe an appeal to the FCC for some cooperation 
here would make an enormous public dollar difference.
    Mr. Coonrod. There are two parts to my response. One is, 
while what you are proposing is attractive, it is not an option 
we currently have as an option we have available to us. We are 
constrained by the existing deadlines and time frames. And I 
just simply don't know the answer to the second part, as to 
what the dollar difference would be if we did that. We can only 
speculate.
    Mrs. Northup. Mr. Chairman, do you think that it would be 
possible to send a letter to the FCC inquiring about the 
possibility of cooperation or opportunity here? You know, we 
know the numbers before us anticipate current costs, we know 
that prices are anticipated to come down; the commercial market 
that is out there in front of us is liable to drive that. And 
considering our local communities that are struggling with 
this, I just wondered if that would--as weappropriate money for 
this project, whether that makes sense.
    Mr. Porter. We certainly could consider as a subcommittee 
doing that; yes.

                      digital funding distribution

    Mrs. Northup. I would like to also ask whether you are 
considering giving States any guidance to prioritize certain 
markets. You have some States that I think would maybe 
appreciate some guidance as to how to prioritize. In fact, I 
believe there are guidelines for the commercial market. I am 
sort of struggling here to maybe prioritize the high-population 
markets.
    Mr. Coonrod. Yes.
    Mrs. Northup. Is public television going to do something 
along the same line that would give some relief to a phase-in 
to those? I mean, ultimately, some of the urban areas and State 
legislatures are going to have to subsidize significantly what 
the rural population does.
    Mr. Coonrod. We are using a kind of different approach than 
has been--I mean, let me put it this way. The FCC has given 
public broadcasters the option of converting on the last day, 
in effect. There is no requirement that it be staged where the 
top 10 markets have to go first, and then the next group and 
everything else. So the public broadcasters don't have that 
requirement. They would literally be able to all convert on the 
final day.
    On the other hand, there are a number of public 
broadcasting stations that have already made significant 
expenditures, and they are going first. And there is a group 
called the Digital Broadcast Alliance, about 11 stations that 
are moving forward quickly. It is a voluntary thing and we 
think it is a useful and important voluntary thing because it 
is going to provide us with the kind of experience that 
currently is unavailable. And we think, based on that 
experience, the engineering in the subsequent stations will be 
much smoother.
    So, in effect, what we are saying is that the stations that 
are taking the lead have agreed as a system to provide the 
expertise that they acquire to help the smaller and the more 
rural stations in making the transition. And that is not 
entirely a cost question; that is also a technical and 
engineering question, because when you have to bring in 
consulting engineers and all of those sorts of things, that 
drives your cost up. If that expertise is available from within 
public broadcasting, we can keep the costs considerably lower, 
so we are doing that.
    In addition----
    Mrs. Northup. Let me follow-up on that, if I may. So the 
money we would appropriate this year, would it be targeted to 
those 11 stations?
    Mr. Coonrod. The money that we would ask for in 1999 would 
not necessarily be targeted to those 11 stations, because some 
of them have already made the expenditures and we wouldn't want 
to, you know, provide money for expenditures already made. But 
we have identified the costs of the top 20 markets, where 
people will be making--the conversion to digital will already 
begin and there are about $47 million in costs in the top 20 
markets.
    We mentioned earlier the towers. We believe that there are 
fully--a third of the stations will have to develop--will have 
to either move towers or do something with the towers. Eighty-
three percent of the stations, beyond two-thirds, will have to 
make some towers modifications. Those were prerequisites, so we 
would target those kinds of preliminary activities.
    Not to belabor the towers question, but there are, as I 
understand it, seven engineering firms that are fully qualified 
to provide the kind of towers--consulting and engineering 
services for towers. And so you need to get into it, and the 
way you get into it is to make a down payment and part of the 
funds would be going for things like that.
    Mrs. Northup. I just wondered, since I think having 11 
stations go first and work through it, and also waiting for the 
technology, that we are going to have a tidal wave of 
technology here, considering all the commercial channels, that 
it makes sense to target what we do, to plan, to build the 
capacity, and make sure we do those 11 well, and in the 
meantime, let the price drop. And I just worry about--you know, 
even though I realize there is sort of a drop dead date, it 
wasn't my understanding that we really thought that date would 
be adhered to. And if we can buy for $50 million what we are 
liable to spend $75 million today for, it is a good use of 
public money.
    Mr. Coonrod. Any way we can find to reduce our overall cost 
would be to everybody's advantage, certainly.
    Mrs. Northup. I also am going to submit questions about 
your ready-to-learn program. I am very interested in what you 
all are doing in the area of reading.
    Mr. Coonrod. I would be happy to respond to that.
    Mrs. Northup. Thank you, Mr. Chairman.
    Mr. Porter. Thank you.
    Ms. Pelosi.
    Ms. Pelosi. Thank you very much, Mr. Chairman. 
Congratulations to you, Mr. President, and good luck to you.
    Mr. Coonrod. Thank you very much.
    Ms. Pelosi. Just listening to the questions and reading 
your testimony, it is pretty exciting.
    Mr. Coonrod. Yes, it is.

                    the need for federal assistance

    Ms. Pelosi. It is pretty exciting to see. It is interesting 
because the Corporation for Public Broadcasting is such a 
challenge to begin with, and now there is this additional 
challenge. But let's make sure we all take complete advantage 
of the opportunity.
    It is interesting to hear you talk about it in terms of 
distribution as well as programming, and some of my questions 
were asked by my colleague, so I am going to go to the 
questions about distribution and what it will mean. 
Congresswoman Lowey asked about what difference it will make, 
and you pointed out this very clear chart for Maryland. What 
will happen if Congress does not assist public television in 
the transition? I mean, it is just not to be considered?
    Mr. Coonrod. Well, we try to think--we try not to look at 
the bleakest options, but I certainly think there arecertain 
stations that would make the transition to digital. But one of the 
things we would lose is universal service and one of the things that 
has been the hallmark of public broadcasting from the very beginning is 
that the best in television is available to all people in this country 
at no cost, and that would no longer be the case.
    There are a number of markets that will have difficulty 
making the transition, even with Federal assistance, and 
without Federal assistance it would be impossible. So I think 
the first thing we would note is a loss of coverage in certain 
parts of the country. And the next thing we would note is that 
the educational potential that is available through digital 
would be truncated, if the stations then had to direct all of 
their resources to building infrastructure rather than 
developing the content that we know will--that the digital will 
be able to provide. So we would lose the possibility of fully 
exploiting the potential of the digital technology.
    And I think the final thing, at least that sticks in my 
mind, is the fact we are looking at digital as an opportunity 
to serve the multiple audiences that public broadcasting 
serves. Two things are true. This Nation is simultaneously 
getting older and it is getting younger and more culturally 
diverse. Both of those things are true. We need to appeal to 
audiences that have divergent tastes and interests, and one of 
the things that digital does is it offers that opportunity. You 
can provide quality programming that appeals to a mature 
audience and you can at the same time provide quality 
programming that appeals to a younger, more culturally diverse 
audience. And while you are doing that, you can also be 
providing the educational services and the ready-to-learn 
service. So I think it would be an unfortunate missed 
opportunity if we didn't go forward with this.

                     culturally diverse programming

    Ms. Pelosi. Since you talked about the diversity--and I 
think that is very important--as you mentioned in your 
testimony, the subcommittee has expressed its support for an 
increased amount of multicultural programming from public 
television and support for the work of the Minority Consortia. 
Are you satisfied with the amount placed in the multicultural 
program on public television and radio; and what is CPB's 
commitment to increasing Minority Consortia funding, especially 
in light of the challenges that lie ahead for digital?
    Mr. Coonrod. I don't think we can ever be fully satisfied. 
I do think that I sense--I mean, I can talk about the 
Corporation for Public Broadcasting initially. The board of the 
Corporation for Public Broadcasting is firmly committed to 
sustaining an increase in programming of this nature, and I 
sense a much stronger awareness of this at PBS as well. 
Certainly in public radio, I think there is a deep commitment 
to that in public radio. And in the kind of programs, just to 
use radio for a second, two-thirds of the programs we funded in 
recent years--radio programs--have been of a culturally-diverse 
nature: a lot of Native American programs, Hispanic programs, 
and that sort of thing; and we have been a major developer of 
those kinds of things.
    And I would like to make available to the subcommittee a 
list of the programs that CPB funded in 1997. I think you will 
find an impressive list of programs that really speak to the 
ethnic and cultural richness of this Nation.
    So, no, we are not satisfied, but that would be--we could 
never say that. But I think we are making progress, as part of 
the strategic program review we have underway, we are looking 
at this. I have met with either the chairs or the directors of 
all of the minority consortia in the last several weeks. I am 
convinced that we have common objectives. We don't always want 
to follow the same route to get there, but we all want to get 
to the same place, and I am convinced over time we will be able 
to work together constructively.

                         independent producers

    Ms. Pelosi. Would you address some of that same energy to 
be sure that consideration is given to providing digital 
conversion support to the communities which come from outside 
the public television system, such as independent producers who 
may be supported by the minority consortia or the independent 
television service?
    Mr. Coonrod. That is one of the things we are working on 
now, and we haven't worked out how that should be done, but 
that is one of the things we think is important for two 
reasons. Obviously these are communities that deserve our 
support; but in addition, often some of the kind of work, sort 
of the ``out-of-the-mainstream'' work that is being done, is 
the kind of work that lends itself very well to the digital 
environment, and we want to make sure we can fund that.
    Ms. Pelosi. Do you anticipate--I will press the question--
independent producers will find more opportunities there 
because of digital conversion?
    Mr. Coonrod. Certainly the opportunities will be there. 
What we also have to work on is securing the funding so that 
those opportunities become reality.

                 the federal role in digital conversion

    Ms. Pelosi. The budget request is, as you mentioned, is an 
additional $50 million for the transition fund. The public 
broadcasting stations tell our office they will require funds 
in excess of the President's request. I mean, certainly in 
excess of the President's request, but even the Federal part 
will have to be in excess of the President's request for the 
digital transition fund for the first year. Do you think that 
that is enough or is that just what you thought you could get, 
if I may be so crude?
    Mr. Coonrod. Obviously all of it at once would be best, but 
the administration's request is for $50 million dollars. That 
is enough to get started. The request that the stations have of 
$75 million would be better; there is no question about that.
    Ms. Pelosi. Do you think there is a real absorptive 
capacity for $75 million the first year?
    Mr. Coonrod. There is. When we did our analysis and 
estimates, our first-year estimate was even higher than that, 
so I believe that there is.
    Ms. Pelosi. I was interested in how you came up with the 
$1.9 billion figure. I just want to know how it has been 
defined to be. I would have thought it was more, quite frankly.
    Mr. Coonrod. We did an analysis of the costs, and we broke 
them down into categories. There are five categories, and in 
fact, I could refer you, if you have a copy of the 
justification, to page 41----
    Ms. Pelosi. I know how you get to the $1.7. I want to know 
how you get to the $1.9.
    Mr. Coonrod. I am sorry; I misunderstood the question. The 
$1.9 billion is an annual estimate we do of all revenues that 
are--that come into public radio and television. We do an 
annual survey of all of the stations and of the national 
organizations and the regional organizations and we ask thema 
series of questions. And based on that, we come up with our estimate of 
what we call, for lack of a better word, system revenue.
    Ms. Pelosi. Does that include the Federal funding?
    Mr. Coonrod. That includes the Federal funding.
    Ms. Pelosi. It seems impossible to me a $1.9 billion 
industry can undertake a $1.7 billion transition.
    Mr. Coonrod. It is certainly going to be a stretch, and it 
is going to be a very interesting and difficult operation.
    The other thing, the other stat, though, that I think is 
relevant is that the majority--beyond 80 percent of the 
population--express strong support for public broadcasting, and 
it is that support that we can count on over the long haul to 
provide those funds.
    Ms. Pelosi. Well, from what I hear you say today, I think 
it will be well worth it, and I am very, very excited for the 
prospects, because as wonderful as public television has been 
up until now, it seems like great things are just over the 
horizon. So hopefully we will be able to meet the challenge, 
and I commend you for your leadership and your willingness to 
undertake this challenge. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. Pelosi. We have been operating 
under the 10-minute rule. For round two we will operate under 
the 7-minute rule. We have another agency after this to also 
consider this afternoon.
    Again, Mr. Coonrod, I don't want you to think of these as 
hostile questions.
    Mr. Coonrod. No, sir; I understand.

                              FY99 request

    Mr. Porter. CPB has a large advantage over all other 
programs funded in our bill. In effect, CPB never has to 
compete for funding under the budget caps because you have an 
advanced appropriation that is always taken off the top. All 
other programs have to compete for whatever money is left over. 
I do not believe we ought to consider any funding for digital 
in fiscal year 1999 unless we also go back and reassess the 
underlying appropriation for the year.
    In other words, if you want to have two cuts at the fiscal 
1999 allocation, shouldn't we then put your full appropriation 
back into the same competition for funds that student aid or 
biomedical research or Head Start or every other program has to 
endure? Why, in other words, do you feel that CPB ought to be 
exempt from any competition with regard to operating funds and 
then be allowed to dip back into fiscal 1999 allocation and 
require cuts in other worthy programs in order to fund digital 
conversion?
    Mr. Coonrod. It is my understanding, Mr. Chairman, and I 
must admit that it is an imperfect understanding of how the 
budget process works, but it is my understanding the $50 
million was included in the administration's fiscal 1999 
request. So the imperfect part of my understanding would be 
that since it was included in the President's budget, it could 
be funded without requiring cuts of other programs. As I say, 
that is an imperfect understanding of how it works.
    Mr. Porter. Your understanding is quite imperfect; yes.
    Of course, the President's budget is not going to be the 
budget resolution that we are going to be operating under, and 
we have no idea what our allocations will be. But our point is 
that if you are forward funded, and you are the only program 
that is forward funded by 2 years in our bill, then you are 
never scored against our allocation until we reach the year of 
your appropriation; and then you come right off the top, so you 
are protected, and we have to fit all our other programs under 
what is left.
    The point is that if, in fact, you are already protected in 
your fiscal 1999 sum--and you have been--and now you are asking 
us to add to that sum, why shouldn't the whole process be 
opened so all of that has to compete against other priorities 
within the bill, and not just the digital part you are now 
requesting in addition to what we have already allocated?
    Mr. Coonrod. I can only answer that by saying that I 
believe that the case that was made for the 1999 appropriation, 
when it was made, was a strong and good one and it would hold 
up even better today than it did at the time. So that, you 
know, I guess what I am saying is I think we could compete very 
effectively.
    On the other hand, I would be surprised if we didn't 
achieve a similar result. I am saying that not based on 
overall--you know, I don't know all of the priorities and all 
of the other concerns that you have to deal with as the Chair 
of the subcommittee; but knowing the small piece of it that I 
am arguing for, I think there is an absolutely rock-hard, 
strong, solid justification for a $250 million appropriation in 
1999 for the traditional operations of public broadcasting, and 
I have no--I would be willing to defend that, you know, 
nonstop. So in that sense, I am not concerned; I just don't 
think it would be worth the effort.

                         the cost of conversion

    Mr. Porter. Well, all right. The President is requesting 
that the Federal Government provide $450 million of the 
estimated $1.7 billion cost of digital conversion through the 
new digital grant program. This represents about 25 percent of 
the total cost or twice the Federal contribution to operating 
cost as a percentage of total expenditures. Why are you asking 
the Federal Government to make a much greater commitment to 
digital conversion than you do to operations?
    Mr. Coonrod. There are a couple of reasons. The first is 
that in the past, whenever a major thing like this was 
required, we came to the Federal Government and asked for 100 
percent of it. And this year we are not coming and asking for 
100 percent of it. We recognize the limitations, but, also, we 
recognize the fact that we must, as we have demonstrated in the 
past, we must be more self-sufficient. And this is an example I 
would argue; that we are operating more self-sufficiently than 
we had in the past.
    I am thinking specifically of the satellite 
interconnection. Every time we needed a new means of 
distribution, we came to the Congress and said we need this 
much money. Here is a case where we are saying this is the 
amount of money we need, $1.7 billion, and we think that the 
Federal appropriations should be, you know, roughly 25 percent 
of it. Now, why should it be 25 and not 15, I guess? But there 
are certain areas of the country where they are going to have a 
harder time, particularly the rural areas, they are going to 
have a much harder time to meet the matches than the large 
urban markets and that sort of thing.
    Mr. Porter. Could I ask a question at this point? If the 
Federal Government were to provide $450 million of the $1.7 
billion, how will the rest of the money be raised?
    Mr. Coonrod. It will be raised from States that--from 
stations that are State licensees and therefore get State 
funding. They would get appropriations from State legislatures. 
There are a few stations that are licensed to school boards and 
university stations which would, by andlarge, not get monies 
from the universities; but if they are state universities, they may 
have access to State funding. All of the community stations would raise 
the funding in the community, they would do capital campaigns, they 
would do corporate underwriting, they would get corporate sponsorships 
and that sort of thing.
    Increasingly, there are the cooperative arrangements 
between the commercial stations and the public broadcasting 
stations. There are even some conversations now about joint 
locations. These haven't come to fruition yet, but commercial 
stations and public stations would share facilities. There are 
a number of ways that this would be done, so these funds would 
be raised from nonFederal sources. Some of those would be State 
government sources, but increasingly the proportion that would 
be raised in the marketplace, so to speak, would be increased.
    Mr. Porter. So if they can raise 75 percent of the funds 
that way, why can't they raise 100 percent of the funds that 
way?
    Mr. Coonrod. There are particular parts of the country--as 
I say, this gets to the question of maintaining universal 
service--that, A, we would risk the loss of universal service 
because there would be some areas of the country where it is 
unrealistic to think they could make this kind of digital 
conversion.
    But the second part, Mr. Chairman, is if all of the 
resources went into raising the funds for the infrastructure, 
the stations would be handicapped in their ability to provide 
the programs and the services that we think digital can offer.
    Mr. Porter. One presumes, then, that you have a plan to 
target this money to the stations who cannot and will not be 
able to raise it locally through these other means.
    Mr. Coonrod. We are developing that plan. We have agreed 
with the stations to six principles, that on the basis of which 
we are going to conduct a consultation and make the principles 
very concrete. But two of the principles, one of those is 
hardship; in other words, those stations that have a hardship, 
that realistically could not raise the funds, will get an 
additional incentive. We also are looking at productivity 
incentives for those stations who can do this in a way that 
would be long term, more cost efficient. There would be 
incentive for them as well.
    Mr. Porter. Would WETA or WTTW get any of these funds, 
since they seem to be pretty well-heeled in terms of raising 
funds, would they get any portion of the funds or do the funds 
all go to----
    Mr. Coonrod. They would get a portion of the funds, but 
they would get a smaller portion of the funds than a station 
that had--that was in financial difficulty.
    Mr. Porter. I think we need to talk further about--one of 
the interests that many of us have is to make public television 
more independent of Federal subsidies, and we know very well 
that a lot of stations are perfectly able to raise funds 
themselves and do so all the time and could easily raise 100 
percent of their operating funds and 100 percent of their 
capital needs as well. And we wonder sometimes why a plan has 
to give them any money when they really don't need it. So I 
think we have to leave that for a further discussion at this 
moment because I have to call on Mrs. Lowey, but I would like 
to have your response to that later on.
    Mrs. Lowey.

                         programming for teens

    Mrs. Lowey. Thank you, Mr. Chairman. I would like to ask a 
different kind of question that I have been, frankly, asking 
for years. As you look at this programming, you can really see 
that public broadcasting has made its mark with regard to 
children's programs. Whether it is Bert and Ernie on Sesame 
Street or other characters of Sesame Street, there is no 
question it has taken an important place in our viewers' homes.
    One of my concerns for many years has been, what are we 
doing to creatively program for the teenager? Teenagers face 
such challenges and I know there is an occasional news program 
or, without names mentioned, someone will get a group of people 
around the table to talk about teenage pregnancy or addiction 
or smoking or alcohol use, et cetera, or maybe there is an 
occasional Saturday morning news program. But what is so 
frustrating to me is that with all the great minds in public 
television, you can't somehow create programs that will have a 
positive influence on teenagers. They seem to prefer to watch 
the trash.
    And I think the real challenge for us is how can public 
television create the kind of programming that teenagers will 
watch? And I mean those aged 14 to 22 or, if we can get to even 
part of that, let's say 14 to 16, and then we can go higher, we 
could really accomplish what I feel is an important public 
objective.
    Is there any research being done, is there any work being 
done in that regard, is there any programming that can attract 
our young people? And perhaps you can tell me what percentage 
of the audience is teenage, what percent is 14 to 16, what 
percent is 16 to 18. You get the question.
    Mr. Coonrod. I can provide you with the specific data, but 
I don't have them in my head. I am sufficiently familiar with 
them to say this; that your perception is right. The audience 
for public television, up until about age 6 or 7, is enormous 
relative to other media, and it tails off rather dramatically.
    Mrs. Lowey. Then they get people like me watching Jim 
Lehrer, or the Lehrer Show, it is called now.
    Mr. Coonrod. The News Hour with Jim Lehrer.
    We have a new team together at CPB and we have hired a new 
Executive Vice President and a new Chief of Programming, and we 
have the very engaging head of our education staff. And one of 
the things that they are looking at right now, they are going 
through what I describe as a strategic review, and one of the 
things that they are looking at exactly is the question that 
you raise, because in a digital world, in a digital 
environment, you don't have to make the choice; you don't have 
to say, well, we are going to be broadcasting for the people 
who pay the bills, who give the money. In other words, we are 
going to be broadcasting for the mature audiences, because you 
would be able to do that and still in a multicast environment, 
provide additional programming.
    So we are going to be looking at that question. I don't 
have an answer to it, though we certainly recognize that it is 
a--it is one of those issues that constantly bedevils us and we 
need to come up with a good solution to it, I agree.
    Mrs. Lowey. I certainly would love to continue this 
dialogue and I know the Chairman and my colleagues would join 
me. We spend millions and millions of dollars on appropriations 
to solve the ills of society, and when it comes to our 
teenagers, it is an acknowledged fact that themedia has a 
tremendous impact on them, and I fear in too many cases, a very 
negative impact, at least in my judgment. And somehow we haven't 
figured out how we can get our teenagers directed towards positive 
influences, when there are so many other negative influences around 
them. So we have had this dialogue for many years, and I would hope 
that as difficult that it is to crack, I would hope that through 
adequate research and intelligent minds, you can move in that 
direction.
    Mr. Coonrod. If you don't mind, in about 3 or 4 months, we 
will have a much better fix on the question because it is a 
question we are exploring. If we can sort of get back to you at 
that time, we can sort of maybe get your perspective on it as 
we move forward.
    Mrs. Lowey. I thank you. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.

                       Health Related Programming

    Mr. Coonrod, yesterday a chairman of another committee, Mr. 
Callahan, from Foreign Operations, and I went to speak at Voice 
of America, your old stomping grounds. And when I said earlier 
I was so pleased that you were presiding over this transition 
at CPB and the excitement it presented, I was also thinking 
about your previous work. At that meeting yesterday was a 
marriage of programming and distribution with USAID and the 
Voice of America, to transmit throughout the world to young 
people--just following up on Congresswoman Lowey's point--to 
young people, issues related to their health, whether it was 
about AIDS or other health issues, a transmittal of the idea 
that Americans care about the health of these children 
throughout the world; we work with groups in terms of 
eradication of polio and other deficiencies.
    And I just wonder as I look at this chart, I see Health 
Week and I see Nutrition Mission. But, I mean, I believe that 
we are missing an opportunity with young people in terms of 
their own well-being, but it has to be presented interestingly 
enough. We are in an attraction business, after all; we have to 
attract the viewers.
    And I do think that it is really important for our country, 
for young people, to understand the value that we place on them 
and their health and well-being and their education. And it 
could be presented in a way that may not be a ``you shouldn't 
smoke,'' ``you shouldn't use drugs'', ``you shouldn't do 
this,'' but a value placed on their health, education, and 
well-being in such a way that they would conclude on their own 
that these other things are not preferable means for them to 
take.
    So I would hope that we could see what VOA is doing with 
USAID in terms of reaching young people throughout the world, a 
90-million person audience they have, and see if we can't 
incorporate that. Because I think it is an opportunity missed 
if we don't, especially when young people will be very well 
aware of the fact that digital is crossing a threshold. And if 
we can say to them as we cross the threshold, this is going to 
be good for you in every respect, I think it is an opportunity 
that would be most unfortunate if we missed. So if you would 
like to comment.
    Mr. Coonrod. I agree and thank you for the kind words about 
VOA. I agree with the need for emphasis on health. Two 
observations on that. One, you may have noted, or maybe it 
hasn't started yet, but the News Hour with Jim Lehrer has 
received a major grant so it can establish a health beat, so 
they will be doing more health-related reporting in the future.
    Ms. Pelosi. Wonderful.
    Mr. Coonrod. In addition----
    Ms. Pelosi. We have to get a little younger. But, as I 
said, I worship at the shrine of Jim Lehrer.
    Mr. Coonrod. The other thing is a couple weeks ago, there 
was a series Bill Moyers did on addiction.
    Ms. Pelosi. It was fabulous.
    Mr. Coonrod. Which was a very well-run series; and one of 
the things about that is the audience for that, to use the 
phrase, skewed younger than the typical audience for PBS prime 
time program, which indicates if it is a subject younger people 
are interested in, they will respond.
    Ms. Pelosi. That was a very interesting presentation and 
very useful, and, actually, our colleagues have presented to 
the NIH about addiction and prevention. But I still think we 
have to aim a little younger because we want to get more into 
prevention.
    Mr. Coonrod. But we are heading in the right direction.
    Ms. Pelosi. We are coming down, and who knows; we may be 
developing viewers for other shows, other news programs that 
are important as well.
    Was that a buzzer or is somebody getting a phone call? Do I 
still have more time?
    Mr. Porter. You have over 2 minutes.
    Ms. Pelosi. Actually, Mr. Chairman, I know that we have 
another witness here this afternoon, so I will yield back the 
balance of my time, and I want recognition of the fact I have 
yielded back the balance of my time.
    Mr. Porter. You have 2 minutes in the bank.
    Mrs. Lowey. Oh, wait a minute. I didn't use my whole time. 
How many minutes do I have? We can use that in the future.
    Mr. Porter. I am going to use your 2 minutes.
    Ms. Pelosi. Okay.

                The Bill Moyers ``On Addiction'' Program

    Mr. Porter. Mr. Coonrod, I have been asked by the Speaker's 
office to look into an issue regarding PBS's Web site. I will 
provide you with a copy of the Web page my staff downloaded 
yesterday. It regards the Bill Moyers program on addiction. It 
includes several suggestions to learn about and take action on 
addiction issues.
    It reads, in part: ``Organize a letter-writing campaign to 
your congressional representatives, express your concern over 
the issue of addiction and your support of increased funds for 
prevention, treatment, and public health approaches like needle 
exchange.''
    I don't know whether you know this, but needle exchange was 
one of the two issues that held up the enactment of our entire 
bill last year. Mr. Wicker of our subcommittee was the chief 
opponent of the view espoused by PBS. And, in fact, had the 
subcommittee adopted the position advocated byPBS, our bill 
would never have been passed in the House and Senate, and CPB would not 
have been funded.
    Leaving aside the legality of PBS's activity, is this an 
appropriate use of funds, in your opinion, and shouldn't we be 
concerned about this?
    Mr. Coonrod. We should be concerned about this type of 
thing and this came to my attention yesterday. While I have not 
been able to speak to Bill Moyers directly, we have 
communicated. And I can tell you two other things; it came to 
his attention, too. He was not aware this was in there, and he 
shares my view that is an inappropriate use of the Web site. I 
believe, as we speak, the Web site is being changed.
    To try to put it in some context, however, this was a 
document that was prepared as part of an education guide, and I 
think that is really the key issue here. An education guide 
shouldn't be an advocacy document. That sentence goes over the 
line, and that is unfortunate, but most of the important 
programs on PBS are linked to the PBS Web site. This Web site 
was put up by a group in New York that was responsible for 
putting the education guides together, and I think perhaps the 
person who wrote it was overzealous, and maybe the editing 
wasn't as good as it should have been, and we agree with you it 
is an important thing.
    That program was one that was really outstanding on the 
impact it had and the support it had and I would very much like 
to make information about the program available to the 
committee so that you can have sort of the full picture, and we 
not sort of leave you with the impression that it was something 
that should not have been done, because a lot of what should 
have been done was also done and we would like to leave you 
that impression. I asked Bill Moyers and he sent a memo with a 
lot of detail in it that I would like to make available to the 
committee.
    [The information follows:]


[Pages 441 - 444--The official Committee record contains additional material here.]



    Mr. Porter. Thank you, Mr. Coonrod. We have had a lot of 
very tough questions for you. Let me reiterate this 
subcommittee, for the most part, are strong supporters of the 
Corporation for Public Broadcasting and your mission. We want 
to, within the limit of our resources, provide you with the 
resources that you need from the Federal Government. At the 
same time, we would like to see a more independent CPB, if that 
is possible.
    We appreciate your appearance, your answering our questions 
directly, and the fine job you are doing there at CPB.
    Mr. Coonrod. Thank you. I appreciate all the support you 
and other members of the subcommittee have been providing to us 
and look forward to a continuing working relationship.
    Mr. Porter. Thank you, sir. The subcommittee will stand 
briefly in recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 446 - 513--The official Committee record contains additional material here.]



                                            Wednesday, May 6, 1998.

                     NATIONAL LABOR RELATIONS BOARD

                               WITNESSES

WILLIAM B. GOULD IV, CHAIRMAN
FRED FEINSTEIN, ACTING GENERAL COUNSEL
ALFRED WOLFF, CHIEF COUNSEL
HARDING DARDEN, JR., BUDGET OFFICER

                       Introduction of Witnesses

    Mr. Porter. The subcommittee will come to order, to 
complete our regular hearings this afternoon on the fiscal year 
1999 budget. We are pleased to welcome the National Labor 
Relations Board: William Gould, Chairman, and Fred Feinstein, 
the Acting General Counsel.
    I would point out to the Chairman that this is the first 
time in over three years, since I have become the Chairman of 
this subcommittee, that the NLRB has had a full Board with no 
vacancies. We certainly welcome the new members of the Board, 
and we are obviously very glad that the White House and the 
Senate could get together and get NLRB back to full strength.
    Mr. Gould, if you would introduce the other people who you 
have with you at the table, and then we would be very pleased 
to hear your comments.
    Mr. Gould. Thank you, Chairman Porter. To my far right is 
Acting General Counsel Fred Feinstein, and to my left is my 
Chief Counsel, Alfred Wolff. To my immediate right is Harding 
Darden, who is our Budget Officer.

                           Opening Statement

    Mr. Chairman and members of the committee, I appreciate 
this opportunity to appear before you a final time as the 
chairman of the National Labor Relations Board to testify in 
support of the agency's budget request for fiscal year 1999. My 
term of office expires in August of this year, and I will 
depart at some point during the summer.
    It has been a privilege and an honor to accept President 
Clinton's nomination of me as Chairman of the Labor Board, and 
to serve in Washington for more than 40 years--4 years in this 
capacity. It seems like 40 years. I am grateful to the 
President, as well as the Senate, which confirmed me, for their 
confidence in me.
    I have worked hard at this job for the more than 50 months 
that I have held the office of Chairman to meet the standards 
of excellence that I have set for myself throughout my entire 
professional career. I am pleased to be able to carry on the 
tradition of public service which my family is associated with, 
going back to my great-grandfather, who served in the United 
States Navy in the War of the Rebellion between 1862 and 1865.
    In accordance with our normal procedure, the agency has 
submitted a detailed fiscal year 1999 justification, Mr. 
Chairman, and in my testimony today I am just going to briefly 
highlight a few of the points that we are focusing upon, as 
well as some of our recent initiatives and accomplishments.
     The fiscal budget for 1999, which is now before you, 
requests an appropriation of $184.5 million so that the NLRB 
can fulfill its responsibilities to protect the rights afforded 
to both employees and employers under the National Labor 
Relations Act of 1935, as amended.
    This request is the product of an analysis of the Board's 
best current estimate of the number of cases that the agency 
will be handling in 1999, how those cases will be resolved, and 
the FTEs that are necessary, as well as the information 
technology requirements for case processing and the costs 
expected in connection with our caseload.

                 government performance and results act

    I want to begin by noting the Government Performance and 
Results Act, GPRA, which requires agencies to put a high 
priority on measuring and improving the efficiency and 
effectiveness of their operation. The Board's strategic plan, 
annual performance plan and budget, are formulated within the 
context and spirit of GPRA, and what we have attempted to do is 
to set the measures which allow us to expedite and deliver 
cases to the public, as we are required to do, to issue all 
representation cases that have been pending at the Board for 
more than two years--they shouldn't be pending at the Board for 
more than one year--to reduce the age of unfair labor practice 
cases pending by 5 percent each year, and to issue all unfair 
labor practice cases that have been pending for more than three 
years.

                    justification for budget request

    This budget is dedicated to personnel costs, which 
constitute 78 percent; rental payments of GSA's, and the 
request would be a 5.6 percent increase over that of the 
previous 2 years. The additional $9.8 million which we seek for 
fiscal 1999 would cover mandatory adjustments in employee 
compensation; investment in information technology needed to 
complete CATS, the Case Activity Tracking System, and achieve 
Year 2000 compliance; and to bring an additional 15 FTEs to 
deal with the problem of the backlog.
    It remains a problem in the field. We have made some 
improvements in terms of overcoming that backlog in recent 
months, but the problem of the backlog in the field is such 
that we have more than 6,000 cases which are still pending in 
the field. I think that this is so for three principal reasons.
    One is that the mix of cases has changed. We are having 
more unfair labor practice cases, as opposed to representation 
cases, which consume more than double the amount of staff time.
    The other factor is that because of the success of the NLRB 
Information Office program, which is designed to screen out the 
frivolous cases that would otherwise come before us, the merit 
factor has gone up slightly.
    Also, the size of cases, transcripts, the burden that our 
administrative law judges have even in ordinary unfair labor 
practice cases, has gone up. I note on page 7 that just a 
couple of years ago the average transcript size was 449 pages. 
In the first 6 months of fiscal year 1998, it was a record 684 
pages.
    We continue to face a backlog problem at the Board. This is 
a troubling trend, and one that I am trying to come to grips 
with. It is attributable at least in part to Board member 
turnover. You mentioned that we are and have been, since 
November of 1997, Mr. Chairman, at full strength for the first 
time in a number of years. We have a 15 percent decrease in 
Board member staffs since I first came to office in 1994.
    In conclusion, Mr. Chairman, let me mention the fact that I 
take great pride in the initiatives that we have put forward 
since I became chairman in early 1994. They are all aimed at 
reducing wasteful litigation by putting in place a new 
settlement judge corps among our administrative law judges, by 
establishing bench decisions which are being used successfully 
and in which less appeals are being taken than are taken in 
most of our cases. Our administrative law judges are using them 
increasingly. This means that we are able to both expedite our 
cases and resolve a lot of our cases without the need for them 
to come to Washington and then on to the Court of Appeals.
    Finally, let me say that I am also pleased to say that as a 
result of my initiatives, I have urged the Board and the 
general counsel to restructure the agency in such a way that 
our resources can be used more efficiently. As a result of my 
efforts, the agency will formulate, by the end of the year, a 
plan which will identify efficiencies and assess whether 
offices in the field, as well as here in Washington, can be 
consolidated or otherwise restructured. We will establish a 
time frame for implementing this plan.
    Mr. Chairman, the critical role of the National Labor 
Relations Board is to promote industrial peace, to substitute 
the resolution of disputes for strife which would otherwise 
occur and to thus contribute to economic stability, and to 
facilitate the unimpeded flow of commerce between the States. 
This is the fundamental justification, Mr. Chairman, for the 
fiscal year 1999 request which is before your committee.
    The National Labor Relations Board respectfully requests 
favorable consideration by Congress to enable the agency to 
effectively enforce this statute and to protect the rights of 
all parties, employers, employees and individual employees 
covered by it.
    This concludes my statement. When the Acting General 
Counsel has completed his statement, my colleagues and I will 
be pleased to answer any questions that you may have.
    Mr. Porter. Thank you, Chairman Gould.
    Mr. Feinstein.

                Statement of the Acting General Counsel

    Mr. Feinstein. Thank you, Mr. Chairman, and members of the 
subcommittee.
    Today I appear before you as the Acting General Counsel of 
the NLRB. Having completed a four-year term as General Counsel, 
I now serve as the Acting General Counsel until the Senate 
confirms a successor.
    It has, as the chairman has stated, been an honor and a 
privilege to serve as General Counsel. The job has certainly 
been a challenging one, and to the extent that I have succeeded 
at all, I wish to credit and again thank the dedicated career 
staff of the agency who have worked hard to enforce the 
National Labor Relations Act. Together we have worked to 
continue to build upon the traditions of the agency that have 
stressed fair and effective law enforcement.
    As in my previous appearances before you, today I will 
describe how the part of the NLRB that comes under the 
supervision of the General Counsel's office has continued to 
reinvent, restructure, and economize to meet current fiscal 
realities. I believe our record of accomplishment is a sound 
one, and it is one of which I am proud.
    While today I will briefly describe some of the things that 
we have done in these past 4 years to improve our efficiency 
and service to the public, a much fuller presentation is 
contained in the retrospective report that Irecently issued 
just last week which I have provided to the subcommittee as an 
attachment to this statement. I do hope that you will take the time to 
review it, and you will see that the NLRB's Office of General Counsel 
has undergone important changes during this period of time.
    At the time that I began my term, the government had 
embarked on a new way of doing business. As the chairman has 
suggested, in accordance with the Government Performance and 
Results Act we have developed a strategic plan which sets clear 
goals for the NLRB, as well as objectives, strategies, and 
performance measures with which to determine whether we are 
meeting our goals.

                          performance measures

    Pursuant to the goals set forth in the NLRB's strategic 
plan, performance measures for fiscal year 1999 include: At 
least 50 percent of all elections will be held within 42 days 
of the filing of a petition; no election will be held more than 
85 days from the filing of a petition, unless due to 
circumstances beyond the regional office's control; and the 
percentage of unexcused overage, what we call Category III 
cases, those allegations that are most central to the NLRB's 
mission and/or affecting the most significant number of 
employees, we hope to reduce from 18.3 percent to 16 percent.
    The goals and principles and methods of GPRA have informed 
our efforts to improve operations and reduce costs. In the 
Office of General Counsel we have reviewed every aspect of our 
operations with a view toward improving our service to the 
public. I believe we have succeeded in numerous respects.

                    improving service to the public

    In the area of case handling, we have adopted a program 
that we call impact analysis. We have moved beyond the ``first 
in-first out'' approach in an effort to ensure that the cases 
we get to first are those which are most central to the 
agency's core mission. While we still do not get to all of the 
cases as quickly as we would like, we are better able to ensure 
that our backlogs are comprised of lower priority cases.
    Similarly, we have paid much attention to finding ways to 
focus on all aspects of conducting elections. Pre-election 
issues are resolved promptly by agreement or decision. 
Elections are held sooner, 87 percent, almost 9 in 10, within 
57 days, compared to 75 days in 1993. Post-election objections 
and challenges are disposed of as quickly as possible, as well.
    In the injunction area, we have tried to standardize the 
approach taken by our regional offices so all cases receive 
proper consideration, regardless of where in the country they 
happen to arise. Despite an early upsurge, the number of 
injunctions being sought has leveled off as respondents have 
come to recognize that delay will no longer be available to 
them as a means to evade the law.
    In the compliance area, which concerns obtaining the 
remedies that have been ordered or agreed to, we have 
streamlined our methods of computing back pay, provided 
centralized guidance, applied the principles of impact 
analysis, and encouraged the regional offices to pay greater 
attention to a respondent's likely ability to comply in 
fashioning the relief sought in each case.
    We have also taken numerous steps to save costs. Since 
1994, and especially during the 1996 space reduction 
initiative, we have reconfigured by reducing space or closing 
completely 28 field locations, including the Division of 
Judges. We closed the El Paso, Texas, resident office, and 
moved the resident office in D.C. to our headquarters offices. 
The '98 and '99 planned space reductions include 10 regional 
offices and headquarters. Our 1998 end-of-year space assignment 
is expected to be 721,000 square feet, a more than 10 percent 
reduction from the 1994 level. This represents a rental savings 
of $2.25 million.
    Other areas of savings include streamlining of supervision, 
command and control, reduction of casehandling travel, 
increased delegations, and greater use of electronic 
communications internally and with the public.

                          growing case backlog

    Notwithstanding all of the administrative efforts of the 
past several years, case backlogs continue to grow, 
particularly at the initial investigative stage of unfair labor 
practice cases, where two-thirds are finally resolved by 
dismissal or withdrawal. In 1997, case intake rose 2.1 percent 
over the previous year. Furthermore, case intake for the first 
5 months of fiscal year 1998 is approximately level with the 
same period last year. At the end of February, 1998, there were 
almost 6,800 unfair labor practice situations pending initial 
disposition, nearly double the number from just four years ago. 
Additional backlogs appear at the more advanced stages of our 
casehandling pipeline.
    What is the reason for these growing backlogs? We fear that 
despite all of the steps we have taken to become more 
efficient, the size of our professional staff simply is not 
enough to get the job done the way it should be. Our present 
FTE level of 1,900, actually a little bit below that now, is 
the NLRB's lowest since 1962. Yet, our case intake last year 
was almost 60 percent greater than it was that year. The case 
intake in fiscal year 1997 was almost 2 percent above the 1991 
level, yet the FTE was almost 10 percent lower.
    The net effect of the steady staffing reduction of recent 
years, which has not been matched by shrinking case intake, has 
been that the case handling burden per FTE has risen markedly. 
Last year the case intake per FTE was 12 percent higher than 
the level five years earlier. In addition to anincrease in the 
sheer number of cases each employee is called upon to handle, as the 
chairman has indicated, the cases have grown in complexity, further 
exacerbating the workload.
    This phenomenon has come about for several reasons: First, 
changing patterns of business organization have changed the 
nature of disputes and the ease with which remedies can be 
ascertained and carried out.
    Second, the mix of cases has shifted towards a greater 
proportion of unfair labor practice cases, which are more 
resource-intensive compared to representation cases.
    Finally, the success of our information officer program, 
which is designed to reduce the filing of frivolous charges, 
has meant those cases which do enter the system are more likely 
to make a real claim on our resources.

                          president's request

    The President's fiscal year 1999 appropriations request, as 
you know, is $184.5 million. This funding level would permit 
current staffing and operational levels to be adjusted for 
inflation and provide an additional 15 FTE to help begin to 
reduce our field backlog by an estimated 750 cases, or about 10 
percent.
    The request includes $10 million for information 
technology, $6.9 million of which is for the multiyear CATS 
project and the upgraded technology platform upon which it will 
run. CATS is the NLRB's initiative to meet the information and 
functional needs for case processing. It will maintain 
information on the status and activities of cases nationwide, 
as well as the history of closed cases. It will also support 
the functional legal research litigation and administrative 
needs of the NLRB staff in its various casehandling processes.
    By the end of fiscal year 1998 CATS development will be 
completed for the regional offices and will be operational in 
eight regions. CATS headquarters data consolidation and 
reporting systems will be completed, we hope and expect in 
1999. The completion of CATS, along with the Year 2000 
activities and other agency systems, will make the NLRB Year 
2000 compliant. In addition, CATS will improve the accuracy and 
availability of information for reports to Congress, public 
inquiries, GPRA compliance, as well as internal management.
    Failure to implement the system as has been planned will 
necessitate increased costs in future years to patch old 
application software that is not Year 2000 compliant, and 
cumbersome to program as well, as well as to maintain obsolete 
information technology that is more than 20 years old and can 
no longer be commercially supported.
    Thank you for this opportunity to appear before the 
subcommittee in support of the President's fiscal 1999 funding 
request for the National Labor Relations Board.
    [The prepared statements follow:]


[Pages 522 - 573--The official Committee record contains additional material here.]



                Chairman's Tribute To Congressman Stokes

    Mr. Porter. Thank you, Mr. Feinstein.
    I said at the beginning of this hearing that this was the 
last regular hearing of the subcommittee for this year, and I 
want to take a minute before we proceed to pay tribute to one 
of our senior members of the subcommittee who is retiring at 
the end of this session of the Congress, and that is our friend 
Lou Stokes from Ohio.
    Lou has been on the subcommittee for 24 years. He began 
when Dan Flood was the chairman, and if you know the intensity 
and volume of the hearings of this subcommittee, you know that 
that is real, true service to our country and to the process we 
are privileged to serve.
    Lou, you have been not just a member, you have been here, 
you have been here listening to the testimony. Lou has been one 
of the most steadfast members to be here and listen to the 
testimony and ask the tough questions. This year and for the 
last few years he has been a ranking member on his other 
subcommittee, and prior to that time was the chairman of the 
subcommittee, and nevertheless, he was here steadily and 
participated actively in the deliberations of the subcommittee. 
That alone would get him a great deal of tribute from the 
members of this subcommittee.
    But let me say that he has been a true leader, a leader in 
looking at the effects of policies on minorities in our 
country, looking at programs in the NIH where a disease may 
disproportionately affect minority populations, and ensuring 
that those populations are served and represented and that we 
are doing the research that reaches out to them and helps to 
solve the diseases that afflict them disproportionately; a 
leader in fighting for those programs that affect those most at 
risk in our society.
    Lou has been an absolute champion of programs like TRIO, 
for example, that make a difference in the lives of young 
people who don't have a full opportunity and a chance to 
participate in our economy and get the kind of education that 
they might need. Lou has been there every single time.
    I just want to say, as we have had our hearings this year, 
practically every witness has come before this subcommittee and 
thrown hosannas at Lou Stokes for his work. All of us, Lou, 
feel even more so that you have been a really valued member of 
this subcommittee. Your service to our country and to the 
Congress has been exemplary, and we are going to miss you a 
great deal.
    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Obey. Mr. Chairman, if I could have equal time.
    Mr. Porter. Mr. Obey.

                       ranking minority's tribute

    Mr. Obey. Mr. Chairman, let me say that I remember it took 
a rules change in order to get Lou on this committee, and me 
too, for that matter, because in those days members didn't have 
an opportunity to bid for committee assignments.
    As a lot of you know, my favorite philosopher is Archie the 
cockroach, and I quote him a lot. One of the things that he 
said was that as life goes by, he tried to see things from the 
underside. I think that Lou Stokes, in all of the years that he 
has served not just on this subcommittee but in this Congress, 
has understood that there are a lot of people in this country 
who only get to see life from the underside, and they rely on 
us to equalize things just a bit so that everybody has at least 
some opportunity to make a better life for themselves.
    I cannot think of a single education initiative taken on 
this bill in the years that Lou has been a member that he has 
not been deeply involved in. I cannot think of a single markup 
where he has neglected in any way the needs of people in this 
society who need help the most.
    In addition to the work that he has done in this 
subcommittee, he has been truly a Congressman's Congressman. He 
chaired the assassination committee, an incredibly difficult 
job. In fact, I saw him on television just the other night 
because they were showing the rerun of one of those exchanges. 
He chaired the Ethics Committee, and he has done absolutely 
everything that he has done in this place with consummate good 
will and grace.
    I am going to miss him very much, as I know every other 
member of the subcommittee is. I think you can truly say of Lou 
Stokes that he left this place, at least in terms of his own 
contributions, certainly in at least as good a shape as it was 
when he found it, and I cannot think of a single thing that he 
has done in all the years that he has served here that has in 
any way denigrated service in this institution. I don't think 
there are very many members that can make that statement.
    Lou, it has been a privilege to work with you, and we all 
feel that way.
    Mr. Stokes. Thank you very much, David.
    Mr. Porter. Lou, you are not going to want to retire after 
hearing this, or you are going to be impossible to market, one 
or the other.
    Mr. Stokes. Mr. Chairman, if I can just comment.
    Mr. Porter. Mr. Stokes.
    Mr. Stokes. If I can just take a moment, Mr. Chairman, to 
express my appreciation to both you and Dave Obey for your very 
kind and overly generous words on this occasion.
    I would just like to say that for me, I have had no greater 
honor than the privilege of serving on this subcommittee. I can 
recall, so vividly, how whenever our revered Chairman of this 
subcommittee, Bill Natcher, took this bill to the floor, he 
would say, ``Mr. Speaker, this is the people's bill.'' And 
indeed I think all of us over the years have felt that we had a 
chance to work on the people's bill. This is a bill that has 
meant so much to the people in this country, and I have enjoyed 
the privilege of serving with each and every one of you on this 
subcommittee.
    When I leave the Congress, I will carry with me fond 
memories of each and every one of you. It has been a privilege 
and honor for me to serve with all of you, and again, thank you 
for your comments.
    Mr. Porter. Thank you, Lou.
    Mr. Gould, let me start by saying that I have a very high 
respect for you. I have a high respect for your intellect. I 
have a high respect for your service as Chairman of the NLRB, 
and you and I, I think, have been able to communicate in a way 
where we at least defined our differences and knew where one 
another have stood during the time you have been Chairman.
    Last year when the bill was on the floor of the House I 
conceded that I felt that you had politicized this agency. You 
took great offense at that. We talked about it at some length, 
and I think we have since talked that out.

              press release on california proposition 226

    This past week or so you testified before the California 
legislature regarding Proposition 226. That is a ballot 
initiative that requires individuals to give unions permission 
to spend their dues for political activities. Clearly, you have 
a right to do that and to express your viewpoint in any way you 
see fit. Clearly, you would also have the right to do that in 
your capacity as Chairman of the NLRB, provided you were 
talking to the California legislature, under the provisions of 
our bill.
    What I have a problem with, and I want to be clear what I 
have a problem with here, what I have a problem with is that 
this testimony said, in part, a very small part of it, it said 
that Proposition 226 is flawed because it would ``exclude trade 
unions from participation in a democratic pluralist society, 
and at the same time cripple a major source of funding for the 
Democratic Party.'' That was a significant part of your 
testimony that you wrote into an NLRB press release and put on 
the NLRB website, and I think in doing so that you have gone 
beyond the authority that you have, and may in fact have 
violated the law.
    I take this as a very serious matter, and it is not the 
content of your statement, you can make any statement you want, 
it is not testifying before the legislature. It is taking this 
and putting out a press release and using the NLRB website for 
what I consider to be a very political statement, to start 
with, but also an attempt to influence people in their views in 
a political way.
    So I am very disappointed that you would do this. You know, 
of course, and you handed me just a moment ago an Inspector 
General report on this same subject, apparently, Ihave not had 
a chance to read it, but Section 503 of our bill prohibits the use of 
agency resources for publicity designed to influence legislation--
designed to influence legislation--except in direct presentation to the 
Congress or a state legislature. The presentation to the State 
legislature in my mind is within that provision. The putting it on the 
website and putting out a press release and using the NLRB is not.
    That is why I believe that we ought to ask, and I have 
asked or will ask the GAO to determine whether this use of the 
website and a press release violates this Act or any other Act. 
I think that the remarks hurt the agency. I think it does 
politicize the agency, Mr. Chairman. As I say, I have been very 
disappointed in that.
    We had earlier this year another issue, and you had written 
to me in regard to it that independence of the agency is a 
prerequisite for the confidence which the Board must enjoy if 
the statute is to be interpreted impartially. You told me that 
NLRB is different from the rest of the administration. It needs 
an extra measure of independence to have credibility, to be an 
impartial arbiter.
    I agreed that you do need independence and credibility, but 
I think publishing the press release and putting it on the 
website went beyond, first, your authority, and secondly, 
beyond good judgment, and I think it imperils the credibility 
and impartiality and independence of the agency. It is a 
matter, I think, of judgment.
    Now for the first time in three years you have a full 
Board. Your term ends soon. There will then be another vacancy. 
We believe you ought to be working on the backlogs, and I know 
you are going to tell me you are, you have told me you are, and 
getting as many decisions out while the Board is at full 
strength. The budget justification makes clear that work on the 
backlogs is required, but I don't think it makes clear at all 
that political use of the website is required.

                  review of material on agency website

    Mr. Feinstein, the chairman has designated to your office 
the responsibility of maintaining the website. For the record, 
I would like you to indicate who at the agency is responsible 
for reviewing the content of material before it is posted on 
the Web, and who certified the availability of funds for this 
particular activity.
    Again, I don't question the Chairman's right to make the 
statement before the legislature, but I am very concerned about 
the use of agency resources to publicize through the official 
agency website a statement that I consider to be a political 
one, that I read earlier.
    I understand the material was put on the Web without 
consulting other members of the Board. I understand that there 
are many within the agency who do not support the use of the 
website for such activities. I want to note that the material 
was taken off the Web yesterday afternoon, and I want to 
commend the agency for taking that responsible action, and to 
personally commend those individuals who took the difficult 
decision to broach this matter with their chairman.
    Mr. Feinstein, this raises an issue that all agencies must 
face: How do they determine what materials should and should 
not be posted to the Web? In most cases a relatively low level 
official has responsibility for determining what will go on the 
site. Under what circumstances is that person able to tell a 
more senior agency official that something should in fact not 
be posted? Who is currently responsible for the content of the 
website? What guidelines does the agency have for its use? What 
steps will NLRB take to ensure that incidents like this one do 
not recur in the future?
    Mr. Feinstein. Mr. Chairman, first, if I can just take a 
half a second to associate myself with your remarks and those 
of Mr. Obey regarding Mr. Stokes' tenure. As a former staff 
member of Congress for many years, I had the great honor and 
pleasure of working with Mr. Stokes from time to time, and have 
enormous respect for the work that he has done.
    Mr. Chairman, the NLRB has had a website now for a little 
less than a year and a half. When it was first established, a 
committee was set up that had representatives from both the 
Board side of the agency and the General Counsel side of the 
agency to set the basic guidelines of how the website would be 
administered.
    As you know, and as I have stated many times, our agency is 
divided into two parts, the General Counsel's side of the 
agency and the Board side of the agency. While the General 
Counsel serves as a prosecutor and also as the administrator, 
it is not within the responsibility of the General Counsel, and 
would indeed be beyond the General Counsel's designated 
authority and responsibility, to in any way advise or recommend 
or regulate the ways in which individual members of the Board 
choose to present themselves to the public. That is a matter 
and an issue that is the responsibility of the Board and the 
Board members.
    When we were establishing the website we reached an 
agreement. The Board and the General Counsel's Office agreed to 
the kinds of materials that would appear on our website. They 
included decisions of the Board, summaries of decisions of the 
Board, operational manuals, other kinds of operational 
documents that the public utilizes and could have better access 
to through its publication on the website. We have recently 
instituted a help desk in which we direct people to other 
agencies, where the kinds of queries they have are not 
pertinent to our agency but might be to others. We haveexpanded 
the kinds of materials that are available.
    One of the appropriate kinds of materials that was outlined 
in our initial formulation of the website was press releases. 
The way in which a press release would get posted on the board 
is either, if it were a General Counsel side press release, it 
would be done through our office; or if it is a Board side 
press release, it would be done through the Board side, through 
the Office of Information which is under the authority of the 
Board. Thus the way in which a press release could get on would 
be if it were a Board press release, they would simply, through 
our Office of Information, contact the GPO, who is the actual 
administrator of our website, to put forward the particular 
document.
    Those are the basic structures and guidelines. Future steps 
might be necessary. This is something that is not only new to 
us, but new to government in general. We are certainly 
concerned that our website meet the needs of the public and the 
needs of the agency to present itself to the public and to 
provide pertinent and relevant information. It is something 
which we will continue to assess and evaluate as to how we can 
assure the best possible use of our website.

           PURPOSE OF STATEMENT ON CALIFORNIA PROPOSITION 226

    Mr. Gould. Mr. Chairman, if I may, may I respond to your 
comments?
    Mr. Porter. Yes. I have to say my own time is up. I want to 
give every member of the committee a chance to ask questions. I 
am assured that this matter will undoubtedly come up in the 
questioning with you, but I think you should have a right to 
make whatever statement you would like at this point.
    Mr. Gould. Yes. This matter began when I began--prior to 
the California legislature's invitation to me to make a 
statement to them, I began to hear in a variety of forms, 
conversationally, newspaper reports, and statements that were 
made when I would give talks--the most recent was over at the 
American Enterprise Association--ideas presented which were in 
my view mischaracterizations, misrepresentations of both the 
National Labor Relations Act and the agency's interpretation of 
that statute, particularly as it relates to worker liberty and 
also as it relates to the enforcement of Beck. I was invited by 
Senator Solis, I think around April 14 or 15, to submit a 
statement to the California legislature on Proposition 226, and 
I submitted that statement in response to her invitation.
    I might say, with regard to the content of the statement, 
my intent was to clarify misunderstandings, misimpressions 
about both the National Labor Relations Act and the National 
Labor Relations Board. My approach and rationale would have 
been exactly the same even if unions were giving more money to 
the Republicans than to the Democrats. That basic point was 
irrelevant to the central thrust of my testimony to the 
California legislature, which was that the statute--which was 
that the Proposition proceeded upon false understandings of our 
statute and the way in which our agency administers it.

                   SECTION 503 OF APPROPRIATIONS BILL

    Late Thursday afternoon I received word from your office 
about Section 503. I regret to tell you that I had never seen 
that statute until that moment. On Friday--and I had a number 
of discussions with my staff at that particular time. On Friday 
morning Members Hurtgen and Brame of the Board came in to see 
me and expressed their concern about this.
    I said, as a result of the meeting, that I would do two 
things. One would be that I would undertake an immediate 
investigation to determine whether I had done something that 
was lawful or unlawful, and I immediately asked the Inspector 
General to look into this matter. You have his report, which 
was issued early this afternoon.
    I also have had conversations with the White House in which 
I expressed the view that my hope was the Office of Legal 
Counsel would look at this as well, and I welcomed any 
examination of this. I did not know of this statute as of late 
Thursday afternoon.
    I also telephoned a number of people who were involved in 
the Senate and House Appropriations Committees to get some 
sense of what the purpose of the provision was. On Monday and 
Tuesday no investigation was completed. I took steps 
immediately, without any meeting or without any consultation, 
without any urging from anyone else, any other presidential 
appointee, to remove this from the website because of the legal 
issues that had arisen with regard to it.
    I regret the diversion that this has caused. I felt that I 
was meeting my responsibilities. I have an obligation to adhere 
to this law as the chairman of the National Labor Relations 
Board, and from time to time to speak out, particularly in 
response to the invitation of both the Congress and the State 
legislatures, on a law which directly implicates the National 
Labor Relations Act.
    I wish, with regard to the passage that you had cited, that 
I had said that the same would be true if more money was given 
to the Republicans than is given to the Democrats, because the 
basic thrust of my statement was that this was--this 
Proposition 226 was sailing under false sails insofar as our 
statute was concerned, and constitutional issues which are 
concerned with it.
    I have an obligation to speak out when our law is 
implicated, and I have an obligation to remain faithful to the 
trust that has been given to me to interpret the statute and to 
see that the goals of this statute are realized. That is what 
has happened. I did not intend to violate any law.I was not 
aware of the rider. The Inspector General has concluded that I have not 
violated the law. I welcome any investigation of this matter. I have 
nothing to hide or be ashamed of, or apologize for.
    Mr. Porter. Mr. Chairman, if the main thrust of your 
testimony was otherwise, I don't understand why the passage I 
just read was highlighted in your press release, if it wasn't 
really relevant or it is only tangential to the main thrust of 
your statement. Why write it into a press release and put it on 
the website?
    Mr. Gould. Let me say, Mr. Chairman, that I did not direct 
that a press release be issued. I did not write the press 
release. I did not know the form that it would take. What I 
knew was the statement that I gave to the California 
legislature.
    Mr. Porter. Sir, somewhere within your agency somebody 
wrote a press release and put it on the website, and you are 
responsible for what goes on in your agency.
    Secondly, you are a lawyer. You are a law professor. Your 
agency is an agency that carries out a very important law. You 
should have known that there was Section 503.
    Mr. Gould. I should have known, you are absolutely correct, 
Chairman Porter. For that, I apologize, and as the guy at the 
top, I have to take--the buck stops here. I have to take 
responsibility for it. I didn't know. I should have known.
    The Inspector General has concluded that in any event, I 
did not violate the statute. But I should have known that the 
statute was there.
    Mr. Porter. I haven't read the Inspector General's report, 
but on its face I would say that you probably have violated the 
statute, without knowing all the relevant matters.
    Mr. Obey.

                RANKING MINORITY'S VIEW OF PRESS RELEASE

    Mr. Obey. Mr. Chairman, I am reminded of the Biblical 
admonition, let he who is without sin cast the first stone. I 
would observe that there is not a person serving in the 
Congress who has not put out a press release which bears an 
impact.
    But having said that, Mr. Gould, I want to say this. I 
believe that the more people who become involved in public 
issues and the more people who advocate various courses on 
public issues, the stronger our society and our government will 
be. I also think that people are given special roles within our 
society and under our system of government which make certain 
types of advocacy more difficult to engage in without running 
into the law of unintended consequences.
    Several years ago you accepted one of the most important 
jobs in any industrialized society, to be the chief peacemaker 
between employers and employees. Your agency can have an 
enormous impact on our overall economic growth, job creation, 
unemployment, the national prosperity, and most of all, the 
sense of justice in labor and management relations.
    There may be some on this subcommittee or some in Congress 
who regard unions as a nuisance and as an interference in the 
wonders of the free market, and who would like to see us return 
to the good old days of almost anything goes between labor and 
management, or where fights were settled between Pinkerton 
guards and union muscle.
    I don't happen to share those views. I think the NLRB has 
done a lot to bring about a sense of justice to the bargaining 
table, and I think you have helped in that process. I think the 
current prosperity which we are enjoying is in part the product 
of the more modern approach to resolving labor-management 
disputes which the National Labor Relations Act represents.
    But the ability of your agency to act as an honest broker 
in the process of assuring fairness to workers can be hurt, as 
the Chairman has indicated, if you do not act with exquisite 
care in the expression of your views. I agree with your 
personal observation, or with your personal opposition to the 
California initiative in question. I agree that in fact the 
initiative in fact would stand Beck on its head.
    I also believe that the discussion of the partisan 
implications of that policy, while they might be appropriate as 
an expression of personal opinion, are nonetheless easily 
misconstrued and should not be made or should not appear to be 
made on behalf of the Board. Certainly I don't believe that 
that reference belongs in a press release or on your website.
    I very much admire your willingness to stand up for what 
you believe to be fairness on an issue, but if you feel 
strongly enough to do that, then I would simply suggest that it 
might be much more effective for you to do so, and at the same 
time you might be in a better position to protect the 
objectivity of your agency, if you were to make clear that you 
are expressing your remarks in a personal rather than an 
official capacity.
    Since I understand you are already intending to leave in 
August, I believe that your comments might be more effective 
and more appropriate if you were to limit future comments on 
issues like this until after your departure; and to make 
certain that people understand that in your response to the 
California legislature, you were speaking for yourself and not 
on behalf of the Board. I think if you were to exercise that 
caution, that there would be less confusion about the actions 
of the Board as a neutral arbitrator and your actions as they 
concerned individual citizens, in your view, trying to achieve 
a just outcome in political controversy.
    I can understand your motivations, but I also think it 
isnecessary for you to appreciate the problems that it creates for the 
agency if you do not demonstrate exquisite care in the way you exercise 
the responsibility. I would hope that you would take the Chairman's 
expression of concern and mine to heart in dealing with issues like 
this in the future.
    Mr. Gould. I shall take them to heart, Congressman Obey. I 
did take care to speak in the first person singular, but 
perhaps I should more affirmatively disassociate myself, when 
speaking on a matter like this, with the agency itself.
    Mr. Obey. If I could interject, I think the fact that this 
appears in a press release and on your website could have led 
one to conclude that this was the agency speaking, rather than 
yourself. I don't think the agency can afford that under any 
circumstances. I would urge you to exercise much greater 
caution in the future.
    Mr. Porter. Thank you, Mr. Obey.
    Mr. Istook.
    Mr. Istook. Thank you, Mr. Chairman.

          Intention of Testimony on California Proposition 226

    Mr. Gould, I find a tremendous contradiction between what 
you are telling us was the purpose of your testimony and the 
actual text of your testimony.
    You sat there this afternoon and claimed to us that you 
testified in California to correct misunderstandings about NLRB 
and about the Beck decision, and it was only that someone who 
you did not identify took your statement and put it into a 
press release that put the focus on your opposition to 226. The 
press release, of course, has the headline that ``NLRB Chairman 
William Gould attacks California's Proposition 226.'' That is 
the word they use, ``attacks,'' and I have a copy of your 
testimony itself.
    Mr. Gould. Congressman----
    Mr. Istook. Let me finish. I have a copy of the statement 
that you submitted to the California legislature, and the focus 
of that statement is indeed attacking Proposition 226, not the 
purpose which you just told us a few moments ago was your 
intent, to straighten out misunderstandings about NLRB or the 
Beck decision. Those are only peripheral.
    It is very clear to any person that reads your testimony, 
that looks at the whole point of it. You first introduce 
yourself and then you say, ``I plan to vote no for a number of 
reasons set forth below.'' Then you have the caption: 
``Proposition 226 is flawed,'' and you go on from there.
    That was the purpose of your testimony, to discourage 
people against voting for Proposition 226, not to straighten 
out anything that has to do with the policy of the Federal 
agency itself. I am not stupid, sir. I resent deeply your 
trying to say the contrary to this committee today, when just 
reading the statement that you presented to the California 
legislature shows clearly that your whole purpose was to attack 
Proposition 226. Your statement itself shows that, just as the 
press release which follows.
    I don't think a person who can't tell the truth to this 
committee should be in your position. I don't think the 
taxpayers should have had to pay for your trip out to 
California. I think you ought to, at the least, whether it was 
legal or not, you ought to be reimbursing what we paid through 
the Treasury of the U.S. Government for that trip out there and 
any expenses that were associated with it.
    I deeply resent, sir, your trying to say something 
different. All you have to do is look at the statement you made 
to the California legislature, and it has a very different 
purpose than what you are trying to claim to us.
    Mr. Gould. May I respond, Congressman?
    Mr. Istook. You may respond briefly, and I am going to go 
vote, because frankly I don't trust anything you might say to 
us after that beginning.
    Mr. Gould. Notwithstanding that, let me tell you that I am 
speaking and do speak truthfully, and that I first of all did 
not travel to California. I submitted a statement to the 
legislature. I was unable to get to California.
    Mr. Istook. I misunderstood that. That is fine.
    Mr. Gould. Secondly, you are absolutely correct, I attacked 
Proposition 226. I attacked Proposition 226 because much of its 
assumptions are built upon false and flawed reasoning with 
regard to the National Labor Relations Act and what the 
National Labor Relations Board is doing, absolutely.
    The whole focus of my statement to the California 
legislature was Proposition 226. That is what it is all about, 
because these people who are pushing Proposition 226 are saying 
that we must do so in the interests of protecting worker 
liberty, which is not assailable. So what I tried to do was to 
sketch for the legislature what the actual provisions of the 
National Labor Relations Act are, what the actual provisions of 
the Landrum-Griffin Act are, and what the Supreme Court 
holdings say about the extent to which trade union treasuries 
represent the views of members, as opposed to corporate 
treasuries.
    Secondly----
    Mr. Porter. Chairman Gould, we are going to have to go 
vote. We will give you a chance to continue, and Mr. Istook to 
continue his line of questioning, when we return.
    The subcommittee will stand briefly in recess.
    [Recess.]

                        Knowledge of Section 503

    Mr. Bonilla [presiding]. We are going to start again, for 
the record.
    My question was, in trying to understand what you were 
saying earlier, I want to try to focus in on this and get right 
down to the point: Is it possible, then, that you broke the law 
because you did not know what the law was?
    Mr. Gould. My answer, Congressman Bonilla, is this: In 
vacuo, whenever an individual doesn't know about a law, his 
chances, I suppose, of him violating it increase.
    I think of myself as a law-abiding citizen. I don't believe 
that I violated this particular law, and I must say that the 
Inspector General's report, which was issued earlier this 
afternoon, seems to come to the same conclusion.
    I am going to note also that there was--I asked Congressman 
Hoyer's staff to get the congressional service people to look 
into this as well, and they could come to no conclusion that I 
had violated the law, either. I sent them--and also the 
Inspector General, obviously--a copy of my press release, as 
well as the statement, and indicated to them that it had been 
placed on the website.
    So that is the best answer I can give to you, sir.
    Mr. Bonilla. Mr. Feinstein, I ask you the same question: Is 
it possible that you broke the law, even though you may not 
have known what the law was? I just want to ask that for the 
record.
    Mr. Feinstein. Congressman, I was not involved in either 
the writing of this press release or its dissemination on the 
website. I was aware of the law. I do know what it says. I am 
not an expert on it, certainly. But on this particular matter, 
I simply had no involvement.

                         Independence of Board

    Mr. Bonilla. Mr. Gould, another just more philosophical 
question I want to ask along these lines. When we wrote you a 
letter about the single site rule recently, there was a group 
of Members that wrote you about that, and you expressed your 
view very strongly, and we respect that, in response to the 
issue we brought up.
    But the point you raised was about there was an implication 
that the Board was above politics, and that such political 
influence that we were allegedly trying to impose on NLRB might 
``erode the system of independent adjudication and democracy in 
the workplace.''
    So I guess my question is more philosophical. If you are 
claiming that NLRB is trying to stay above politics and trying 
to remain independent, then isn't that a direct contradiction 
to what the statement was in California about the proposition?
    Mr. Gould. I don't think so, Congressman Bonilla. I think 
that the statement that I made to you referred to our 
adjudicatory process. The Board must remain free to decide 
cases on a case-by-case basis, independent of immediate 
political passion or immediate political pressure from the 
outside.
    Congress, of course, as I said in my letter to you, is 
always free to change the statute. You have that authority. I 
think that that is very different from the function of a 
chairman speaking about national labor policy and what proposed 
legislation may mean for national labor policy which is on the 
books.
    There are many proposals which come forward where those 
kinds of situations are presented, and I have been asked by 
members of the Senate, the United States Senate, frequently, to 
comment on legislation that was coming before the Congress 
which involves the NLRB.
    Mr. Bonilla. I don't want to get diverted on whether or not 
you have a responsibility and a right to make such a statement. 
My only reference was to the fact that you specifically 
mentioned one political party and what the political impact 
would be on that; not your responsibility of stating your view.
    Mr. Gould. I understand your point. I would like to refer 
you back to an earlier point that I made. That is that my 
analysis is just the same even if you change the statement in 
my document and substitute the word ``Republican'' for 
``Democrat,'' that the unions are giving most or all of their 
money to the Republicans. It is irrelevant to my approach to 
Proposition 226, which I think will involve us in a great deal 
of wasteful litigation about substantive law and about 
jurisdiction, as well.
    Mr. Bonilla. In hindsight, I am sure you wished you would 
have probably referred to both political parties and made that 
reference, and avoided this entire situation. It has turned 
quite sticky.
    Mr. Gould. In hindsight, I do wish I had referred to both 
political parties, but I want to say that I don't think I would 
have avoided the situation nor the stickiness involved in it.

                             Salting Cases

    Mr. Bonilla. I want to move on, now. I don't want to use 
all my time up on this one subject. I want to move on to the 
budget you are proposing.
    Throughout your testimony you are discussing the increasing 
caseload facing the Board, Mr. Gould. Would you agree that the 
various salting campaigns across the country have contributed 
to this increased number of charges filed with the Board?
    Mr. Gould. We do note that there is an increase in the 
salting cases that are pending before the Board in Washington. 
In the past fiscal year, according to the records that I have, 
the number of salting cases has doubled from 5 percent of our 
caseload to 10 percent of our caseload, according to my best 
estimates.
    Mr. Bonilla. So if there were not as many salting 
controversy cases out there, you would not need as much money 
as you are asking for?
    Mr. Gould. I don't know whether that would be the case or 
not, Congressman Bonilla. There are many who believe the 
salting cases emerged because other avenues of 
organizationalactivity were being closed down or were not being 
successful.
    I can't sit here today and tell you that if Congress were 
to prohibit salting and reverse Town & Country, or to adopt the 
law that passed the House of Representatives in March, that 
there would be a decrease in the caseload, because I don't know 
what the parties in the field would do in response to that.
    Mr. Bonilla. Do you have a feel for whether some or most of 
those charges are motivated by a desire to set up the employer, 
or to put the employer in a Catch-22 of settling cheap or 
paying to defend against frivolous charges?
    Mr. Gould. Congressman, I am not in a position to comment 
on the motivation of individuals who are bringing charges 
before our agency. I have no contact with those individuals, 
and it would be inappropriate for me to, in my present 
capacity, learn of their motivations. All I can do is to look 
at every case that comes before me and make a decision based 
upon the record and the law that is relevant.
    Mr. Bonilla. I certainly wouldn't ask you to comment on a 
pending case. My question was more general in nature.
    Mr. Gould. I realize it is more general in nature, 
Congressman, but that is the best answer I can give. We have 
many cases coming before us which involve a whole myriad of 
fact situations. What we have to do is to make judgments about 
these cases on the basis of the National Labor Relations Act, 
as best we can.

                      Weeding Out Frivlous Claims

    Mr. Bonilla. How do you make decisions on how to weed out 
frivolous claims? Could you give me an example of a frivolous 
charge that you have dismissed?
    Mr. Gould. When I spoke of frivolous claims earlier, I was 
speaking of the information officer program which we have in 
the field and through which our people, through our information 
officers, are able to deal with people who walk in off the 
street and say, you know, ``I have this kind of complaint.'' 
You can say to them, ``Hey, listen, this has nothing to do with 
the National Labor Relations Board. You ought to try some other 
avenue.'' I suggested that we are dealing more effectively with 
frivolous claims because of the good work of the NLRB 
information officers.
    I can't--regrettably, Congressman, there are many cases 
where I have participated where we have summarily affirmed the 
administrative law judge's dismissal of charges that are 
brought before us. I can't give you chapter and verse and name 
one for you at this moment, but I would be glad to supply 
examples of that to you subsequent to the close of the hearing, 
if that is satisfactory to you.
    Mr. Bonilla. I would appreciate that, Mr. Gould, very much. 
I appreciate your time here. I only have one last question 
because my time is running out, as well.
    [The information follows:]

    The following are examples of recent cases in which the 
Board adopted with little or no comment an Administrative Law 
Judges dismissal of a complaint:
    1. Lepel Corporation, 29-CA-19699, 323 NLRB No. 150, 5/30/
97
    2. Sanitary Fill Company, 20-CA-27139, 324 NLRB No. 21, 7/
31/97
    3. Cardiovascular Consultants of Nevada, MI, 28-CA-13567, 
28-CA-13601, 323 NLRB No. 7, 2/25/97
    4. Dobbs International Services, Inc., 1-CA-31889, 323 NLRB 
No. 71, 4/11/97
    5. Fredon Corporation, 8-CA-27797, 323 NLRB No. 91, 4/28/97
    6. Power Systems Analysis, Inc., 8-CA-27465, 8-CA-27776 
(Formerly 3-CA-19457), 322 NLRB No. 85, 11/13/96
    7. GATX Logistics, Inc., 8-CA-27101, 325 NLRB No. 63, 3/9/
98
    8. International Paper, 3-CA-20001, 325 NLRB No. 127, 4/30/
98
    9. Food Mart Eureka, Inc., 20-CA-26545-1 and 20-CA-26545-2, 
323 NLRB No. 218, 7/18/97

    Mr. Feinstein. Mr. Chairman.
    Mr. Bonilla. Mr. Feinstein.
    Mr. Feinstein. I just wanted to comment that the vast 
proportion of salting cases never reach the Board and are 
handled in the field. Indeed, 95 percent of the caseload that 
is filed before the agency gets resolved in the field, without 
any need for not only Board involvement, but not even 
Washington General Counsel involvement.
    I think the Chairman is certainly correct in that one of 
the ways in which we hope to deal with frivolous charges is 
through our Information Office program. But I think the other 
way, and this has really been one of the strengths of the 
agency for many, many years, is that we have success in getting 
to an initial merit determination on such cases in a relatively 
short period of time. The quicker we can deal with a frivolous 
case and dismiss it, the less disruptive it is to all 
concerned; certainly to a party, a respondent, in this case, 
perhaps an employer who is unjustly accused. If we can 
investigate that case quickly and dismiss it quickly, it has 
the least disruptive and the least costly effect. That is what 
we strive to do.
    We have continued to dismiss approximately two-thirds of 
the cases in recent years, as in the past, and we try to do 
that, again depending on the import of the case, just as 
quickly as we possibly can. I would suggest to the Congressman 
that that is certainly one of the ways that we are best able to 
deal with these kinds of frivolous, nonmeritorious claims.

                      Nomination of Laurence Cohen

    Mr. Bonilla. I only have one further question. This is for 
Mr. Feinstein, about his proposed successor, Mr. Cohen. He has 
been called, and this is all in the spirit of trying to look at 
the politicizing of issues, as we have been discussing here 
today, he has been called the ``father of salting.''
    I feel certain that the man who dreamed up these campaigns 
will not have an objective view of which claims do or do not 
have merit. Since he is not before us today, I will have to ask 
you, Mr. Feinstein, how in the world could the ``father of 
salting'' consider any salting claims to be frivolous?
    Mr. Feinstein. I am not exactly sure how to respond, 
Congressman. Larry Cohen has been nominated to be the General 
Counsel by the administration. I was not involved in that 
process, of course. That was a determination by the President 
and by the administration.
    I would reiterate what several have said on both the labor 
and the management sides: that he has an extremely fine 
reputation as a lawyer, as a legal advocate, as a fair and 
balanced person with great integrity. I have known Mr. Cohen 
for many years and I have dealt with him over the years, both 
in my capacity on the Hill and the agency, and I know him tobe 
an extremely able advocate, an extremely able attorney, and I suppose, 
most importantly, a fair individual. I certainly think he would be 
capable of being balanced and fair.
    Mr. Bonilla. I ask that question as food for thought, as we 
look at who fills some of the shoes at the NLRB.
    Obviously, we have another vote.
    Mr. Dickey, would you like to proceed now and recess and 
then come back, or would you like us to recess and then come 
back and resume?
    Mr. Dickey. I would like to proceed.
    Mr. Bonilla. Mr. Dickey.

                Purpose of Testimony on Proposition 226

    Mr. Dickey. Mr. Gould, I am quite shocked at the statement 
you made. You all have been talking about whether or not it is 
against the law or for the law or however you might want to 
discuss it. But I want a short answer. We don't have time for 
long answers right now.
    Do you consider it a major goal of your agency to protect 
the funding for the Democrat Party?
    Mr. Gould. No.
    Mr. Dickey. Why would you ever make such a statement, then?
    Mr. Gould. No. I was concerned about the fact that 
arguments were being put forward about Proposition 226 which 
were ephemeral, which were not real arguments. I suggested that 
this is really what 226 is about, not about the arguments that 
are being put forward; i.e., worker liberty and lack of 
enforcement of Beck.
    Mr. Dickey. You were helping them with their scope of the 
picture? In other words, they didn't know enough about it, and 
you were telling them what it was that was going on in their 
State? Is that what you are saying?
    Mr. Gould. I am a Californian, Congressman Dickey. I was 
invited by the California legislature to testify in my own 
State.
    Mr. Dickey. As a Californian?
    Mr. Gould. Yes, sir.
    Mr. Dickey. You were telling them that they were missing 
the point, it really was about trying to limit the Democratic 
Party getting funding, political campaign funding, is that 
correct?
    Mr. Gould. I----
    Mr. Dickey. Is that what you were saying?
    Mr. Gould. I said that was part of it.
    Mr. Dickey. What possible duty do you have in your capacity 
as Chairman to go in to preserve the campaign funds for any 
party?
    Mr. Gould. I have no interest in preserving the campaign 
funds for any party, Democratic or Republican. The only 
interest I have is in seeing that this statute retains its 
integrity.
    Mr. Dickey. Do you say that is not a political statement 
you made? Is that what you are saying?
    Mr. Gould. Which statement?
    Mr. Dickey. The statement you made about protecting the 
funds for the Democratic Party. Is that a political statement?
    Mr. Gould. I don't believe it was a political statement. It 
alludes to a political reality.
    Mr. Dickey. It certainly does. Let's talk about a political 
reality, and that is that you want to protect the Democratic 
Party. Everything that you do has some effect of protecting the 
Democratic Party. Isn't that correct?
    Mr. Gould. No, that is not correct.
    Mr. Dickey. When we levelized the budget last year, you 
reacted, didn't you, to it?
    Mr. Gould. Surely.
    Mr. Dickey. What did you do? Tell me some of the things you 
did in response.
    Mr. Gould. We had to look and see how we were going to live 
within the means that----

                   meetings with members of congress

    Mr. Dickey. You came on the Hill and tried to lobby some 
people, didn't you?
    Mr. Gould. I am sure I have----
    Mr. Dickey. It is not ``I am not sure.'' You know you did 
it, don't you, Mr. Gould?
    Mr. Gould. I don't know whether I did it subsequent to the 
time that the budget was finalized.
    Mr. Dickey. Did you talk to any Republicans?
    Mr. Gould. Yes.
    Mr. Dickey. Did you tell any of the Republicans this is 
going to hurt the Democratic Party?
    Mr. Gould. No, sir. No, sir.
    Mr. Dickey. Did you tell any Democrats that this is going 
to hurt the Democratic Party?
    Mr. Gould. No, sir, I did not speak to either Democrats or 
Republicans about the Democratic or Republican parties. I spoke 
to Democrats and Republicans about the budget of this agency.
    Mr. Dickey. Do you know what Mr. Obey said when the 
conference started? Have you heard his statements? Have they 
been written down and handed to you?
    Mr. Gould. I have not seen any of Congressman Obey's 
statements except the one I was provided this morning.
    Mr. Dickey. Have you heard the one last year during the 
conference----
    Mr. Gould. Yes, sir.
    Mr. Dickey. Was that favorable toward the bill?
    Mr. Gould. It was not.
    Mr. Dickey. Was it because you were being political?
    Mr. Gould. No, I don't believe it was being political. It 
was because he thought, as he was putting it, we didn't know 
how to act, and he was referring to others besides me, in 
Washington; that he said that by going to--and I have since day 
one, since 1994, I have gone to both Democrats and Republicans 
in Washington, D.C. and throughout the United States, and made 
them aware of the plight of our agency, and part of our plight 
being its funding problems.
    Mr. Dickey. Whose amendment was it that was voted on in the 
subcommittee, asking for a reduction in your budget that year, 
last year? Who proposed that amendment?
    Mr. Gould. I know that you have proposed a number of 
amendments providing for our reduction.
    Mr. Dickey. Did you ever come to me and ask whether or not 
I would reconsider or whether or not we could do something 
about it?
    Mr. Gould. I have come to you on a number of occasions, 
Congressman. In fact, I tried to arrange a meeting with you for 
two months this spring, but I was told that you were unwilling 
to meet with me.
    Mr. Dickey. That is not so.
    Mr. Gould. That is what I was told.
    Mr. Dickey. I said, of course, we will meet any time. I 
don't know what has happened to that meeting.
    But what I am asking about is when we asked for a modest 
reduction last year, and we were told we couldn't get the votes 
this time--that is what they said last time. That amendment was 
my amendment, and you never came to me, but you went to the 
Democrats, didn't you?
    Mr. Gould. Congressman----
    Mr. Dickey. You went to every Democrat you could, because 
you knew that you could say to them, ``We are protecting your 
party.'' Isn't that correct?
    Mr. Gould. No, that is not correct. Congressman Dickey, I 
have come to you time and time again. You know I have sought 
you out since 1995. We were standing outside the hallway at the 
hearing, and I identified myself and introduced myself. You 
know that I have come to your office. You know----
    Mr. Dickey. That is correct.
    Mr. Gould. I have met with you in my office. You know that 
I tried to arrange for a meeting with the new Republican 
members of the Board, and we were told, perhaps erroneously, 
that you were not able to meet with the three of us.
    Mr. Dickey. If you gave a certain date, I guess that is 
right.
    Mr. Gould. We were ready--you write in the date, we were 
ready to meet with you any time.
    Mr. Dickey. I will meet with you today, tonight.
    Mr. Gould. I will meet with you tonight.
    Mr. Dickey. My point is that you are politicizing things.
    Mr. Gould. I don't think I am politicizing things. I reject 
your assertion. I am telling you that I am willing to meet with 
Republicans as well as Democrats, and I have met with 
Republicans as well as Democrats. I am willing to meet with you 
any time, Congressman.
    Mr. Dickey. Let me tell you this, you have made my job a 
lot easier this time. For what Mr. Obey said, how he was 
offended by the way you acted and the way you were lobbying, 
and saying we can't do this, and then today, and I guess--
without going to him, I don't know, but he sat there, and we 
were all just--our jaws were dropping with what he said. Then 
you sit there and do that.
    You have used the 10(j) injunction as if it is your own 
instrument to try to organize labor across the United States, 
to make it miserable for business to exist. You have done all 
those things plus others. Chairman Porter has mentioned 
several. I don't know how you could do anything but ask now for 
a decrease in your budget.

                        GENERAL COUNSEL VACANCY

    I want to ask Mr. Feinstein a question. I don't know how 
much time I have, and I have to watch going over to vote.
    Mr. Feinstein, you are the Acting General Counsel?
    Mr. Feinstein. That is correct.
    Mr. Dickey. I want to know this, and I will try to calm 
down later for my next run.
    What percent of reduction would it take for you just to 
resign and leave the position vacant? What percent of the 
reduction would you say, ``Okay, I can't go any further''?
    I can see what is happening. You all have put up the father 
of salting as the General Counsel. You know he is not going to 
be confirmed in the Senate, so you are going to stay on forever 
as Acting General Counsel. I like you personally, as I do Mr. 
Gould, but I think you have politicized this agency, from what 
I have been told, more than any other General Counsel in time 
that can be remembered.
    I want to ask you, sir, the only job I can do is to drive 
home a reduction in the budget. What percent would it take for 
you to say, ``I am leaving,'' with or without a replacement?
    Mr. Feinstein. Congressman, the National Labor Relations 
Board cannot function without a General Counsel in place. Each 
of the actions that are taken in court before administrative 
law judges, the papers that are filed, are all done under the 
name of the General Counsel, so that were there not to be a 
General Counsel, the agency could virtually not function. The 
agency would in effect have to close down until there was 
someone in place.
    Mr. Dickey. Could we close some of the offices, some of the 
regional offices during that time, effectively? We have 52, 
don't we?
    Mr. Feinstein. I believe it is 51, now.
    Mr. Dickey. We could close some of those down during that 
period of time?
    Mr. Feinstein. You would have to close all of them down, 
and headquarters as well. The agency, as I say, can't function 
without a General Counsel.
    Mr. Dickey. Mr. Feinstein, if we did that, would we get a 
more reasonable offer for a replacement of yours, rather than 
someone who is the father of salting?
    Mr. Feinstein. Again, I am not responsible or involved in 
the process of naming the General Counsel. That is the 
responsibility of the President or the administration.
    Mr. Dickey. Are you saying there is no scheme? There is no 
scheme set up here to put him up there so that you stay on? Is 
there a scheme?
    Mr. Feinstein. I am not aware of a scheme, no. Let me say 
this, also, in response to your question.
    Mr. Dickey. I have to go vote, Mr. Chairman.
    Go ahead and answer.
    Mr. Feinstein. In terms of how I have conducted myself as 
the General Counsel, I have tried to be a General Counsel who 
has been effective, who has been balanced, who has been fair. 
All of the indices that measure the performance of the General 
Counsel's Office indicate that during my tenure as General 
Counsel the office has been conducted in a manner that is well 
within the traditions of General Counsels of the past, both 
Republican and Democratic.
    We proceed on approximately the same number of cases. There 
are approximately the same number of cases pending before the 
agency. Our success rate in the courts is roughly equivalent, 
to what it has been in the past. The merit factors, the appeals 
rates, all of those are well within the range and are quite 
consistent with the records of General Counsels of the past.
    I am proud of that record. I have tried to conduct myself 
as General Counsel in a manner that is consistent with the 
agency norms and the way General Counsels in the past have 
performed. Frankly, I am sorry that Congressman Dickey isn't 
here, but when statements like his are suggested, I am puzzled 
as to where they are coming from.
    Mr. Porter. Mr. Stokes?

                             CASE BACKLOGS

    Mr. Stokes. Thank you, Mr. Chairman.
    Mr. Chairman, what I would like to do is move into the 
questions involved with the budget. My understanding is that 
this is a budget hearing. I think we have gotten off into 
another area. I would like to pursue some questions regarding 
the budget.
    The testimony this morning from the two of you, or rather, 
early this afternoon, indicates that you are experiencing a 
growing backlog of cases. I would like to know the extent of 
this backlog problem.
    Mr. Gould. In Washington the backlog is in excess of 700, 
Congressman Stokes. As you may recall, in November, 1995 we got 
the backlog in Washington down to the lowest level it has ever 
been since we have been keeping figures, and it poses a sharp 
contrast to what existed in the 1980s when the backlog was, I 
think, 1,600 or 1,700 cases.
    We have been backtracking over these past three years, and 
we are up substantially in excess of 700, and my hope--and it 
is due to some of the reasons I alluded to when I gave my 
opening statement, i.e., the turnover, the loss of Board staff, 
and the like. I hope that we are able to turn this around. 
There isn't a day that I don't try to urge my colleagues to 
take on the business of tackling these cases, and I hope that 
when I do leave this summer we are going to be seeing a picture 
of progress.
    Mr. Feinstein. Mr. Stokes, may I talk about the backlogs in 
the field?
    Mr. Stokes. Yes, Mr. Feinstein.
    Mr. Feinstein. These are a little more troubling. The 
primary measure of our backlog is what we call situations 
pending initial investigation. Those are cases where 
investigations are pending.
    Our backlog has gone up from 3,858 in 1993, to the 1997 
figure which was almost twice that, 7,424. This is a very 
troubling number. It is a number that suggests that we are not 
getting to the cases in the kind of expeditious fashion that 
the agency believes is necessary and appropriate and in the 
manner that we have gotten to them in the past.
    Most importantly what it means is that our ability to make 
this initial determination, this initial merit determination--
which, as I suggested earlier to Mr. Bonilla, results in the 
dismissal or withdrawal of almost two-thirds of our cases--our 
ability to reach that determination is delayed. That field 
backlog case processing number is one that is particularly 
troubling to us.
    Mr. Stokes. Let me ask both of you, will the President's 
budget adequately enable you to address this backlog in a 
meaningful manner?
    Mr. Feinstein. If I could start, we estimate that the 
President's budget will allow us to begin to bring down the 
backlog. We expect that it should allow us to bring down the 
backlog approximately 10 percent in fiscal year 1999.
    We certainly hope, in the future, to be able to do better 
than that, but that would be an important start. It would allow 
us to make a serious inroad into our case backlog, yes.
    Mr. Gould. Speaking of the regional backlog, andspeaking of 
our national backlog in Washington, at the Board level, Congressman, my 
belief is that the budget will adequately permit us to reduce the 
backlog. We can do it. I want to see us do it. I believe that we will 
do it within that budget.

                     case activity tracking system

    Mr. Stokes. Let me ask you, what is the current status of 
the implementation of the NLRB's Case Activity Tracking System?
    Mr. Feinstein. Mr. Stokes, we are making progress on its 
implementation. We do expect that it will be installed by the 
end of this year in approximately eight regions. With the 
President's budget we would expect it would be installed in all 
the regions in 1999. However, it would not be entirely 
operational until into the Year 2000.
    We are taking steps in regard to meeting the Year 2000 
problem, contingency steps that will allow us to meet the Year 
2000 problem. Although we will not, as we had originally hoped, 
be able to have the CATS program fully implemented by then, we 
do expect to have the CATS system fully operational sometime 
early in the Year 2000, budget permitting.
    Mr. Gould. We have submitted--we have submitted monthly 
reports on the status of becoming Year 2000 compliant, and as 
the General Counsel has indicated, I think the first report, 
which was due on April 30, was submitted a few days ago. We 
have 29 mission critical systems, of which 11 are already 2000 
compliant. Ten systems are being rewritten, and eight are being 
modified to be Year 2000 compliant.
    Mr. Stokes. You were referring to the Year 2000 compliance 
problem. Can you give us some understanding of what it would 
mean if your agency were not compliant by the Year 2000? What 
would be the impact?
    Mr. Feinstein. Our agency, like all other agencies, and 
indeed probably all other organizations in the public sector or 
private sector, is becoming increasingly reliant on computers 
and technology. Were we not to be Year 2000 compliant--and of 
course no one knows precisely what would happen--it would cause 
a serious disruption in our ability to process cases, to 
develop recordkeeping and performance measures, and the other 
kinds of operational indicators that are critical to the 
functioning of our agency.
    I could summarize by simply saying, were we not to be Year 
2000 compliant, it would seriously impair the ability of the 
agency to function.
    Mr. Gould. And particularly, Congressman, in connection 
with the actual scheduling of hearings and the calculation of 
back pay, where back pay is awarded in unfair labor practice 
proceedings, the inability to be 2000 compliant would cripple 
us in that regard.
    Mr. Stokes. Do I understand from both of you that in terms 
of becoming Year 2000 compliant, that you are currently on 
schedule, that the budget submission to the Congress is 
adequate for those purposes, and that there is nothing 
additional that Congress would have to do, let's say in terms 
of reprogramming or anything of the sort, to enable you to 
become compliant by the Year 2000?
    Mr. Feinstein. Right. As I suggested, Congressman, we have 
instituted plans, contingency plans, that will account for the 
fact that our original plan to have the CATS system up and 
running by Year 2000 will not be met, given the funding that we 
have experienced in the last couple of years. We have developed 
contingency plans which are currently being implemented, so 
that we will be able to be Year 2000 compliant if we receive 
the President's budget.
    We will be able to be Year 2000 compliant through the 
implementation of the contingency plan and then the completion 
of the CATS program. We have budgeted $10 million in fiscal 
year 1999 in anticipation of the budget requested by the 
President, and that is what we believe would be necessary to 
assure that we are Year 2000 compliant.
    Mr. Stokes. Chairman Gould?
    Mr. Gould. I have nothing to add to that, Congressman.
    Mr. Stokes. Okay.
    Mr. Feinstein, Chairman Gould, thank you very much.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Stokes.
    Mrs. Northup?

                           regional directors

    Mrs. Northup. Thank you, Mr. Chairman.
    Mr. Gould, I have a couple of questions. Actually, I think 
I will direct these to the General Counsel, if I may.
    I was wondering, Mr. Feinstein, how exactly the Regional 
Directors operate, what sort of oversight they have, what sort 
of goals you have put in place for them. I guess what I am 
wondering, of the regional offices, do some directors seem to 
be able to expedite cases more quickly? Let's start with that 
question.
    Mr. Feinstein. Regional Directors are appointed. I make the 
nomination to the Board and they must be approved by the Board. 
Most Regional Directors have served for many years. We have a 
number of operational measures and operational incentives by 
which we evaluate and assess the performance of our regions, 
and that of course includes the performance of the Regional 
Director, who is the chief operating officer of the regional 
office. We have a number of measures of performance, case 
processing times, various other ways in which the performance 
of the Regional Director is evaluated.
    Some of our Regional Directors do better than others. That 
is true in any organization. I think that in general the 
caliber of our Regional Directors is quite good, and that their 
performancehas withstood the test of time, and that they have 
done a good and in many instances an excellent job of managing their 
offices.
    Of course, as I have said, some do better than others. For 
those regional offices that have had performance problems, that 
have not been up to the standards of the best performing 
regional offices, we certainly make an attempt to work with the 
regional management, the Regional Director as well as other 
regional managers and supervisors, to see what we can do to 
improve their performance, to disseminate best practices.
    We look closely at those regions that are performing best, 
that are the most productive or the most efficient. We try to 
understand what is going on in those offices, and we try to 
make that information available to the offices that could 
benefit from it.
    Mrs. Northup. Since I am on a time limit here, I would like 
to just sort of keep this going at a fairly steady pace.
    Have you ever removed a Regional Director?
    Mr. Feinstein. There has been no Regional Director removed 
during my tenure. As to whether it has happened in the past, I 
am not aware of any, but it is possible. I am just not aware of 
it.
    Mrs. Northup. How many Regional Directors are there?
    Mr. Feinstein. We have 33.
    Mrs. Northup. Thirty-three? And how long have you been 
there?
    Mr. Feinstein. A little over four years.
    Mrs. Northup. When you have a Regional Director that is 
sort of not up to snuff or does not seem to be able to perform, 
are there differences in pay increases that the Regional 
Directors get?
    Mr. Feinstein. Like all employees in the Federal sector, 
there are various award incentives, and of course it is our 
best performing Regional Directors who receive those awards. 
Unfortunately, we have had to suspend them this year because of 
budgetary reasons. But that is one way in which we can reward 
the performance of those who do the best.
    We appraise their performance. Each year the Regional 
Directors receive performance evaluations, and again, those who 
are performing less well than others are appraised at a lower 
level. That, too, affects the ability to receive incentives.
    Mrs. Northup. Just from an objective standpoint, would it 
be possible for you, without giving me names, to list the 33 
regions? You said most of them have been there for many years. 
Would it be possible for you to give me a list of how many 
years each one has been there?
    Mr. Feinstein. I certainly can provide you with that.
    [The information follows:]


[Page 596--The official Committee record contains additional material here.]



                        productivity of regions

    Mrs. Northup. I guess the sort of recurring themes that I 
have heard when I have asked questions about efficiency and so 
forth is that, number one, that there are too many regions, and 
number two, that there are regions that don't perform well.
    Since the buck stops with you in that case, I just sort of 
wondered what sort of concrete steps you were taking to ensure 
that every region was productive. Have you thought of combining 
any regions? What can you tell us about the effective 
management of those regions?
    Mr. Feinstein. There are at least two questions there, one 
having to do with what we do with the weaker performing 
regions, and the other has to do with the number of regions.
    In regard to the latter question, the number of regions, 
that is a question which we continually evaluate. Our concern 
is, of course, that we have to process all of our cases, and 
the model of the agency has been a decentralized one. That is 
to say, since we have to be everywhere in the country because 
cases arise everywhere in the country, we find, generally 
speaking, that it is more efficient to have more regional 
offices spread throughout the country than having centralized 
offices, with more people in them, which then have to serve a 
wider geographic area. What that does is it increases our 
travel costs, it limits our accessibility to the public, and it 
creates certain limitations on our ability to get to and 
investigate a case quickly.
    If we were to take, for example, two offices, one office 
with 20 staff and the other office with 30, that serve two 
different regions, and combine them into one, so we now have 50 
people serving in a more centralized office, our experience 
suggests that that would not decrease costs. We still have to 
house the same number of people with the same amount of space. 
We still have to serve the same caseload. What it does is, in 
addition to the initial moving and restructuring costs, to 
increase travel costs.
    To the second question, what we do to increase efficiency, 
for some of them we try to develop action plans. We sit down 
with the regional management, others who are involved in the 
operation of that region, and we try to pinpoint exactly what 
the operational deficiencies are. We try to come up with a 
specific plan as to how to address that. We have done this in a 
number of regions.

                performance plans for regional directors

    Mrs. Northup. Are those plans open records? Would it be 
possible to reassure ourselves that in fact these action plans 
are executed, because that just doesn't seem to be the 
prevailing sort of culture or understanding that people seem to 
have about this agency, people that deal with it all the time.
    I guess it would be just reassuring to me to know, isthere 
any sort of look at this? Is there any sort of GAO study about what 
these action plans consist of? You are giving me all this information, 
and I would just sort of like to know just how concrete they are and 
how well executed they are.
    Mr. Feinstein. I would be happy to provide you with that.
    Mrs. Northup. Okay, so we could sort of set up a meeting 
with our office and follow up.
    Mr. Feinstein. Sure.
    [The information follows:


[Pages 599 - 619--The official Committee record contains additional material here.]



                     varying backlogs among regions

    Mrs. Northup. Let me ask you, do I understand there are 
some regional offices that do not have a backlog and some that 
do?
    Mr. Feinstein. There are some regional offices where the 
backlog is greater. I don't think we have any regional office, 
although I haven't checked the numbers most recently, that has 
no backlog, that is completely up to date. We certainly do have 
some offices that come close, but the norm and certainly the 
majority of offices at this point have significant backlogs.
    Part of this is due to fluctuations in caseload, that it 
might be the case that over a particular period of time there 
is a dropoff in cases in a particular region, so that might 
allow that particular region to catch up, while in another 
region there is a surge of cases that causes the backlog to go 
up. Part of this has to do with structural matters that are 
really not a reflection of the performance of the region, but 
there certainly are differences.
    Mr. Gould. There is a substantial--if I can just interject, 
Congresswoman, there is a substantial difference in the pending 
cases in different regions. For instance, if you look at region 
7, the pending cases, 838. If you look at 24, the pending cases 
are 81. So to answer your question, there is a substantial 
difference.
    Mrs. Northup. It is sort of my understanding that maybe you 
would have a strike someplace and you would have a fluctuation, 
an accelerated number of cases that would be filed, but at the 
end of that they would also tend to be settled fairly quickly.
    I would also be interested in knowing, region by region, 
the number of cases in the backlog and the total number of 
cases over, say--you know, what would be a director's tenure? 
Maybe eight years? Would that be an average tenure, if they 
have been there for many years?
    [The information follows:


[Pages 621 - 622--The official Committee record contains additional material here.]



    Mr. Feinstein. I don't know the exact figure. We have some 
directors who have been in office longer than that.
    Mrs. Northup. Because I think the question is, are they 
inefficient, or are there too many regions? One of the ways is 
to look at the caseload, although I realize that you could have 
very time-consuming cases and also some fairly quick cases. But 
because of a strike causing a spike, that would come down, and 
you would have to look, I guess, at about a----

                           transfer of cases

    Mr. Feinstein. I do want to mention one of the initiatives 
we have taken which, along with many others, is outlined in 
this four-year report which I have provided you. We are now 
transferring cases between regions at a much greater level than 
we have in the past, to address these kinds of fluctuations.
    Mrs. Northup. Mr. Feinstein, if you are going to transfer 
cases, then you have moving anyway, and traveling and 
everything. Doesn't that argue for consolidating some of these 
offices?
    Mr. Feinstein. I was starting to say that what we have done 
through the development of the impact analysis process, which 
is also outlined in this report, is differentiate between the 
kinds of cases we get. Only a certain kind of a case is 
susceptible to that kind of treatment.
    If a case requires a lot of personal contact, personal 
interviews and going out and meeting with witnesses, you can't 
transfer that kind of case. But we do get some kinds of cases 
in which we have now developed alternative investigative 
methods, such as investigation by telephone, investigation by 
questionnaires and position papers provided by the parties. It 
is those kinds of cases which we are able to transfer. We have 
more than 2,000 cases now that we have transferred. A few years 
back we had hardly any, so that has been a significant change.
    I think you are correct, that our increased ability to move 
cases around does raise issues that perhaps we can consolidate 
some of our operations, and that is something which we are 
looking at and continue to consider.
    Mrs. Northup. The fact is that every case in Louisville, 
Kentucky goes to Cincinnati, anyway. They are going to travel. 
It is just are they going to travel to Cincinnati or to 
Indianapolis, if you consolidate. You are not really 
eliminating travel by having all of these--unless you happen to 
be in one of the 33 cities. They oversee quite a bit of other 
area that requires travel.
    Mr. Porter. Mrs. Northup, your time is up.
    Mrs. Northup. Do I get another round?
    Mr. Porter. If you stay, yes, absolutely.
    Ms. Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman. I want to thank you 
for your wonderful words of commendation to our dear colleague, 
Mr. Stokes. I wish he were here so I could publicly, in front 
of him, associate myself with your remarks, and also to say 
that on the Intelligence Committee,we have the Stokes 
Scholarships there for young people to be involved in the intelligence 
community, and once again it relates to education, of course, as Mr. 
Obey referenced. There is hardly a place in this Congress that you can 
go that a positive impact has not been made by Mr. Stokes.
    Thank you, as one who admires the work of Mr. Stokes, and 
it is presumptuous to thank you but I certainly did enjoy 
hearing your kind words about him.
    I also commend you, Chairman Gould, for your fine service 
to our country and the education of our young people as a 
professor, and now in your public service as Chair of the NLRB. 
I, for one, will certainly miss you, as I believe you have 
brought great integrity and intellect to the position.
    Mr. Gould. Thank you, Congresswoman. It has been a pleasure 
working with you on the committee.
    Ms. Pelosi. Thank you.
    Mr. Feinstein, I don't know how long ``Acting'' is, but I 
commend you also for your fine contribution. I think that 
America and the NLRB have been well served by the service of 
all of you, and that is very important to the productivity of 
our country and to the morale of our workers, the success of 
our workers. Thank you for that.
    Mr. Feinstein. Thank you.

                            impact analysis

    Ms. Pelosi. Coming as I do at this point, my questions have 
been asked. And then in answer to Congresswoman Northup's 
questions of Mr. Feinstein, you started to go into the area 
that I was going to go into, to ask him to further elaborate on 
the impact analysis program.
    I understand that you did respond to some of my other 
questions, which I will check the record for, but I will be 
fascinated to see how you are dealing with the year 2000 
challenge that we have.
    Mr. Feinstein, if you would, is there anything more you 
would like to add to the record about the impact analysis?
    Mr. Feinstein. Yes. This is one of the key initiatives of 
my tenure. It is a program which was developed over a period of 
in excess of a year, and we took great care. We had an agency 
task force that was composed of a broad cross-section of 
representatives in the agency. We had managers, supervisors, 
and our internal unions who all made an important contribution 
to the development of this program.
    It was consistent with the dictates of NPR and GPRA to be 
more consumer conscious in attempting to better rationalize 
increasingly limited resources. It was an effort to begin to 
process cases with better recognition and better understanding 
of the particular importance and the particular issues in 
different cases. It simply could no longer be first in, first 
out. Our backlogs were increasing. We wanted to assure 
ourselves that those cases that we were taking longer to get to 
were the ones that could best tolerate more lengthy 
consideration.
    The cases with the broadest impact, the broadest impact on 
the collective bargaining process, the broadest impact on 
employee rights, on employer rights, are the ones that we are 
focusing our resources on initially. Also, as I suggested to 
Congresswoman Northup, it also gave us the ability to 
differentiate how we approached the investigations of different 
cases, so that we are now better able to say, in these kinds of 
cases we can develop alternative investigative techniques which 
are more efficient and require less resources, but would not 
necessarily be applicable to other kinds of cases.
    So the benefits are on different levels. As I say, we took 
a lot of care. We consulted with the people who practice before 
the agency. We have developed and implemented this program, 
which has now been up and running for nearly two years in our 
regional offices. We are carefully assessing it. It does 
reflect a significant change in the operational culture of the 
agency, and it is an initiative which we are now carefully 
evaluating and assessing.
    We recognize that when you implement an initiative of this 
nature, you have a responsibility to evaluate and assess and 
make appropriate adjustments as we better understand its 
effect. We are currently in the process of doing that, and do 
expect to be refining and modifying the program accordingly.
    But I think that the initial reaction, the initial response 
both from the people within the agency who are carrying it out, 
as well as those who appear before the agency, has been a 
positive one, and we are hoping to continue to develop and 
improve it.
    Ms. Pelosi. I appreciate that.
    Does anyone have anything to add to that?

                           settlement judges

    Mr. Gould. The only thing I would say, Congresswoman, is 
that we have tried to streamline our agency, particularly with 
regard to the resolution of cases at the administrative law 
judge level. Earlier I referred to our settlement program, 
where what we have done is reduced the amount of wasteful 
litigation that would otherwise consume our agency and 
ultimately consume the courts.
    One of the things that I have been proudest about is the 
ability of our administrative law judges to come in and act as 
impartial arbiters or mediators, so to speak, conciliators, 
really, and to resolve differences between parties that would 
otherwise go to litigation. They have been effective in issuing 
their bench decisions, expediting our procedures, and they have 
been carrying a heavier workload and doing it in much less time 
than their predecessors.
    I often speak of our administrative law judges as kind of 
the unsung heroes of our agency. All of our people, I think, 
throughout the regions as well as in Washington, have done just 
first rate work during my tenure, and I think that our 
administrative law judges stand second to none.
    We have also undertaken reforms that we have outlined to 
you earlier in connection with our procedures in Washington 
itself.
    Ms. Pelosi. What you say is music to the ears of Members of 
Congress, I believe, because performance and results are 
important to us in terms of approaching issues fiscally, as we 
do in our committee, but also in terms of what it means to the 
people who have a grievance and are looking for a decision.
    So to that extent, to hear about these efficiencies is very 
encouraging, and especially if you are doing it with a 
discerning eye in terms of those that can be resolved one way, 
not a cookie cutter approach, but making some distinctions 
among the cases that lend themselves to that versus those that 
do not. So I commend you both for that, and again for your 
service as General Counsel and the Chairman of the NLRB.
    Mr. Chairman, if I may, I would just like to for one moment 
say something about what you opened the meeting about this 
morning. That is, that in making and observing the issue at 
hand, I think we have to also keep in mind that we are on new 
territory here when we talk about cyberspace.
    I remember on the Intelligence Committee this year I wrote 
the dissenting views to a bill we took up on encryption earlier 
in the year, and I did not put my dissenting views on the Web 
immediately because I wanted to get the permission of the 
committee to make sure it ought to go. For two days my office 
was subjected to the most harassment that we have ever 
received, ever received under any issue, because we were 
withholding the information.
    People think once something is in the public domain--the 
expectation is something quite different than it might have 
been in the past. They want it in realtime. There may not be an 
exact corollary from one situation to the next that we are 
talking about here today, but I do know what the public 
expectation is. They think once it is uttered, it is theirs and 
entirely theirs.
    Mr. Porter. If the gentlewoman would yield, except that in 
this case we are dealing with a specific statute.
    Ms. Pelosi. I understand that. But I am saying as we look 
into that, we have to take into consideration what the public 
expectation is, as well. But I appreciate the Chairman's 
observation.
    Once again, I thank the gentleman, and I yield back the 
balance of my time.
    Mr. Porter. Thank you, Ms. Pelosi. You yielded back, I 
think, two seconds.
    Ms. Pelosi. Nonetheless.
    Mr. Porter. Mr. Miller.
    Mr. Miller. Gentlemen, I am cautiously optimistic that we 
are moving in the right direction, I think, in the direction 
not to pursue single site. I think it was a politically 
responsible decision to withdraw your renomination. However, 
with this Mr. Cohen we take two steps forward and we go three 
steps backward, so I hope the administration will get some very 
objective and not biased, partisan people to be your 
successors.
    But with just that statement, I would like to yield the 
balance of my time to my colleague, Mr. Dickey.

                Statement on California Proposition 226

    Mr. Dickey. Thank you, Mr. Miller and Mr. Chairman.
    Mr. Feinstein, I would like to ask you a question. Mr. 
Gould has made the statement that the proposition in California 
would ``cripple a major source of funding for the Democratic 
Party, given the fact that most donations by unions go to 
Democrats rather than Republicans.''
    Do you agree or not agree with that statement?
    Mr. Feinstein. Mr. Dickey, since I first became General 
Counsel more than four years ago, I have made the judgment that 
I have declined to comment on public issues, on legislative 
issues, on issues of matters pending before legislatures. This 
was, from day one, a position that I have taken. I have 
consistently declined to comment when asked in public 
appearances to comment on these kinds of issues. I have not 
commented upon them, in the limited public remarks I have made 
during this period of time.
    Mr. Dickey. Are you saying you can't comment now?
    Mr. Feinstein. I am not saying I can't comment. I am saying 
the position I have taken is I prefer not to comment.
    Mr. Dickey. Do you agree or don't agree? I am just asking 
you this, and you make up your mind. Mr. Gould is your partner, 
and you all have worked together for all these years. Do you 
agree with what he said or do you not agree with what he said? 
Just yes or no.
    Mr. Feinstein. In terms of characterizing our relationship, 
Mr. Gould is the Chairman of the Board. I am the General 
Counsel. We are separate. There is a wall between our 
functioning.
    Mr. Dickey. I happen to know that. Just yes or no, do you 
agree with what he said?
    Mr. Feinstein. In his statement?
    Mr. Dickey. Yes, sir.
    Mr. Feinstein. I haven't studied it closely. I agree with 
parts of it and I disagree with other parts of it.
    Mr. Dickey. Which part do you agree with? Let me read it 
again, ``. . . cripple a major source of funding for the 
Democratic Party, given the fact that most donations by unions 
go to Democrats rather than Republicans.''
    What part of that do you agree with?
    Mr. Feinstein. Congressman, I don't mean to be evasive 
here. I have not studied the issue. I am not aware of the 
nuances or even the content in particular of the issue.
    Mr. Dickey. You are not only being evasive but you are 
taking a lot of time.
    Mr. Feinstein. What I am saying is I have not studied the 
issue and I don't have a view on it.
    Mr. Dickey. You say you agree with some of it.
    Mr. Feinstein. Plans----
    Mr. Dickey. Is it something he shouldn't have said? You can 
answer that. Should he or should he not have said, as a 
professional head of this agency, that comment?
    Mr. Feinstein. My position is that it is something I would 
not have said.
    Mr. Dickey. You think he shouldn't have said it?
    Mr. Feinstein. The Chairman and I have discussed over the 
years the kinds of comments that might or might not be 
appropriate, and we have agreed to disagree on that issue.

                            Bodenstein Case

    Mr. Dickey. I know. I want to ask you about the paycheck 
protection. Is it the Bodenstein case--do you know about that, 
Bodenstein?
    Mr. Feinstein. I am not sure I know----
    Mr. Dickey. Where you all decided that the 70 cents a month 
that, without consent, went to political purposes, that it was 
de minimis, too small to mess with. Do you remember that case?
    Mr. Feinstein. I think I have a vague recollection of it. 
It is a case that arose several years ago.
    Mr. Dickey. Yes, sir, from Oklahoma.
    Mr. Feinstein. Yes.
    Mr. Dickey. De minimis is 70 cents. If we have 15 million 
workers, we are talking about $126 million that goes for 
political purposes. Is $126 million de minimis?
    Mr. Feinstein. If this is the case that I think it is, I 
believe that the holding in that case was a procedural holding. 
The information that was provided to the particular individual 
was sufficient at what we call stage one of the Beck case for 
the individual to decide whether or not to proceed to challenge 
the allocation.
    It was not saying that the allocation itself was de 
minimis. It was saying that the information that was provided 
was adequate for the particular individual to assess whether or 
not to challenge the way in which the union was allocating its 
expenses.
    Mr. Dickey. Mr. Gould, let me ask you that question, if I 
may. Can you answer it?
    Mr. Gould. I cannot answer it, Congressman, because this is 
a matter that did not come before us. As I understand it--I 
recollect a good deal of discussion in the press, and I think 
there was some discussion of it in the hearing that we had last 
year. You asked the General Counsel about it. I cannot discuss 
it because it is a matter that has not come before us and that 
could come before us during our tenure, or during my tenure.
    Mr. Feinstein. I believe it is currently a live case. It 
has now come to us in what we call level two. Now, the actual 
allocation is being challenged.
    Mr. Dickey. Let me ask you this, Mr. Gould: Is any part of 
your decision that your agency gave in this case colored by the 
fact that the Democratic Party is going to get the benefit of 
the $126 million?
    Mr. Gould. First of all, let me tell you that our agency 
did not--our agency--I did not make a decision in this case. 
The Board did not make a decision in this case.
    As I understand it----
    Mr. Dickey. It is back to Mr. Feinstein.
    Mr. Gould. All that has happened at the General Counsel 
level.
    Point number two, no decision of mine is ever colored by 
the amount of money that is going to go to a particular party 
or not, period.
    Mr. Dickey. ``This would cripple a major source of funding 
for the Democratic Party, given the fact that most donations by 
unions go to Democrats rather than Republicans.'' You are not 
asking me whether I agree with you, you are just making a 
statement that you are not aware, that you don't make decisions 
based on who gets the money. Is that what you are saying?
    Mr. Gould. I am telling you----
    Mr. Dickey. Are you asking me to agree with you?
    Mr. Gould. I am not asking you anything. You are asking the 
questions, I am giving the answers. I am telling you that I do 
not make any decisions based upon where the money in a 
particular political contribution case goes to.
    Mr. Dickey. What does this mean, ``. . . cripple a major 
source of funding for the Democratic Party?'' You were out 
there in California advocating for the Democratic Party, so 
they would get part of this $126 million, if not all of it.
    Mr. Gould. My point in California was that this proposal in 
California was animated by those concerns that you have just 
alluded to, and my purpose in opposing Proposition 226 is based 
upon the view that this will interfere with the National Labor 
Relations Act, and that the Board is doing a good job in 
enforcing Beck.
    I am not commenting on matters that were before the General 
Counsel.

                  impact of fifteen percent reduction

    Mr. Dickey. Let me ask Mr. Feinstein this: If 15 percent of 
your last year's budget is cut, if that is part of an amendment 
and it is passed, that would be $27 million that would be cut 
from last year's budget. Let's just assume that is correct. 
What would you do? What offices would you close? What people 
would you terminate to cover $27 million?
    Mr. Feinstein. Congressman, I can't tell you at this time 
specifically the offices or specifically the people. I can say 
that it would require us to lay off employees of the agency and 
it would cause our case processing times to increase 
significantly.
    Mr. Dickey. In the last year you have added 40 new 
employees to your work force?
    Mr. Feinstein. This current fiscal year we have had a 
hiring freeze and we have not added any new employees. In fact, 
we have lost on the order of 40 or 50 people that have quit or 
retired over this period of time.
    Mr. Dickey. You have a net loss of 40?
    Mr. Feinstein. That is correct, this fiscal year.
    Mr. Dickey. I thought you had a net gain of 40.
    Mr. Feinstein. Last year we did hire some 40 or 50 people 
over the course of the year, who replaced around half of the 
people who left the agency during that period of time. So last 
year we had a net decrease, as well, but we did do some limited 
hiring. This year we have done none.
    Mr. Dickey. The $27 million, would you close any offices? 
You all--I have been on this thing since 1995, I guess, saying 
``Please close an office, please close an office,'' and you 
closed one, and I think that was in D.C. Would any offices be 
closed if $27 million was cut from your budget, and which ones?
    Mr. Feinstein. Again, Congressman, I can't tell you 
precisely what would happen. It would certainly require a 
significant reduction in the staffing level of the agency. 
Whether that would mean that every office gets reduced 15 
percent or whether we would close specific offices, the 
determination of that would require careful consideration as to 
what we would believe would least impair the operations of the 
agency. I simply could not give you an accurate answer to that 
at this point.
    Mr. Dickey. The annual rent on the offices here in 
Washington is $8 million a year. Would you consider reducing 
the office space and cutting off some of that $8 million a 
year, if that happened?
    Mr. Feinstein. I think that would have to be considered, 
yes.
    Mr. Dickey. Would that be considered before you close the 
regional offices? Which is more important to you, the regional 
offices, or the home office charging $8 million a year?
    Mr. Feinstein. That it is a hard question to answer. We 
have reduced significantly the space in both regional offices 
and in headquarters. We have moved the resident office in D.C. 
into the Washington headquarters. We also closed the resident 
office in El Paso.
    As to which we would do first, the best answer I could give 
you is we would carefully evaluate that question. I have not 
made a determination because I haven't really sifted through 
the facts and the evidence as to which would be the most 
appropriate thing to do.
    Mr. Porter. Mr. Dickey, your time has expired, but we will 
have a second round, if you wish to stay.
    Mr. Dickey. Thank you, sir.
    Mr. Porter. Mrs. Lowey.

                      growing complexity of cases

    Mrs. Lowey. Thank you, Mr. Chairman. Welcome, Mr. Gould and 
Mr. Feinstein. I want to thank you for appearing before us.
    I hope that we can really focus on the important mission of 
the NLRB. You have already discussed your view of this 
incident. Our Chairman I thought was very gracious in 
discussing it. I think it is absolutely critical that we don't 
use those views of some of our members who have been anti-NLRB 
for a very long time to obfuscate the very, very important 
mission of the NLRB, which is to promote peace between labor 
and the business community. I personally want to thank you and 
Mr. Feinstein for the important accomplishments you have 
advanced since your tenure there.
    I am hoping that this hearing can really remain focused on 
the important work of the NLRB, because I think this incident 
has been discussed quite sufficiently. I would like to go on to 
several questions that I want to pose to you.
    First of all, Mr. Chairman, can you please elaborate on 
your testimony in which you state that the NLRB's cases have 
grown in complexity? I think it is important for us to know, as 
we appreciate the work that you are doing, how these cases have 
changed, how has this affected staffing needs? Life certainly 
has gotten more complex in a whole range of areas, and you 
certainly see it at the NLRB. Can you discuss that with us?
    Mr. Gould. Certainly, Congresswoman Lowey. Thank you for 
your comments.
    Let me say that a major way in which our cases have changed 
relates to the mix between representation and unfair labor 
practice cases. We are getting a greater percentage of unfair 
labor practice cases than we did in the past, and this requires 
more than double staff time that would otherwise goon a 
representation case, so we are getting more unfair labor practice 
cases.
    Why this is, I am not sure. I have been particularly 
interested, for instance, in looking at the resident office in 
Las Vegas, where there is a great deal of union activity and 
where some of the unions apparently are not filing 
representation petitions but where, nonetheless, we have gotten 
a big increase in cases, particularly in the unfair labor 
practice area.
    The second factor here is that I think many of our cases 
relate in a global economy to corporate relocations, 
reorganizations, mergers and the like. We are getting more lead 
cases dealing with the duty to bargain, the duty to disclose 
information. Some major disputes between the companies and 
unions have emerged.
    You may have read of the Caterpillar dispute which consumed 
a great deal of our agency's time and resources. I was pleased 
to see that we were able to approve of the settlement that the 
United Auto Workers and the Caterpillar Corporation entered 
into.
    Just the volume of pages that we are getting, and I am not 
sure whether there is a complete correlation between the 
complexity of the cases and the volume of transcript pages that 
we are getting, but we are--whether this is because lawyers are 
becoming more contentious, or whatever. But we have now moved 
to, as I said in my earlier testimony, to an average of 684 
pages per unfair labor practice case. Just three or four years 
ago we were at about 449. So again, this increases the burden 
on our administrative law judges and our people in the field.
    We are trying to attack this problem of a greater burden by 
introducing some of the initiatives that I have alluded to. Our 
agency has always had a very good record when it comes to the 
settling of cases. What we are trying to do, as I described to 
Congresswoman Pelosi, is to involve our administrative law 
judges in this process. We have been able to settle about 250 
cases in the relatively short time that this initiative has 
been in effect, where we bring in a third party, and that third 
party doesn't have the authority to adjudicate but merely to 
conciliate differences between labor and management. So these 
are the kinds of things.
    And there are other disputes of this kind, like Bridgestone 
we had a few years ago. We have had a number of disputes in the 
Midwest; the case in the deep South, the Avondale case, which 
has taken up--Ms. Webber is handing me the table of contents 
for I guess the administrative law judge's decision in this 
case. There were thousands--40,000 pages of transcript. We are 
putting an enormous amount of time and energy into trying to 
resolve these very difficult--these very difficult matters.
    So hopefully this provides you with some kind of insight 
into the challenges we are confronted with.
    Mrs. Lowey. Just to pursue that for a moment, because I 
certainly don't have the expertise that you and your staff 
have, you mentioned that the average brief has increased from 
440 to----
    Mr. Gould. Transcript pages.

                   reasons for increase in litigation

    Mrs. Lowey. Transcript. What are the other reasons for the 
increase in litigation, do you expect?
    Mr. Gould. Gosh, that is very difficult to say. One of the 
things----
    Mrs. Lowey. Is there less discussion between labor and 
management at the outset?
    Mr. Gould. You know, one of the things that has happened in 
the 1980s and has continued through the 1990s is that we have 
seen a society where we have had more polarization, 
regrettably, between labor and management, and frequently that 
has meant less discussion.
    We try to, through our agency, promote discussion, promote 
the resolution of both representation and unfair labor practice 
cases. I think we have increased our ability to do so. But I 
think that we as a society are seeing more polarization between 
labor and management, and that tends to harden positions, to 
make disputes sometimes more acrimonious and carry over a 
considerable duration.
    If you will recall, the Caterpillar dispute lasted six full 
years, at the end of which it finally resulted in a settlement. 
We have seen a number of disputes that have gone on for a very 
substantial period of time, even though the number of 
industrial disputes and strikes and walkouts is decreasing. 
What we are seeing is that some of the very big ones, in terms 
of the tenacity and obdurate nature of the parties, is 
increasing.

         improving productivity through information technology

    Mrs. Lowey. Given the increase in workload and the increase 
in complexity, to what extent has information technology 
improved the productivity of your staff, and how are you using 
it?
    Mr. Gould. I think information technology has improved the 
productivity of our staff, but we are very far behind. I 
mentioned this Avondale case that has so many hundreds of pages 
of transcript. The lawyers who were representing the company 
had scanners where they could identify particular portions of 
testimony, briefs, that they could use immediately, every night 
at the end of the hearing.
    We are behind in technology, and we are trying to make more 
of an investment in technology. That is a large part of what 
the President's budget is all about. We find ourselves a few 
steps behind what private parties generally have in this arena. 
Our hope is that with the President's budget we can recoup some 
of the disadvantages that we suffer from.
    Mrs. Lowey. I know Mr. Feinstein has been working in this 
area. Could you elaborate?

                      growing complexity of cases

    Mr. Feinstein. Surely. As to the first question, in terms 
of complexity, the Chairman has made a number of points with 
which I would concur as to possible reasons. It is difficult to 
know.
    I think changes in the economy itself, in the increasing 
fluidity of the workplace where employees are less tied to 
particular employers, there is more contracting and 
subcontracting, changes in economic organization. This new 
workplace reality presents a number of complex issues when they 
come before the agency in the form of a case: Who is the 
employer? Who is liable? Who are the employees? How broad 
should be the scope of a unit, or should be liable in what is 
considered to be a violative situation?
    So the changing and increasing complexity of the workplace 
itself is reflected in the increased complexity of the cases 
that appear before the agency. As the Chairman suggested, we 
have made efforts to weed out, through our information officer 
program, those kinds of cases which in the past were coming 
before the agency and were relatively easy to resolve because 
they were not meritorious, or because they were not 
appropriately before the agency. So what is left are cases with 
greater substance that are more demanding of our resources.
    These are, again, some of the reasons for the increase in 
complexity.
    We have been working hard on improving our technological 
capacity at the agency, the level of our computerization, the 
kinds of automated data processing systems which enhance our 
productivity and enhance our work. We have not made as much 
progress as we had hoped, largely due to funding limitations, 
but we continue to move forward in this area. Once our CATS 
program is implemented over the next couple of years, we will 
benefit significantly in terms of further productivity 
increases and further capacity to improve our efficiency.
    Mrs. Lowey. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much, Mr. Chairman.
    Mr. Gould I apologize for being late. Welcome to the 
committee. I understand you have had a delightful afternoon. I 
am pleased to be here.
    Mr. Gould. It goes with the turf, Congressman.
    Mr. Hoyer. Some turf is rougher than others.
    I presume some of the concerns I have have been covered, 
and if they have, you can simply say that we have covered that 
and you don't need to answer a second time.
    Obviously the concerns I have are that we have a statute in 
place which I strongly support, which gives to working men and 
women the right to organize and bargain collectively on behalf 
of their rights to pay, benefits and working conditions, and 
that that right is only so good as the enforcement mechanisms 
that are eventually to ensure that the law is complied with on 
both sides of the bargaining table.

                        decreasing case backlog

    So my concern is that, as we have reduced very 
substantially your budget, your complement of employees, by 35 
percent, 30 plus percent over the last 10 years, that we are in 
fact able to handle the cases properly and in a timely fashion.
    In that regard, Mr. Dickey asked the question, if $27 
million were taken out of the budget, what impact would that 
have? Let me start from, if the President's budget is approved, 
will in fact we be able to not only handle the new cases, but 
to reduce backlog?
    Mr. Gould. It is our expectation that we will be able to 
reduce the backlog, Congressman. That is our expectation.
    Mr. Hoyer. How rapidly? In other words, what percentage do 
you project, under the President's budget, for us to get the--
--
    Mr. Feinstein. In terms of the field backlogs, we estimate 
that under the President's budget we could reduce them by about 
10 percent.
    Mr. Hoyer. Per year?
    Mr. Feinstein. Yes, 10 percent in fiscal year 1999, the 
year that the budget covers.
    Mr. Hoyer. Okay. We have a five-year projection, however. I 
don't know whether you have a five-year projection.
    Mr. Feinstein. Yes, we do, under our GPRA plan.
    Mr. Hoyer. I understand that.
    In terms of that, would it be approximately 10 percent a 
year? Would it be appropriate to project it would take you 
seven to nine years to reduce the backlog so we had a current 
docket?
    Mr. Feinstein. That is a fair rough estimate. Of course, we 
are talking about an operational budget at roughly the same 
level, that if the operational budget were maintained at the 
level of what the President proposes for 1999, we could make 
continuous progress on the reduction, slowly, of the backlog.
    Of course, it is contingent upon the one thing that is the 
most difficult to predict, and that is the caseload. If the 
caseload surges, that obviously would not be the case. 
Likewise, if it decreases, we would be able to make quicker 
progress.
    Mr. Hoyer. That is my understanding, that in fact the 
caseload has surged.
    Mr. Gould. It has. In recent months there has been a surge. 
I think it is difficult to project for the entire year whether 
there will be a substantial increase. We have not so projected.
    Mr. Hoyer. With respect to the reduced staffing and the 
reduced funding as required--I am sure it is in this paper that 
I am looking at, I just can't find it--but the backlog or the 
pending cases that are unresolved, how quickly are they rising 
on an annual basis?
    Mr. Feinstein. To give you a couple of numbers, again to 
the field backlog, the 1993 number was about 3,850. The 1997 
figure was in excess of 7,400.
    Mr. Hoyer. When you say ``situation pending,'' that is the 
backlog?
    Mr. Feinstein. That is the primary measure of the backlog, 
yes.
    Mr. Hoyer. So the backlog in 10 years has increased by 250 
percent, 2,891 to 7,424?
    Mr. Feinstein. I trust your math.
    Mr. Hoyer. It is obviously more than two and less than 
three.
    Mr. Feinstein. Double.
    Mr. Hoyer. Being a politician, I will split the difference, 
right? But it is over a 200 percent in increase in 10 years. 
And at the same time we have had--since 1993 we have had a 10.6 
percent effective reduction in your budget?
    Mr. Gould. Yes.
    Mr. Feinstein. That is correct, I believe.
    Mr. Hoyer. Now, the concern that for instance we have with 
respect to the Federal Election Commission, expressed by many 
on both sides of the aisle, is that we are not handling cases 
quickly enough and we are having to dismiss cases that may have 
merit, and therefore not enforcing the system. Some perceive 
the fact that we do not have sufficient computerization of that 
system--it may not be as applicable to your work as the FEC's, 
but it is clearly applicable.

                               year 2000

    We are very concerned in the Congress about the compliance 
for Year 2000. Are you, given the President's budget, going to 
be able to have solved your Y2K problem by the first quarter of 
next year?
    Mr. Feinstein. As we indicated earlier, under the 
President's budget, we believe we will be in compliance with 
the Year 2000 problem. It has required us to develop a 
contingency fallback plan. Our original plan, developed a 
couple of years ago, we are simply not able, given the funding 
restrictions, to implement. But we have already developed a 
contingency plan that will bridge our ability to get from the 
current operating system to the new system that we are 
implementing in a manner that is consistent with meeting the 
Year 2000 problem.
    The short answer to the question is, under the President's 
budget, we have a plan to take care of the Year 2000 problem.
    Mr. Hoyer. Now, I am glad to hear that, and I am glad to 
hear of your optimism. We are all very concerned that--I sit on 
the subcommittee that oversees the IRS. It is critically 
important it gets there. Defense, it is critically important it 
gets there. Yours as well; all the agencies. I am concerned 
that the optimism perhaps may not be justified.

                         cancellation of trials

    Having said that, can we go on to another subject? As a 
result of the current funding freeze that you are under, it is 
my understanding that you have canceled all trials in 
September. Was that this coming September or last September?
    Mr. Gould. This coming September.
    Mr. Hoyer. That will mean, I presume, that cases that are 
legitimate and not legitimate, you are not--how are you making 
the judgment? How do those get on the docket? If you are 
canceling all trials in September, what ramifications does that 
have? How long will it be before they get back on the docket?
    Mr. Feinstein. The way our trial calendar is developed is, 
as cases progress through the pipeline and complaints issue, 
and our efforts to settle the cases are not successful, they 
get set for trial. They are set at the next available slot--
each region is allocated a certain number of trial slots. The 
cases that need to be set for trial are then set for trial in 
the first available trial slot.
    The length of the period of time it takes to schedule a 
case does vary from region to region. I think our average is 
about eight or nine months now, or seven months or so. What the 
cancellation of trials in September means is that we are not 
scheduling, we are leaving the month of September blank, we are 
not scheduling any trials. The cases that would normally be 
scheduled in August are being scheduled in August. The cases 
that would normally be scheduled in July will be set in July. 
The cases that would normally be set in September are not being 
set for September.
    We have had to do that simply to assure ourselves that we 
will be able to come in under the line for our current fiscal 
year budget. What will happen to those trials is they will be 
deferred and put over until next year, which causes delay, 
causes further backlog in the pipeline, and most importantly, 
further time to resolve the issues of the case.
    Mr. Hoyer. At the time the decision was made, was the 
October docket--October, November, December docket already 
filled up, so you just didn't push everybody 30 days? You are 
now going to jump the September cases out of the line and put 
them somewhat later?
    Mr. Feinstein. It probably was a little of both. When we 
were developing our operational plan for the current fiscal 
year, we realized that in order toassure ourselves that the 
budget was balanced, so to speak, we needed to do this and realize the 
savings. Conducting a trial incurs transcript expenses, travel 
expenses, and other kinds of expenses.
    Mr. Hoyer. I understand the savings that can be effected. 
It is the ramifications to the litigants that I am concerned 
about.
    Mr. Feinstein. Exactly. Some of the trials might have been 
put forward a month, some might have been put forward further. 
There were probably October trials that were already in place 
at that time.
    Mr. Gould. To give you some nature of the extent of the ALJ 
hearing problem, in Region 15, for instance, you can't get a 
hearing now, right now, as we speak, before February of 1999. 
In Region 28 you can't get a hearing before late February of 
1999. In Region 30, late January of 1999. So this is the 
enormity of that.
    Mr. Hoyer. That would mean if there was an allegation of an 
unfair labor practice by a group trying to organize a 
particular business, if they could not get that resolved, the 
probability is they would not be able to continue their 
organizational efforts?
    Mr. Gould. I think it would be very difficult.
    Mr. Hoyer. It would at least undermine it?
    Mr. Gould. It is the old story. ``Justice delayed is 
justice denied'' has particular applicability in our field. One 
of the things that we have tried to do is to deliver our 
service more promptly, but this makes it quite dismal.
    Mr. Porter. Mr. Hoyer, your time is up, but we are going to 
have a second round, if you are interested.
    I want to at this point in the record say that when the 
subcommittee adjourns today, our regular hearing schedule is 
complete. We will have a special hearing on May 20th, beginning 
at 1:30 p.m., with six Nobel laureates to discuss with the 
members of the subcommittee the future of biomedical research. 
They will be here for us.
    The second round, Mr. Dickey.
    Mr. Dickey. Thank you, sir. How long do I have?
    Mr. Porter. Ten minutes.
    Mr. Dickey. Thank you.
    Mr. Porter. You have already had, I might say, 18 minutes, 
but 10 minutes.

                          generation of cases

    Mr. Dickey. Mr. Feinstein, have you ever paid any 
attorneys' fees to anybody personally?
    Mr. Feinstein. I believe I have. In the preparation of our 
will I believe I incurred an expense. Perhaps there were 
others.
    Mr. Hoyer. Mr. Chairman, parliamentary inquiry. I presume 
under the hearing process one cannot object to a question as 
being irrelevant and immaterial?
    Mr. Dickey. Neither can you ask me why I asked it. Are you 
the judge or something?
    Mr. Porter. I am sure Mr. Dickey is going to develop that 
relevancy in the course of his questioning.
    Mr. Dickey. I may and I may not.
    Mr. Hoyer. I am betting on the latter.
    Mr. Dickey. Mr. Feinstein, have you ever been a part of a 
large law firm?
    Mr. Feinstein. No, I have not.
    Mr. Dickey. Let's just assume that nowadays we have a lot 
of branches and everything. Let's say a law firm in Washington, 
D.C. wants to branch out, and they go into--they have 51 
different offices all across the Nation. I don't know where I 
get that figure, but I am just going to pick 51 out of the air. 
They are going to put people in those offices and they are 
going to want them to generate the business to justify that 
office. Isn't that a fair assumption?
    Mr. Feinstein. I am quite honestly not familiar with the 
economics of law firm practice, but it sounds reasonable to me.
    Mr. Dickey. Let's just say if you put someone out there and 
they see job security as being very important, they are going 
to make sure that they have enough caseload to justify that 
office staying open, aren't they?
    Mr. Feinstein. It sounds reasonable to me, yes.
    Mr. Dickey. Every law office controls how much caseload 
they have. They can control it. They can say no or they can say 
yes, or they can go out and advertise, in the case of private 
practitioners, or they can go generate just so they can keep 
their job security. Have you ever thought about the fact that 
these 51 offices that you have created a caseload motivation or 
momentum?
    Mr. Feinstein. Congressman, I think that the nature of the 
act which we enforce requires us to respond to charges that are 
filed with the agency. I am not aware of any activity by anyone 
within the agency that could be construed as generating cases.
    Particularly in recent years when our backlogs are 
increasing, as is the number of cases that are being handled by 
each of the staff members, I think if anything the incentives 
run the opposite way. In the case of a government agency like 
ours, there is an incentive to have less cases because each 
individual staff member already has a caseload that is 
significantly greater than it was in previous years. I am 
certainly not aware of any activity conducted by anybody in the 
regional offices that could be construed as attempting to 
generate cases.
    Mr. Dickey. Do you think those 51 offices should run like a 
law firm, like a branch of a law firm, or do you thinkthey 
should just be out there and be autonomous? Should there be some 
accountability as to how many cases they have and don't have? Should 
there be a comparison between the offices and the efficiencies of 
various offices?
    Mr. Feinstein. Certainly. We do keep records of the extent 
of the caseload and the efficiency of the operations, how 
quickly and thoroughly and the degree of quality with which the 
cases are handled. That is an important part of our operational 
structure.

                       distribution of resources

    Mr. Dickey. I have felt like we either put a lot of money 
in the home office or we put a lot of money in the regional 
offices. I have asked you all, because of budget 
considerations, to please get efficient one way or the other, 
and you have just--you have said no. You have just sat there 
and are spending money on both counts.
    Let me ask you this: Which is more important for the 
welfare of the litigants in America, the home office or the 51 
branch offices?
    Mr. Feinstein. Congressman, we are constantly assessing 
where our increasingly limited resources are best spent. Over 
the past several years a higher proportion of resources have 
been allocated to the field. The reduction in headquarters has 
been greater than the reduction in the field. We have been 
reducing both. Our general inclination at this point is that we 
need to allocate more resources to the field.
    But let me say this, that we have tried very hard, out of 
necessity and out of a sense of responsibility, that it is the 
right thing to do, to economize and operate more efficiently. I 
have issued a report which points to a number of very specific 
things that we have done, specifically in the area of cost 
savings and efficiency initiatives.
    We estimated in our presentation to you a couple of years 
ago that those efficiencies had realized savings in excess of 
$12 million, and we have continued to implement efficiencies, 
and I believe that we have accomplished other considerable 
efficiencies. So I would merely assert that we have taken your 
concerns and the concerns of others and the concerns of the 
administration, and the fact that we have increasingly limited 
resources, to work very hard to increase our efficiency. I 
think we have made important progress in that area.

                      effect of cases on litigants

    Mr. Dickey. Mr. Gould held up this brief or whatever it was 
and said, ``Look, that is what we are dealing with. This is the 
number of pages we are dealing with.''
    Have you ever thought, maybe when you woke up at night or 
when you were in a particularly thoughtful mood and had enough 
time, have you ever thought about the effect that this has on 
the litigants and the bottom line, and the expense of all these 
companies?
    Mr. Feinstein. Absolutely. That is a great concern of ours.
    Mr. Dickey. Have you ever thought about, rather than 
acrimony, trying to promote cooperation?
    Mr. Feinstein. Absolutely.
    Mr. Dickey. Talking to those people and saying let's work 
it out?
    Mr. Feinstein. Absolutely. I think that is a very important 
value and a very important process to encourage. In fact, we 
settle 95 percent of the cases that are brought before us. We 
dismiss approximately two-thirds of them, and the remaining 
third that we find meritorious, we reach settlements in 
something approximating 95 percent. I believe last year it was 
96 percent.
    Mr. Dickey. Could that be attributed in any way to the fact 
that you all are generating cases that do not have merit at the 
start, and you are finding that these generation centers or 
these lawsuit centers that you have out there are bringing 
cases in that don't really have merit?
    Mr. Feinstein. I don't think so, Congressman. I think that 
the number of cases that we process is approximately the same 
as it was 10 years ago. If that in fact were the case, that 
would have been the case for many years.
    What I am pointing out is that it hasn't changed. Our 
settlement rate has gone up somewhat, although the agency has 
always been quite proud of the high degree of settlement. One 
of the reasons for the settlement rate is indeed the high 
caliber of staff and the expertise of the agency, and the 
respect that the agency has in the communities that it serves, 
in the regions that it serves. People understand that the 
agency, because it doesn't find merit in the majority of the 
cases, that when there is merit and that there is a potential 
for--that the agency has acted responsibly in finding merit. 
That is one of the reasons we settle so many cases.

                           10(j) injunctions

    Mr. Dickey. Are you saying that the reduction of the 10(j) 
injunctions from a high of 32 a month to a low of 4 a month was 
done because you all had started working with people? Or did it 
have anything to do with the fact that this committee had 
passed several different provisions that were aimed at the 
10(j) injunction abuses?
    Mr. Feinstein. I am not sure what numbers you are referring 
to, but as I have said to this committee in the past, the 
initiative in the 10(j) area consisted of the following. One of 
the things that I observed and was made to understand was that 
the enforcement of the 10(j) provision of the Act was not 
consistent throughout the country; that we had a minority of 
the regions, perhaps a third of the regions, handling--bringing 
70 or 80 percent.
    There was no indication that that was based on simply the 
kinds of cases that were occurring in that region. It did seem 
to be that there was an inconsistency with how different 
regions were approaching the enforcement of this important 
provision of the Act.
    Mr. Dickey. We saw that, yes.
    Mr. Feinstein. We implemented a training program, we 
published a manual. What happened was, we have greater 
consistency now.

                          perceptions of bias

    Mr. Dickey. It also has something to do with what we did 
here.
    Mr. Gould, is there a chance that there is more litigation 
because you all have driven management and industry into the 
awareness and the reality that you all are prejudiced and 
discriminate against them in any way?
    Mr. Gould. I don't think that is the case, and I don't 
think that I am prejudiced or discriminatory towards them in 
any way.
    You raised earlier the Beck issue. I have been in the 
forefront, for instance, of obliging unions to spell out in 
their collective bargaining agreements precisely what the 
worker has to do under these union security agreements, and to 
give the workers information about their Beck rights, and in 
the Monson decision, and Group Health.
    Just this week I have been urging, on behalf of a majority 
of the Board, the Solicitor General to file a brief in the 
Supreme Court taking the same position that I have taken, 
imposing obligations upon unions in this Beck area. So I don't 
think anyone, be they on the management or union side, who 
tells you that I am prejudiced against one side or the other is 
telling you correctly.
    Mr. Dickey. I don't know if I was a litigant that I would 
go tell somebody I was Republican, under this thing, since you 
think it will cripple a major source of funding for the 
Democratic Party. Don't you think there might be some people on 
the other side that think you all are just creating this 
problem because we are Republicans?
    Mr. Gould. As I said to you, the word ``Republican'' could 
be substituted for ``Democrat'' in terms of the basic rationale 
that I pursued in my testimony to the California legislature.
    As I have said to you also, my approach to Beck in the 
context of adjudication has been one of balance and fairness 
which has taken into account the competing interests of unions, 
employees and employers, and which has thrust greater 
obligations upon unions to spell out exactly what they are 
obliged to spell out vis-a-vis the employees that they 
represent.
    You may smile, Congressman Dickey, but----
    Mr. Dickey. I am smiling because of the next thing I was 
going to say. I wasn't really listening, I am sorry.
    Mr. Porter. You are not going to be smiling because your 
time is up.
    Mr. Dickey. I am going to tell him that you are finished 
with me this year. That is what I am smiling about.
    Mr. Gould. Don't say that.
    Mr. Hoyer. Mr. Gould, be truthful, now. Be truthful.
    Mr. Gould. I was going to ask him to join me at Blues Alley 
to hear Ron Holloway play some jazz, because I have had such 
difficulty getting together with you, Congressman, I thought 
maybe that was the way to reach you.
    Mr. Dickey. I just found out about that. Bob Brame did make 
an appointment and did come by. You are certainly welcome, or I 
will come see you, like I did last time, up at that $8 million 
mansion.
    Mr. Gould. Whenever, wherever.
    Mr. Porter. Mr. Hoyer, would you like to yield your time to 
Mr. Dickey?
    Mr. Hoyer. Can I take a few minutes to think about that?
    Mr. Dickey. Thank you, Mr. Gould, and Mr. Feinstein.
    Mr. Gould. Thank you.
    Mr. Feinstein. Thank you.
    Mr. Hoyer. I am sure Mr. Dickey wants to hear my questions.
    Mr. Dickey. I am leaving.

                       mechanism to solicit cases

    Mr. Hoyer. For the record, Mr. Feinstein, as Mr. Dickey 
walks out the door, do you have any mechanism to solicit cases?
    Mr. Feinstein. Not that I am aware of.
    Mr. Hoyer. Do you have any employees that are charged with 
the responsibility of generating cases?
    Mr. Feinstein. No, we don't.
    Mr. Hoyer. Do you have any option under the statute not to 
respond to cases that are brought to you?
    Mr. Feinstein. No, we don't. We have to respond.
    Mr. Hoyer. You can respond by dismissing them?
    Mr. Feinstein. Correct.
    Mr. Hoyer. I presume you can respond by dismissing them at 
a relatively early stage, but you cannot reject them?
    Mr. Feinstein. We have to consider any charge filed, yes.
    Mr. Hoyer. So any cases considered by the NLRB are in fact 
cases that were brought to you through the mechanism 
established by statute?
    Mr. Feinstein. That is correct.
    Mr. Hoyer. You do not solicit businesses or unions to say 
that we are available and we would love to have your business, 
and we will charge you $25 per crack?
    Mr. Feinstein. We don't do that.
    Mr. Hoyer. All right. Clearly not. I am not sure I followed 
my colleague, who I happen to really like, I want everybody to 
understand that. He is a delightful individual, even though we 
disagree on some premises underlying his view of the NLRB and 
mine.
    But there is, I want to make it clear for the record, and 
Mr. Gould, maybe you want to comment on that, there is no 
mechanism, budget item, office structure, employee who is 
assigned the responsibility or does in fact generate cases that 
appear at your doorstep?
    Mr. Gould. Absolutely. There is nothing whatsoever like 
that, Congressman Hoyer. There is no mechanism like that. We 
are the recipient of charges and petitions that are filed with 
us, and we have no mechanism to recruit and solicit cases.
    As I have indicated previously, quite to the contrary, what 
we are trying to do through the settlement judge program, 
through the voluntary efforts in the field, is to diminish the 
amount of litigation that would otherwise tie us and the 
taxpayers and private parties up, and I think we have been 
fairly successful in that process.
    Mr. Hoyer. Mr. Gould, what you have just said is consistent 
with what Mr. Dickey asked, and I think we all agree. That is, 
to the extent that we can reduce cost and time for litigants on 
either side, we will have served thepublic's interest?
    Mr. Gould. I couldn't agree with that more.
    Mr. Hoyer. So Mr. Dickey is clearly correct, if we can get 
parties to voluntarily come to an agreement and compromise on 
disagreements, everybody wins?
    Mr. Gould. And one of the things, probably the major thread 
to all the reforms that I have pursued since I have been here, 
has been to reduce what would otherwise be burdensome and 
sometimes wasteful litigation. Less appeals are taken from the 
bench decisions which we put in place with the administrative 
law judges than are taken with regard to most administrative 
law judges' decisions. I think this also has served this 
overall purpose well.

                    measures taken to lower caseload

    Mr. Feinstein. Mr. Hoyer, if I can simply add, not only do 
we not solicit cases but we make efforts, and I can point to 
three specific ones, to try to lower our caseload. We have 
talked about our information officer program, in which we 
handle from 150,000 to 200,000 inquiries a year, of which less 
than 5 percent result in charges. That number has steadily come 
down through the years. We believe that our IO program has 
helped to keep our caseload down.
    Another undertaking, early in my term as General Counsel we 
made a determination to defer certain kinds of cases where an 
alternative remedy outside of the NLRB processing the case 
might be available. Instead of continuing to process such a 
case, we have a policy to defer consideration of that case, 
hopeful that an alternative means can be realized to resolve 
that case so the agency won't have to consider it.
    Finally, we engaged in a process with the Postal Service 
and the Postal Service union. We had more cases before the 
agency that were generated out of the Postal Service than any 
other employer that comes before the agency. We noticed that 
there were a large number, many hundreds of cases of a 
particular nature dealing with information requests, and we 
undertook to get the Postal Service and the Postal Service 
union together to see if they could work out an agreement 
whereby, instead of bringing these kinds of cases to us, they 
can establish an internal mechanism to resolve such cases.
    It was a long and difficult process. It is not always easy 
getting the Postal Service unions and the Postal Service 
together on a matter, but they acted responsibly, and we 
pursued with them the development of an ADR, alternative 
dispute resolution process whereby these kinds of claims would 
be solved without bringing the case to the agency. An agreement 
has been in effect now for going on nearly a year, and we 
believe that it has resulted in a reduction of cases brought 
before the agency by many hundreds, and indeed eventually we 
think a couple of thousand cases.
    Mr. Hoyer. I am glad to hear that. I think Mr. Dickey and 
some of our other friends will be glad to hear that as well. 
They would be even happier if it were a private sector employer 
with whom we worked closely. If you are going to use an 
example, my suggestion would be Postal Service, and Postal 
Service unions are sort of quasi-public, quasi-private 
organizations. But I think what you have done is good and I 
assume that is the case.
    Mr. Chairman, I thank you for the time.

          controversial nature of national labor relations act

    Mr. Gould, in closing, I do not want to get into the 
controversy that has arisen with respect to your testimony 
except to say this, and I am sure you know this, this is a 
controversial agency because the law itself is controversial. 
There are very substantial philosophical differences and 
perspectives with reference to what rights ought to be extended 
to workers and what protections ought to be given to employers 
who have put their capital at risk to start a business.
    In that context, because of the controversy that surrounds 
the determinations that your agency makes, it is, therefore, 
even more important that the specter of fairness and 
objectivity be maintained. Without saying more, there were a 
number of us, as you know, who were concerned, I am sure you 
were concerned in retrospect, about the appearances that have 
occurred.
    Having said that, whatever happens is not related to that. 
There is a much bigger issue at play here, in that if you don't 
like a law some way, sometimes the way to get at it is not to 
repeal it, because you don't have the votes to do that; it is 
simply to not enforce it.
    Frankly, I make no analogy here, I want to make that clear. 
There were a lot of very good words and very good protections 
in a lot of autocratic states. The words were great, both in 
constitutions and in statutes, but the fact of the matter is, 
there was no mechanism to enforce them so they were empty 
rhetoric. It seems to me it is the responsibility of Congress 
to ensure that the words that it enacts in pursuit of a 
workplace that is fair to both sides must not be empty. And if 
they are not to be empty, you have to have the resources to 
carry out your responsibility.
    Thank you very much, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Hoyer. Let me say that what the 
gentleman from Maryland said earlier about the rights of 
American workers to organize and to bargain collectively is 
something that all of us believe in very deeply. This agency is 
one whose purpose is to allow that process to go forward and be 
a free and fair one, and to resolve disputes that occur in the 
course of that in an environment of law insteadof violence that 
we have had in the past in this country.
    The independence and credibility of the agency, as I said 
earlier, is to me very, very important. I think it is to 
everybody on this committee. While, Mr. Gould, we have 
obviously had some differences about some of the things that 
you have said and done in the course of your service, I don't 
want to end this hearing for you or Mr. Feinstein without 
saying that you have performed valuable service to the agency 
and we do appreciate that service to our country.
    Mr. Gould. Thank you, Mr. Chairman. It has been a pleasure 
and honor for me to serve the United States Government. I have 
tried to do the best that I can to keep the faith of this 
statute and agency alive. I am proud of the work that I have 
been able to do, and I will try to keep on doing it until I 
leave Washington. I thank you very much for your hearing this 
afternoon.
    Mr. Porter. Thank you.
    Mr. Feinstein. I wish to thank you as well. You have been 
very generous in your comments and in your efforts to work with 
the agency, and it is greatly appreciated.
    Mr. Porter. Thank you. The subcommittee will stand in 
recess until a special hearing with the Nobel laureates May 20, 
Wednesday, at 1:30 p.m.
    [The following questions were submitted to be answered for 
the record:]


[Pages 644 - 768--The official Committee record contains additional material here.]



                                           Tuesday, April 28, 1998.

UNITED STATES NATIONAL COMMISSION ON LIBRARIES AND INFORMATION SERVICES

                               WITNESSES

JEANNE HURLEY SIMON, CHAIRPERSON, U.S. NATIONAL COMMISSION ON LIBRARIES 
    AND INFORMATION SCIENCE
ROBERT S. WILLARD, MEMBER AND ACTING EXECUTIVE DIRECTOR

    Mrs. Northup [presiding]. Good afternoon. We are delighted 
to have this afternoon the National Commission on Libraries and 
Information Sciences and Mrs. Jeanne Simon who is the 
Chairperson. I would like to welcome you and tell you as the 
mother of six children, my husband and I and our six children, 
they will all be sorry they missed you because going to the 
library was the thing we did for recreation for years and 
years. They were the only books we could really afford and we 
have a deep love and still do. We go every other Monday night 
when I am home. I want to welcome you and tell you that you 
have a warm place in my heart and many other Americans.
    Ms. Simon. That is a very nice way to start out. Thank you, 
Madam Chairman. I am Jeanne Simon. I am the chairperson of the 
U.S. National Commission on Libraries and Information Science. 
My colleague here today is Robert Willard, who is the acting 
executive director of our commission. I am pleased that you 
have library cards, you and your six children. I speak for two 
children and four grandchildren, so I can kind of catch up with 
you, who are also library users.
    I am sorry that Mr. Porter is not here because he comes 
from the State of Illinois and has always been very, very 
cordial. I will see him later on, I hope.
    We thank you for scheduling this hearing for the U.S. 
National Commission on Libraries and Information Science. The 
President's budget for fiscal 1999 includes $1 million for our 
agency, the same amount appropriated by this Congress for the 
current fiscal year.
    This is my fifth appearance as chairperson before this 
committee. I should be more at ease than I am, but I am very 
pleased to discuss with you our past accomplishments, current 
activities and future plans. And as I pointed out, Bob Willard, 
appointed by President Clinton in 1994 as a commission member, 
is now our acting executive director.
    I am most grateful for the opportunity to discuss what is 
admittedly a microscopic amount in terms of the amounts usually 
discussed by this committee and by the Congress itself. A 
famous son of Illinois, Senator Everett Dirksen, is supposed to 
have remarked at one point, a billion here, a billion there, 
and pretty soon you are talking about real money. But I can 
assure you that the $1 million entrusted to us is real money 
both to the American people and to us, and we take pride in the 
careful and effective manner in which we put it to use on their 
behalf.
    It can be argued that the public makes a relatively small 
investment generally in libraries of all types. Yet that 
investment is paid back many times over in terms of increased 
literacy, economic efficiency, and general quality of life.
    We intend to bring equally powerful leverage to our 
verysmall budget. In establishing the commission as a permanent and 
independent agency, the Congress and the President affirm that library 
and information services adequate to meet the needs of the American 
people are essential in order to achieve national goals and to utilize 
effectively the Nation's educational resources. Since our creation in 
1970, our mission has been to develop overall plans for library and 
information services and to recommend those plans to Congress, the 
President, to State and local governments.
    In the nearly 28-year history of the commission, there has 
probably not been a period as exciting and complex as that 
which faces us today, nor has the need for a policy body like 
NCLIS been as acute. The widespread availability of information 
and communications services through the Internet casts a whole 
new light on the term ``library and information services 
adequate to meet the needs of the people.''
    Meanwhile, new funding mechanisms such as the Universal 
Services Fund implemented under the Telecommunications Act of 
1996 and major new philanthropic efforts are bringing 
significant technology enhancements into a host of libraries 
serving disadvantaged users.
    Throughout these developments, complex issues such as 
privacy, intellectual property rights, censorship and so on, on 
both the national and international level, continue to confound 
policymakers.
    Change is also taking place in the membership and staff of 
the commission. I note with sadness the death last summer of 
our fellow commissioner, Gary Sudduth of Minnesota. We miss him 
deeply. I am happy to report, however, that two prominent 
leaders in the library and information fields, Jose-Marie 
Griffiths, a renowned information scientist and chief 
information officer at the University of Michigan, and Rebecca 
Bingham of Louisville, Kentucky, the retired director of 
libraries for a large urban school district and former 
president of the American Association of School Librarians, 
have joined our commission and are bringing valuable new 
perspectives. Martha Gould of Reno, Nevada, our commission vice 
chairman, has been appointed to a second term, and I am pleased 
to report that President Clinton has nominated me to a second 
term also.
    We have also experienced changes within our very small 
staff. Peter Young, John Lorenz, Jane Williams, and Mary Alice 
Hedge, in short our entire professional staff, departed in less 
than one year. Retirements and opportunities elsewhere 
accounted for that. This development presents us with some 
difficulties but it also provides us a wonderful opportunity 
for renewal. The commission earlier this month in Kansas City, 
Missouri, unanimously approved the appointment of our fellow 
commissioner, Bob Willard, to the position of executive 
director. He is already moving to bring on board excellent 
replacements for our professional staff, and I know that Bob 
will devote appropriate attention to improving the agency's own 
information technology and administrative processes.

                 partnerships with other organizations

    I would like to spend a few moments discussing activities 
funded by transfers from other agencies. Such activities are 
familiar to members of this committee and fully in accordance 
with our enabling statute. The first is our ongoing cooperative 
program with the Department of Education's National Center for 
Education Statistics (NCES) which collects library statistics. 
Recently NCLIS engaged a consultant to perform an assessment of 
the library statistics program. The results of that effort, 
already in hand, will inform us as we move to engage a new 
coordinator and restructure the program to include greater 
NCLIS involvement in support of the joint activities.
    A second and continuing program funded by the State 
Department is the library and information science aspect of the 
International Contributions for Scientific, Educational and 
Cultural Activities known as ICSECA and their funding. This is 
funded at $100,000 in 1997. The activity allows the support of 
a modest number of programs that reach beyond our borders and 
help us to fulfill our broadened mandate to focus on 
international programs.
    I also want to mention an effort currently underway whereby 
NCLIS will survey individuals and organizations in order to 
catalog, as much as we can, all U.S. involvement in 
international library and information science programs.
    Finally, we are planning for the year 2001 when this Nation 
will host library professionals from throughout the world at 
the International Federation of Library Associations annual 
convention in Boston.
    Third is the effort we are undertaking on behalf of the 
Government Printing Office and the Congressional Joint 
Committee on Printing. As GPO relies more on electronic 
information to make its publications available to citizens, an 
essential question concerns the mediums and formats that should 
be used to ensure ease of use, security, and permanent 
accessibility. NCLIS will survey a number of agencies and 
examine a broad variety of publications already, or planned to 
be, converted to electronic form. This unprecedented collection 
of information will not only guide the future publishing plans 
of the entire Federal Government, it will also prepare the way 
for NCLIS' deeper reexamination of a host of public policy 
issues surrounding access to and use of government information 
in electronic form.

                              action plan

    In January the commission adopted an action plan that 
continued its emphasis on themes that have long driven the 
activities of the commission.
    I would like to conclude my remarks by recounting the three 
primary goals of the plan and their implications for the 
upcoming fiscal year. First, we focus on the national and 
global information infrastructure. In this context we will 
continue our data collection efforts regarding the penetration 
of Internet activity into the Nation's public libraries and we 
may expand study into other types of libraries. Our landmark 
research in 1994 and 1996 revealed a rapid growth from 21 
percent to 45 percent penetration in public libraries. In 1997, 
in partnership with the American Library Association--and I am 
holding up a copy of this marvelous survey and I love the 
color--the latest survey showed continued growth, with more 
than 72 percent public libraries connected to the Internet.
    It is also in the context of this goal that we propose to 
deal with one of the thorniest issues affecting public 
libraries today: how to continue the traditional library value 
of unlimited access to information while also assuring that 
children using electronic networks are not the victims of 
pornography and predatory practices.
    We also plan to continue monitoring the implementation of 
funding under the universal services program of the FCC. Also 
we will address issues regarding preferential postal rates for 
book shipments and legislative initiatives to modify current 
copyright law.
    The second goal of our plan is concern with the Library 
Services and Technology Act, LSTA. In this area the cooperative 
library statistics program with NCES that I described earlier 
will play a key role. We hope to be able to measure impacts 
arriving from the congressionally restructured program to 
provide Federal aid to libraries and, where appropriate, make 
recommendations to Congress and the President as well as to the 
director of the Institute of Museum and Library Services on the 
workings of this program.
    Our third and final goal addresses Federal Government 
information products and services. The GPO study project I 
described earlier will be the commission's principal effort 
under this goal. We are also mindful of the current effort to 
revise the sections of Title 44 of the U.S. Code dealing with 
government printing, publishing, and dissemination and stand 
ready to provide policy advice on this subject if the 
legislative process calls for such assistance.
    As you can see, Madam Chairman, for a microagency we have a 
macroagenda. On behalf of all the commissioners, I can tell you 
that we are excited and we are challenged by our vital role in 
policy development in this Information Age. We know there is a 
lot to do, and with proper resources I think we can do it. I 
urge you to support the President's request.
    My colleague Bob and I will be happy to answer any 
questions that you may have. I ask that the entire written 
testimony be entered into the record of this hearing.
    [The prepared statement follows:]


[Pages 773 - 781--The official Committee record contains additional material here.]



    Mrs. Northup. Thank you very much. Mrs. Simon, one of the 
commission's major responsibilities is oversight of the new 
library authorization that is now funded through an independent 
agency in this bill. What is the status of this transition? I 
wondered if you are satisfied with this new system.
    Ms. Simon. I am entirely satisfied because it is still in 
its primary stages; but so far, so good. We were talking this 
morning with Diane Frankel, director of the IMLS, and we feel 
that our cooperation and collegiality has worked out well. We 
looked at the guidelines for the programs that they have 
developed for library services and offered advice, when asked 
for it. We also believe that some of our commissioners will be 
listening to the panel discussions, the peer review groups when 
they come in, when the grants are being reviewed by the panels. 
We will not be contributing; we will not be asking questions, 
but we will see what the process is like and we will be better 
able the next time around to provide more information on 
possible guidelines.
    Mr. Willard. I would just like to add that the presence of 
the cooperative statistics program allows us to develop some 
very important statistics that measure the impact of the 
program. That is why that program, which is done basically with 
the Department of Education money but with very much the 
involvement of the commissioners and staff, is a critical 
program for measuring how well that legislation is attaining 
what the Congress wanted it to do.
    Mrs. Northup. I would like to ask you about the national 
grants now being made jointly to museums. Specifically, you 
know, of course, that we had to fend off an attempt by the 
Senate to earmark all of those funds for a handful of specific 
projects. I wondered how the competition is proceeding.
    Ms. Simon. That is part of the museum part. We are not 
privy to that. The joint programs were earmarked. I am not very 
happy about that. What the Senate does is something that we 
cannot control. We are hoping in the future it will be more 
open.
    Mrs. Northup. But am I not right that the library grants 
are now going, they are now actually on a competitive basis, 
the national grants for the libraries?
    Ms. Simon. Yes, the leadership grants are on a competitive 
basis. We will be sitting in on the peer review panels but only 
as listeners, not as contributing to it, not asking questions 
or participating in it. We will be seeing what the process is. 
Following that, we may come back to our commission meeting and 
discuss the process and perhaps offer some advice to the 
director of the institute.
    Mrs. Northup. Am I right in thinking that April 1st wasthe 
cutoff deadline for those grants and now you are already into the 
process?
    Ms. Simon. The panels will be meeting in July, the end of 
July. They are coming to Washington, and I think there will be 
three sessions, four, to review these leadership grants 
applications.
    Mr. Willard. It should be pointed out that the commission 
is not involved in the evaluation of the grants. That is done 
through a peer review process administered by IMLS. But because 
we have a statutorily assigned role of providing policy advice, 
we will be acting as observers to the peer review process so 
that subsequently when we provide advice both to IMLS and to 
Congress and the executive, we will have that experience in our 
background.
    Mrs. Northup. Okay. Let me ask you a little bit more about 
the advent of all the electronic media and what your thoughts 
are about how that is going to change libraries or what effect 
it will have on libraries. I think that we are interested, in 
particular, as to whether or not libraries will become 
electronic repositories or whether they will continue to be the 
repository of books, the things we do for recreation.
    Ms. Simon. We feel that at least where this transition 
period--we are going to have books always and we will have 
electronic services as well. There is a fear out there, though, 
that libraries may become virtual. I have heard this expressed 
from academic librarians as well as public librarians. I can't 
believe this will ever, ever happen. But there are some people 
out there who feel that they will never be able to pick up a 
book or read to their children again. This simply cannot be. 
But the effect of electronic access and electronic information 
is indeed very important, and it changes all the time. We are 
continually trying to keep up with the whole process.
    Mrs. Northup. From a more personal note, my feeling always 
was that libraries had sort of a drudgery side--that is, when a 
teacher assigned a research project to me--and that they had 
the great recreational side of sort of a primary source of new 
books, what you did when you had your own choice. I guess as I 
watch my children, my suspicion is that there is at least more 
primary research that will go on from computer terminals.
    Ms. Simon. Exactly.
    Mrs. Northup. But the sort of recreational social benefit 
of a library will be just as important as ever.
    Ms. Simon. I totally agree with you. The library will 
always be a meeting place for groups, for people who are 
seeking information, seeking books, seeking ways to improve 
their way of living, seeking medical advice and job 
opportunities, farmers checking up on crop reports. There are 
so many things that libraries do that I cannot even comprehend 
all of it.
    I think, like you, I grew up thinking that the library 
research was important, but the mystery novels and so on were 
also very important. Libraries today are absolutely wonderful, 
the university of the common man. They provide just about 
everything. We are pleased to see that they are growing in 
importance. I can testify that a small library in Royalton, 
Illinois got together a budget of $10,000 for the entire year 
just to keep that library open for three days a week. It is 
that kind of spirit that keeps libraries moving.
    Mrs. Northup. Thank you. Mrs. Simon, we have focused a lot 
of energy on accountability and measuring results. Last year we 
discussed how you might conceptualize a performance measurement 
system for the Institute of Museum and Library Services 
programs. At that time your agency was just getting started. I 
wondered what the status of that initiative is and can you give 
us some specific examples of how the agency will measure 
outcomes in the library programs?
    Ms. Simon. As I understand it from the director of library 
services at the Institute for Museum and Library Services, Mrs. 
Betsy Sywetz, they are in the process of collecting data from 
State libraries to see how this is working. And the evaluation 
will indeed be very important to all of us to understand what 
it means. As far as I know--I have not seen a copy of that 
final report, maybe it is still in the process--but I could 
find out for you and definitely let you know later on if you 
would care to put it that way. For myself, I know that I would 
care to know how it is going because this is a very important 
part of our legislation.
    Mrs. Northup. And certainly, Mrs. Simon, we have found that 
as agencies focus on what their outcomes are going to be, their 
goals, and put them in concrete measurable terms, that it does 
seem to make a difference in reaching those goals, so the 
committee is very interested in knowing.
    Ms. Simon. We will be pleased to provide you information as 
soon as it is available.
    [Clerk's note:--The information was not yet available for 
the hearing record.]
    Mrs. Northup. Thank you. How much do you expect to receive 
in non-appropriated revenue for fiscal year 1998 and fiscal 
year 1999?
    Mr. Willard. Those numbers are still being worked out. They 
are a collaborative or a negotiation process with three 
different agencies. With regard to the GPO study, that one is 
firm. We spent $25,000 last fiscal year. We have $175,000 of 
current year money that is committed. The project will probably 
extend beyond the current year but it is fully funded in fiscal 
year 1998 money. We received $100,000 from the State Department 
for the ICSECA funds last year. We are in negotiations with 
them right now. It looks like we will probably be somewhere 
between 75,000 and 100,000 but that still is not nailed down.
    The library statistics program, because of significant 
changes--two--one being that the Department of Education has 
moved from relying on internal resources to contracting out in 
terms of logistical support, so running the meetings, doing the 
follow up, that has been contracted out. Secondly, after a 
library career that extended 57, 53 years, John Lorenz, who 
used to be deputy librarian at the Library of Congress, has 
finally retired and that left a vacancy in a very critical 
position as statistics coordinator. As the testimony indicated, 
we are subjective, we already have done a very good consultant 
review of how to best manage that statistical program. We are 
very close to implementing that with a change in my situation 
now, where I am about to become the executive director. I plan 
to engage in conversations with the commissioner at NCES and 
his people to really pin that down. From memory I cannot recall 
what the number is. I think it is about 40,000 that is on the 
books this year for the statistical program. I will submit that 
for the record.
    Clerk's note.--The agency provided the following 
explanation: ``The amount transferred from NCES to NCLIS in FY 
1998, is $66,778.00.''
    Mr. Willard. The GPO, the State Department and the 
Department of Education statistics looks like it will be in the 
neighborhood of about 300,000.
    Mrs. Northup. Okay. Thank you. I know you touched on this 
briefly, but I wondered if your agency has a Year 2000 problem 
and if you are going to make it.
    Ms. Simon. I certainly hope we are going to make it. The 
deadline will be reached, I am sure. The Year 2000 brings up 
the Millennium Project and that we are deeply involved in. Of 
course the Boston Convention of the International Federation in 
2001 will also be important to NCLIS, but if you mean the 
transformation of the digital, I am not the expert on that. 
But, Bob, I hope you are. Somebody better be.
    Mrs. Northup. I mean the computer accommodation of the Year 
2000.
    Mr. Willard. We have it as much as anyone who relies on 
personal computers does. But it is not significant. We do not 
have any major systems that any customers rely on, any citizens 
rely on. I think we have been staying in touch with Year 2000 
coordinating activity out of OMB, but we really are not touched 
by it.
    Mrs. Northup. What about the libraries that you work with 
around the country? Are they anticipating any traumatic or 
difficult problems with the Year 2000 conversion?
    Mr. Willard. It is not an issue that we have dealt with but 
it is a very good point and it is something that we should look 
into. I have paid a certain amount of attention to the Federal 
Government's problems with that but it really covers 
everything. People say you better not even be on an elevator on 
New Year's Eve in the year 1999. I cannot answer the question 
but I appreciate it, and we will do a little exploration.
    Mrs. Northup. And the last--finally, has the commission 
lapsed or carried over any funds in the last three fiscal 
years?
    Ms. Simon. No, it has not.
    Mrs. Northup. Okay. Again, I want to thank you for being 
here today. I particularly appreciate hearing what you are 
doing and how viable our libraries are.
    Ms. Simon. Thank you for your attention and for your 
questions, Mrs. Northup.
    Mrs. Northup. Thank you.
    The committee will stand in brief recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 786 - 825--The official Committee record contains additional material here.]



                                          Thursday, April 23, 1998.

                     NATIONAL COUNCIL ON DISABILITY

                                WITNESS

MARCA BRISTO, CHAIRPERSON

                       Introduction of Witnesses

    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the fiscal year 1999 budget and are 
pleased to welcome Marca Bristo, Chairperson of the National 
Council on Disability.
    Ms. Bristo. Thank you, Mr. Chairman. It is a great pleasure 
to be here with you once again. I am joined today by our 
Executive Director, Ethel Briggs, and our Director of Policy, 
Andrew Imparato. Mr. Imparato joins us from the other side of 
the Hill, from Senator Harkins' office.
    Mr. Porter. We will forgive him. [Laughter.]
    Ms. Bristo. In any case, we have submitted for the record a 
full written testimony, and I thought perhaps I could move us 
along a little if I moved into some of the highlights both of 
last year's accomplishments and the priorities that we propose 
for this year.

                           Opening Statement

    First, we are extremely grateful for the support we have 
received from this Committee in prior years, and we believe 
that our small budget, which has not seen an increase for the 
past four years, has been used in a very significant way to 
enhance the rights and opportunities for people with 
disabilities.
    Given our congressional authority to review and analyze 
broad issues of disability policy to both the Congress and the 
President, the Council has undertaken several major initiatives 
last year.

                         Achieving Independence

    Last time I was here, I reported to you on a summit that we 
held in 1996 wherein we released the report called Achieving 
Independence. This report, which I have brought with me today, 
summarized major recommendations from 300 diverse disability 
community leaders.
    One of the major reasons for us doing this summit was to 
galvanize the Council's thinking and strategic direction, and 
it is important to point out that we draw our leadership and 
our direction from the work of this document.
    One of the main recommendations from this document was to 
pursue the strengthening of the enforcement of the civil rights 
laws that we have worked so hard, with your support, to 
achieve.

                        Civil RIghts Monitoring

    During the last couple years, we have commissioned a major 
study to look at these civil rights laws and how they are being 
enforced, and we look forward to the release during the coming 
fiscal year of a report that will look at the Air Carrier 
Access Act, the Fair Housing Amendments Act, followed 
immediately by the Individuals With Disabilities Act and the 
Americans With Disabilities Act.

                         Employment Task force

    This year we have also issued, as required in the statute, 
our policy progress report, which has been distributed widely 
on the Hill. These two documents, our policy progress report 
and our Achieving Independence, led us to pursue vigorously an 
effort to establish within the Federal Government a high 
priority on eradicating the unemployment rate of folks with 
disabilities. This unemployment rate is currently at 70 percent 
of people who are disabled who are not working. We have all 
been working to eradicate this for many years. We felt that it 
needed a jump-start, and one of the recommendations in 
Achieving Independence was to establish that the President 
should issue an Executive Order directing the Secretary of 
Labor to promote the employment of people with disabilities, 
and to establish employment goals for people with disabilities, 
to be reached by the year 2006.
    Yesterday, I am very happy to report that the first meeting 
of this task force occurred. I have to say, in all my years of 
working on disability, it was the first time I have seen 
Cabinet members together in an interagency way, focusing their 
attention in a vigorous and diligent way on this particular 
issue.
    As we heard during the task force proceedings yesterday, we 
have an enormous problem in this area. We are spending upwards 
of $70,000,000 to maintain people with disabilities in a state 
of unwanted dependence, and we are committed, through the 
creation of this task force, to begin a serious effort with 
what the Administration can do to begin to untangle this.

                       Removing Barriers to Work

    The Council recognizes that the Administration is but part 
of the equation, and we also, during the last fiscal year, 
convened a series of field hearings around the country to begin 
to better understand what are the barriers to work that people 
with disabilities face, and what can be done to eradicate 
those.
    We issued another report last year called Removing Barriers 
to Work: Action Proposals for the 105th Congress and Beyond, as 
a result of these field hearings, and I am really happy to say 
that this has been the impetus for both an administrative 
initiative pursuing something called a Ticket for Independence 
by the Social Security Administration, one of the 
recommendations contained in this report, and also through the 
evolution of bipartisan legislative initiatives which are 
currently on the table that are beginning to take a serious 
look at many of the issues both raised in this report and the 
solutions proposed.
    Mr. Porter. Ms. Bristo, may I interrupt just for a moment. 
Ms. Northup, are you going to be able to come back after these 
votes? If so, I would ask that you go now and come back and 
assume the chair.
    Ms. Northup. Yes, Mr. Chairman.
    Mr. Porter. Please proceed.
    Ms. Bristo. We have also continued our work in a variety of 
other areas. I will only touch on those very briefly, inthe 
interest of time.

                               technology

    Our technology initiative has continued this year. Last 
year, I reported to you a series of reports and activities the 
Council had been engaged in. Most importantly, we have just 
returned from an important meeting in Seattle with the Chairman 
of Microsoft, Bill Gates, who made a very powerful public 
statement bringing his whole corporation together to begin to 
look at the issues of people with disabilities.
    More and more and more we hear about how the technology 
revolution is changing the world and opening opportunities for 
people with disabilities. Very little attention is given to the 
fact that for many disabled people technology is closing doors 
to opportunity, particularly people who are blind and visually 
impaired.
    To that end, this year we also issued a report on 
Multimedia Access. As businesses, schools, and the rest of the 
world are beginning to turn their attention to the use of 
computers in a multimedia manner, people who are blind and 
visually impaired are being significantly left behind. There is 
considerable work to be done in this area, and we hope that 
Congress will really focus some attention to this. There is 
more in the way of legislation that needs to occur.

                            youth leadership

    We were also very successful last year in holding the first 
ever Youth Leadership Development meeting where we brought 
young people from all around America together to begin to focus 
on what are the issues that young people with disabilities see 
as we enter the new millennium, and to begin the process of 
understanding how we can strengthen their skills to participate 
in the democratic process. All too often, those leadership 
opportunities are not open to disabled people and, very 
significantly, as I think you know, we have begun to lose many 
of the leaders to premature death associated with disability.
    So we believe that the Council's efforts to turn the 
Nation's attention to our young people is an important 
leadership role we can play. As a result of this, we have 
engaged the support of several other agencies who helped 
promote and support this. We are now working to try to push 
this concept down, out into the private sector. We are happy to 
report that several of the national organizations are beginning 
a process of outreach and sponsoring scholarships to young 
people. We will be again convening this this year.

                             international

    Another area that relates very much to one of the 
presentations you heard from a prior panel today is the 
Council's work in the international arena. Though our work last 
year did not take us beyond the borders of the United States, 
it has considerably continued nonetheless.
    In Achieving Independence, we focused some priority 
attention on this area. We were very happy to see Secretary 
Albright last year address the first international meeting of 
Women With Disabilities where she announced her Agency's 
commitment to looking at issues such as Embassy access, foreign 
assistance and whether and how it reaches people with 
disabilities. We were even more happy to hear her highlight our 
recommendations in her speech and see the results of those 
recommendations form new policies at AID to target some of 
their attention towards international assistance for people 
with disabilities.

                      minority and rural concerns

    Finally, the Council, having heard at our summit and from a 
variety of other sources, about the lack of attention given to 
minority persons with disabilities and people who are living in 
rural communities, we have convened at gatherings with over 100 
leaders who represent people of color and people from rural 
communities, to begin to get a better handle on what the 
particular issues there are. We will continue those efforts 
over the coming year.

                           closing statement

    Our budget request for this year does include a modest 
increase, which is the first such requested increase in the 
last four years, and our work will continue to build in the 
priority areas which I have identified. Although we have 
specified this more fully in our written report, we anticipate 
that our civil rights project will continue in two significant 
ways. Number one, we will turn our attention to two civil 
rights arenas that we didn't look at during the last segments 
of our work, Title V of the Rehabilitation Act, which looks at 
the Government and how it operates, and the Civil Rights of 
Institutionalized Persons Act, that looks at the civil rights 
of people with disabilities who are currently in institutions.
    Secondly, as we consolidate the findings from our prior 
work, we anticipate a need for follow-up in those important 
areas, and we are considering the possibility of convening a 
forum to look at what attention should go as we go forward.
    I mentioned earlier that our youth activities will continue 
this year. We want to build upon the convening that we did with 
the young people in two ways: One, to articulate some policy 
goals from young people through the convening at the summit 
which will occur in June; and, number two, to begin to look at 
how can the Council facilitate integrating young people with 
disabilities both into Government leadership development 
operations such as internships and fellowships, but also in the 
private sector. We will begin a concerted effort to try to 
bring a multiagency approach to this important area.
    Finally, our work in the area of return-to-work and 
employment will continue, although in a slightly different way. 
I sit on the newly created Task Force for Employment of People 
With Disabilities, and I hope to bring to that role a 
conscience, a grassroots link from people with disabilitiesinto 
the work of that body. Number two, we hope to continue our work as the 
legislative proposals evolve that are currently working their way 
through the Congress, to provide guidance and insight and a voice from 
a disability perspective.
    There are several other issues I have not addressed in the 
interest of time. I would certainly welcome any questions that 
you may have.
    [The prepared statement follows:]


[Pages 832 - 854--The official Committee record contains additional material here.]



    Mr. Porter. Ms. Bristo, thank you very much for your very 
fine opening statement. We are, unfortunately--and I apologize 
for this--going to be interrupted by two votes, and it will be 
necessary for us to stand in recess briefly. Do you have time 
to stay and we can come back?
    Ms. Bristo. Certainly.
    Mr. Porter. It is going to be probably 25 minutes or so. We 
will therefore stand in recess for these votes, and then 
resume.
    [Recess.]

                       removing barriers to work

    Ms. Northup [now presiding]. We are back in order. I am 
Anne Northup, and I will chair the meeting until Mr. Porter 
gets back.
    I have several questions and, because we are a little 
fragmented, they may be repetitive.
    I would like to return to the question of Social Security 
and SSI. I guess you were talking about the disability 
question. I have had a number of people in the disabled 
community, and actually the Department of Rehabilitation in 
Kentucky bring to my attention the disincentive to work due to 
the elimination of benefits. I just wondered if you had brought 
this to the attention of Social Security, and whether you have 
proposed some sort of remedy.
    I think that, if I could just editorialize a little bit, I 
think it is the strong feeling of this Congress that SSI should 
not be awarded easily, and that you should be truly disabled in 
order to receive it. But for those that are disabled, every 
opportunity to live as productive and independent life as 
possible should be reinforced by everything we can do through 
the Social Security disability payments. And I just wondered if 
you had had a chance to focus on that problem.
    Ms. Bristo. In fact, this has been one of the main 
priorities of the Council during the last year. I did mention 
earlier, but we convened a gathering of about 40 disability 
leaders who are really expert in these issues about a year and 
a half ago. Out of that, we formulated some recommendations for 
change, and then we took those recommendations to 13 different 
communities to make sure that we were on the right track, and 
that resulted in the formulation of a report from the Council 
that was followed up by a congressional briefing, and we have 
subsequently met both with Commissioner Apfel as well as with 
people over here. There are now two legislative vehicles that 
are being proposed. The Council believes that they are both 
good steps in the right direction. We would have liked to see 
them go further in some respects.
    You were absolutely correct to point out that having the 
opportunity to work is an essential component of economic self-
sufficiency, one of the promises of the Americans With 
Disabilities Act, and we believe that it is all of our 
collective responsibility to untangle the web that keeps people 
with disabilities in a state of usually unwanted dependency.
    Ms. Northup. Well, I am eager to see what those legislative 
vehicles are, and hope that we can take action on that. As I 
said, I think that that is extremely important, especially when 
Americans are reassured that only those that are truly disabled 
are awarded SSI. They will be very enthusiastic about ensuring 
that those opportunities can be combined with work, so that 
people derive the most benefits from their efforts rather than 
the least.

                 accessibility for people who are blind

    I represent Louisville, Kentucky, and recently I have 
become aware of the fact that it is now identified as the area 
that has the highest concentration of the blind community. My 
husband and I have been very involved in the blind community 
over the years, and would like to invite you to possibly come 
to Louisville to visit and to hold hearings there on the 
obstacles faced by people who are blind.

                             rehabilitation

    I want to thank you for responding to my concerns last 
year. You may remember that I was concerned about requiring 
states to combine their Department of Rehabilitation with their 
Department of the Blind, and I really felt like you were very 
responsive to those concerns, and I want to thankyou and extend 
an invitation to visit.
    Ms. Bristo. Thank you very much. I did not attend all 13 of 
our hearings, but Ethel reminds me that one of our hearings on 
Return-to-Work was, in fact, in Louisville. However, I would 
love to take you personally up on your offer to visit.
    We are now, as I mentioned, turning our attention more also 
to the issues of minorities with disabilities and people living 
in rural communities, and we would like to stay in touch with 
your office as these projects unfold.
    Ms. Northup. One of the things that Kentucky has tried to 
do in providing the best network of services is to provide 
services all over the state. But the most advanced and 
comprehensive service systems are best when they are grouped in 
certain areas. Louisville is, for Kentucky, one of those 
centers. There is really a lot of work to combine all 
rehabilitative services, but also the American Printing House 
for the Blind and Kentucky Industries for the Blind are all 
located in that community, and so there is a lot of experience 
and a lot of camaraderie, and I feel like you would gain a lot.

                               TECHNOLOGY

    Ms. Bristo. Thank you. I hope you will take a moment to 
look at our most recent report about Access to Multimedia 
Technology, inasmuch as you expressed a particular interest in 
issues of persons who are blind. This is the wave of the 
future, and many blind people are being left behind because we 
are not gaining the public's attention on the impact that the 
changes of the technology revolution are having on people who 
are blind and visually impaired.
    Ms. Northup. Well, I was going to ask you about that, 
actually, and I look forward to seeing that report because I do 
believe that technology is the best link for many people to a 
job and to self-sufficiency. And I was interested in what sort 
of efforts your department was identifying and directing 
resources to.
    In particular, I would just like to bring up one example 
that the blind community has raised to me. There are a lot of 
ATM machines now that we are all aware use the braille keypads. 
Braille is often really not helpful unless we have a way to 
actually know what is on the screen through braille. That is 
the sort of thing that strikes me that somebody who is blind 
can pick out really fast and the rest of us might overlook.
    Ms. Bristo. Yes. And I might point out, from our 
perspective, that that is the tip of the iceberg. Since 
technology drives so many different things, and the underlying 
problem with graphical user interface for people who are 
blind--we are seeing it in ATMs. We cannot even imagine how 
technology three generations from now will look at many, many 
other areas of our life.
    Specifically to your question of what we are doing in this 
regard, we have for sometime been seeking guidance from folks 
with disabilities who have expertise in technology through an 
advisory body to the Council called Tech Watch. Tech Watch, on 
their request, we convened a representative from the Department 
of Justice to begin some dialogue as to what are the relevant 
civil rights laws that may be covering this issue.
    There is clear intent in the Americans With Disabilities 
Act to not allow discrimination in a variety of areas, 
obviously, and we are really looking for every possibility to 
tackle this issue.
    Another thing we have done, we began a process some time 
ago to get the Federal Government to utilize the existing tool 
of another civil rights component called Section 508 of the 
Rehabilitation Act. That section prohibits the Government from 
purchasing equipment that is used by employees, if that 
equipment will discriminate against the Government's employees. 
And we have been asserting that statute with GSA and other 
partners in the Federal Government. We are really happy to see 
this year that the Department of Education has released some 
guidelines regarding how their agency can comply with Section 
508.
    We are seeing them as model guidelines that we hope will 
get the support, in part, through the Presidential Task Force 
on Employment of People With Disabilities so that other Federal 
Agencies will use the buying power of the Government to help 
the industry move in the right direction in this regard.
    Ms. Northup. Well, if I may suggest, besides the input of 
the disabled community that is affected and empowered by 
technology, you might also consider bringing in people from the 
development industry, the electronics industry, because they 
also know what the capability of machines are, and electronics, 
but may not know what the problem is. The people who know what 
the problems are might be able to ask for exact and more 
advanced remedies if the technology community could be 
included.
    Ms. Bristo. Earlier I referenced the meeting that Bill 
Gates and Microsoft convened recently for their corporation to 
dialogue with the disability community, though that is just one 
example. I believe we have been in communication with Sun Micro 
Systems and some others as well, so we have not left that stone 
unturned either.
    Ms. Northup. Okay. Well, I want to thank you for your visit 
today. I am going to just recess the committee briefly. I know 
that Mr. Porter is coming back anyway, but I have avote, and I 
thank you for being with us today.
    [Recess.]

    PRESIDENT'S COMMITTEE ON EMPLOYMENT OF PEOPLE WITH DISABILITIES

    Mr. Porter [now presiding]. The subcommittee will come to 
order. Again, I apologize, Ms. Bristo. Sometimes the number of 
agencies is confusing. Can you tell us about the President's 
Committee on the Employment of People with Disabilities? Do you 
interact with that group?
    Ms. Bristo. Yes, of course, very much so. The President's 
Committee was established by Executive Order a long time ago, 
to promote the employment of people with disabilities and to 
look for opportunities in the private sector to facilitate 
that.
    A great deal of the President's Committee's work, 
therefore, is targeted outside the Government to promote 
existing policies and to, in essence, market people with 
disabilities and create linkages with the business community.

                        TASK FORCE ON EMPLOYMENT

    Mr. Porter. Now, you talked about, and we have been 
approached about, reallocating funding for a National Task 
Force on the Employment of Adults with Disabilities.
    Ms. Bristo. Yes.
    Mr. Porter. And you mentioned it. Were you consulted about 
the establishment of this task force?
    Ms. Bristo. Actually, it was our recommendation. We feel 
immensely proud of this. This is something that came from the 
grassroots during our meeting. I guess the best way I can 
characterize this to you, Mr. Chairman, we believe that the 
Nation's proper goal around people with disabilities is to 
really pursue the values laid out by all of you in the 
Americans With Disabilities Act, a portion of which is to 
remove the discriminatory barriers. However, one priority in 
the ADA was that of economic self-sufficiency. With 70 percent 
unemployment of people with disabilities right now, costing the 
taxpayers an enormous amount of money, it is a national problem 
that calls out for a mega solution.
    Part of the problem is many people still do not think 
disabled people can work. Some of those attitudes are possessed 
even within our Government. This is something that requires a 
campaign on the stature of the Say No to Drugs campaign.
    It is a travesty that in this greatest country in the world 
where we have visitors coming from all over the world to look 
at the important strides we have made in this area, that we 
have not figured this out. We know, therefore, that a 
concentrated amount of energy in this area at the highest level 
of Government can make a big difference.
    Mr. Porter. How does that differ, the National Task Force, 
differ from the President's Committee? In other words, why do 
we need a new task force if we have a committee that is focused 
on the same thing?
    Ms. Bristo. Well, as I said to you, the President's 
Committee does not have policy authority. It does not have any 
charge or ability to permeate the Federal Agencies. They cannot 
go over to HHS or the Department of Labor and say, ``You need 
to do this''. Their focus is primarily external, and they are 
not policymaking.
    If we could have seen that done, if the President's 
Committee had that authority and that clout, we believe it 
would have been done already.
    I have to tell you, yesterday as I sat with Secretary 
Shalala, Secretary Herman, and many of the other Cabinet 
agencies, they were hearing information about people with 
disabilities at a level of detail that I am not sure we have 
seen in our country before. The level of commitment was evident 
in the room. The President charged his Cabinet with tasking 
people, resources, time, commitment and energy to solve this 
problem, and I am very optimistic.
    I also look at the dollar amount that we are investing in 
this, and when I juxtapose it against the dollar amount that we 
are spending not tackling the problem, it seems to me to be a 
modest investment.
    Mr. Porter. Now, the National Task Force is not authorized, 
is it?
    Ms. Bristo. The National Task Force is established through 
Executive Order.
    Mr. Porter. No, that is the President's Committee, is it 
not?
    Ms. Bristo. No.
    Mr. Porter. Both of them are created by Executive Order.
    Ms. Bristo. There are different Executive Orders. The 
Executive Order that establishes the National Task Force was 
signed by President Clinton on March 13 of this year.
    Mr. Porter. If we have a National Task Force, do we still 
need a President's Committee?
    Ms. Bristo. Absolutely, because the focus of the National 
Task Force is to look within Government, how can the 
Government, under existing law, get its agencies--
    Mr. Porter. All right, that is within Government, you are 
saying?
    Ms. Bristo. That is within Government.
    Mr. Porter. And the President's Committee, you said, deals 
with the private sector.
    Ms. Bristo. That is right, and they are providing an 
invaluable resource. Their job accommodation network, for 
example, is called upon by corporations all over America to 
provide help in figuring out how do we provide reasonable 
accommodations to the employees that we want to employ.

                            BUDGET INCREASE

    Mr. Porter. Now, Ms. Bristo, you described this as a modest 
increase, but we computed it at something over 30 percent, 
which usually is not modest, but what do you need new 
additional funding for? What is it going to be spent for?Is it 
salaries, or travel, or printing?
    Ms. Bristo. Some of it goes into the natural cost-of-living 
expenses that go with administering any agency. However, the 
lion's share of it will go into our contractual line and will 
support our youth leadership initiative.

               reauthorization of the rehabilitation act

    Mr. Porter. Last year you listed reauthorization of the 
Rehabilitation Act as a top priority for you. Could you tell us 
the status of the reauthorization?
    Ms. Bristo. I understand that it is still sitting in 
Congress. Can you advise a little more detail on that, Andy?
    Mr. Imparato. Right now, the Senate has passed through the 
Labor Committee version of the reauthorization, and it is stuck 
there. It is attached to the broader workforce bill, and there 
are problems with the workforce bill in the Senate. So, as far 
as we know, that is where it is right now, and our hope is that 
those problems are getting worked out and the reauthorization 
will proceed.

                           strategic planning

    Mr. Porter. All right. Ms. Bristo, last year you testified 
that you were engaged in a five-year strategic planning process 
related to the Government Performance and Results Act. What is 
the status of your strategic plan, and can you give us kind of 
a brief summary or outline of it?
    Ms. Bristo. The strategic plan was completed on target and 
submitted. It basically focuses our attention in the priority 
areas, some of which we have described here today. It laid out 
for us a broad stroke of where the Council's energy should go.
    I have a copy of it here, and I believe we have submitted 
it for the record. I would be happy to do that, if you do not 
have it.
    Mr. Porter. That is fine.
    Ms. Bristo. I will say it was a challenging thing to 
develop for a policy advisory body. However, we did complete 
it, and the consultant that we worked with scratched his head 
quite a bit in trying to make this tool work for an entity of 
our type.

                               year 2000

    Mr. Porter. Ms. Bristo, we had a full hearing with our 
largest departments and agencies last week on the Y2K matter, 
and we wonder if you can tell us as to whether you have any 
problem with your computer systems and will have any problem in 
the year 2000.
    Ms. Bristo. I think I would like to say no. We think we are 
on top of it, but I would like to defer to our Executive 
Director who has been managing that.
    Mr. Porter. We will hold her responsible. [Laughter.]
    Ms. Briggs. We feel right now our computer system, we will 
not have a problem with the year 2000, and basically for some 
of those support services like payroll, we contract with the 
General Services Administration, which was one of the top 
agencies in terms of the leadership in the year 2000 turnover. 
So we think we are ready.

                  interaction with other organizations

    Mr. Porter. Thank you. Ms. Bristo, last year I asked you 
whether you work with other organizations that are funded in 
our bill, for instance, Recording for the Blind and the 
American Printing House for the Blind. Do you have any ongoing 
interaction with these agencies?
    Ms. Bristo. Not in any active manner, that I am aware of. 
Ethel?
    Ms. Briggs. No.
    Ms. Bristo. Not those specific agencies. We certainly have 
an active role with quite a few of the other entities that are 
funded through your committee.
    Mr. Porter. Why would you not have interaction with those 
agencies? Seems to me sort of a natural thing.
    Ms. Bristo. Well, I guess I can just honestly say I do not 
know. Their scope of work and our scope of work have not 
crossed paths in any significant way.
    Mr. Imparato. I think our Multimedia Report would be of 
interest to those agencies in terms of access for blind folks 
to technology, so it may be that they are more aware of what we 
are doing than we are of what they are doing.
    Mr. Porter. They are actually providing services to blind 
people, but then you are interested not only in employment of 
disabled people, but services to them as well. So it seems to 
me that it would be the kind of thing that you might run into 
one another.
    Why is technology shutting the doors on blind people? 
Recording for the Blind, for example, is using digital and 
voice synthesizing technology to make books much more 
accessible to blind people. Instead of listening to a tape end-
to-end and having to rewind to reread passages, a blind person 
can use a keyboard and a voice synthesizer to jump immediately 
to any point in the text they wish. Why is it cutting them off?
    Ms. Bristo. I want to be clear that not everyone with 
visual impairment experiences the same level of difficulty, and 
also there are many advances in the technological area that 
have really opened many, many doors.
    The particular issue I was focused on was as industry has 
moved from a text-based system to a graphical user interface 
system or a symbol system which requires pointers to access, 
the technology that would convert those images in a manner that 
blind users could have come back to them through their voice 
mechanisms and their computers have not been keeping pace with 
each other. And as I understand it, the people who are in the 
development side of the industry are equally frustrated by the 
problem because just as soon as they solve one problem, the 
next generation of product is there.Critical to this, clearly, 
is having people who are users, customers, blind people, involved in 
the testing and the product development, and that is one thing that the 
Council's efforts have been reasonably successful in getting at least 
within the Microsoft network, a much higher commitment in their 
staffing ratio of people who are affected by these systems, but the 
problem still continues.
    Mr. Porter. Well, you just answered question ten. We have 
several more questions that we will ask you to answer for the 
record and, obviously, we thank you for the fine job you are 
doing and for your appearance here today.
    Ms. Bristo. Thank you.
    Mr. Porter. Thank you so much.
    The subcommittee will stand in recess until 10:00 a.m., 
Tuesday.
    [The following questions were submitted to be answered for 
the record:


[Pages 863 - 918--The official Committee record contains additional material here.]



                                           Tuesday, April 21, 1998.

                  MEDICARE PAYMENT ADVISORY COMMISSION

                                WITNESS

GAIL R. WILENSKY, CHAIR OF THE MEDICARE PAYMENT ADVISORY COMMISSION
MURRAY N. ROSS, THE COMMISSION'S EXECUTIVE DIRECTOR

                       introduction of witnesses

    Mr. Porter. The subcommittee will come to order.
    We continue our hearings on the fiscal year 1999 budget, 
and we are pleased to welcome Dr. Gail Wilensky, the Chair of 
the Medicare Payment Advisory Commission. Dr. Wilensky, why 
don't you proceed with your statement and then we will have a 
few questions.
    Ms. Wilensky. Thank you, Mr. Chairman. I am pleased to be 
here. I have with me Murray Ross, who is our Commission's new 
Executive Director. We are here to talk very briefly about the 
work for fiscal year 1999 and also our appropriation request.

                           opening statement

    As you know, after a couple of false starts, we were able 
to have the 2 predecessor commissions, the Physician Payment 
Review Commission and the Prospective Payment Assessment 
Commission put together. That was part of the Balanced Budget 
Act. It formally occurred October 1st. We have 15 commissioners 
rather than the 17 and 13 that had previously existed. We have 
brought the staffs together. We have actually moved finally at 
the end of February into a single new office so that we can 
work more efficiently together.
    And we have gotten out our first two mandated reports, one 
of which was to the Appropriations Committee in the House and 
the Senate. It was a report on Urban Critical Access Hospitals. 
It came out in December. And, also, our March 1st report, which 
is the first of the two recurring reports that we are obligated 
to provide the Congress. The March 1st report is generally a 
payment report, and then there is a June 1st report, which we 
are busily trying to finish.
    Our final commission meeting is this week, on Thursday and 
Friday, to give the recommendations and information for that. 
That is a broader report. It deals with issues about access and 
liability and the relationship between Medicare and the rest of 
the health care system.
    We are very pleased with the quality of the first reports 
that we have delivered to the Congress. It is a little 
different than what we have done as a report in the past. In 
the past, both PPRC and ProPAC, made specific recommendations 
about payments under Medicare. In this case, because there was 
so much included in the Balanced Budget Act, we are mainly 
assessing the reasonableness of the payments and payment 
reductions that were a part of the Balanced Budget Act. In 
general, we thought that the payment levels that were included 
in the Balanced Budget Actfor the various groups providing 
services to the seniors appear to be reasonable, although this is 
something we will obviously monitor each year to see whether or not 
that continues.
    We are also going to be devoting time to looking at the 
issue as to whether Medicare pays similar amounts for services 
that are provided in different settings and, if they are not 
the same amounts, whether the intentions in terms of signals 
that are being sent is, in fact, desirable. People get very 
similar services in outpatient versus physicians' offices, and 
sometimes these incentives are unintended in terms of the 
messages that we send.

                         appropriations request

    These are obviously broad issues with which we deal, but in 
terms of the appropriation, we are requesting a continuation of 
the same level that we had requested last year. It is 
approximately $7 million. In my formal testimony, there is an 
allocation shown of that $7 million and substantial detail that 
we have provided in the normal course of our appropriations. 
While in many ways we hope that having the same level to some 
extent speaks for itself, we do want to be sure that it is 
noted that we are requesting to spend the money somewhat 
differently, in large part because our first year both had a 
number of expenses that were unusual but also we were forced 
into doing things somewhat differently than we normally would 
like to do them.
    We had some expenses associated with bringing the staffs 
together and also getting ourselves in our new facility, but we 
were also forced to rely more on some contract work because of 
transition bumpiness problems, with staff leaving and our being 
in the position of now doing some aggressive recruiting, 
particularly for some of our experienced senior staff who took 
this transition time to look for other opportunities around 
Washington. There is a very high premium on skilled and 
experienced health policy analysts, and we are having to work 
hard to replace some of those that we have unwittingly donated 
to other parts of Washington.
    So while our total allocation is the same, we will be 
spending more on labor next year relative to this year, but 
less on some of the contract work which we have had to do on 
the outside this year in order to get our two reports out.
    We are comfortable that having gotten through the reduction 
that occurred in the year before our last, and settled down 
with that as a spending level, that as you and others had 
predicted, a single commission does allow us to operate more 
efficiently. And we are comfortable that it was a wise decision 
and have gotten through the worst of our transition and will be 
able to provide the same kinds of high-quality reports as 
requested by various Members of Congress, plus our usual 
mandated reports, in a timely and high-quality way.
    Let me stop there with my prepared statement and answer any 
questions you might have.
    [The prepared statement follows:]


[Pages 921 - 931--The official Committee record contains additional material here.]



                             merger issues

    Mr. Porter. Thank you, Dr. Wilensky. Have you noticed any 
disadvantage in combining the two agencies into one?
    Ms. Wilensky. There were several short-term disadvantages, 
none that I hope will have a permanent effect. The staff that 
we rely on were unsettled by the changes. They were trying to 
put together a single report, operating out of two different 
offices, and, as I mentioned, we lost a number of senior 
experienced researchers who had substantial institutional 
knowledge.
    And I think it is not uncommon to have that kind of change 
occur. But when you take two commissions that had been 
unusually stable, especially for Washington--had had a single 
executive director in the one case and a deputy who became 
executive director in the other case--from its inception, it is 
very unusual for those of us who have otherwise been involved 
in government, but I think it was a little unsettling. But I 
think it was a short-term cost that will, in the end, continue 
to be justified. At a substantive level, it made an enormous 
amount of sense.
    We don't have quite the depth of commissioner talent in 
some areas. The 15 commissioners is a little short, 
particularly with only a minority being able to represent the 
provider community. I initially had thought fewer rather than 
more commissioners was a good idea, because they can get a 
little unruly if their numbers grow, but one or two additional 
commissioners, I think, actually might allow us to reflect the 
many, many, many interests in the $178 billion program that we 
call Medicare. It is a lot of interests that we need to hear 
from, and I think we lost some talent among the commissioners 
that we had had.
    But the commissioners, actually, came together very quickly 
and are a very good group of commissioners. So it is only off 
by maybe one or two.

                        budget category changes

    Mr. Porter. In your budget justification, it appears that 
you have realized efficiencies in areas such as printing, 
supplies, and equipment. However, why is there no change in the 
budget request for the line items related to travel, computer 
programming, and main frame computer?
    Ms. Wilensky. Well, I will leave the mainframe computer for 
last, because that is a little more difficult issue, at least 
for me to respond to.
    With regard to the travel, that is mainly the travel of the 
commissioners. And the commissioners are who they are, and they 
can be from other places. If anything, we have actually 
slightly more nonEast Coast people at the interest of the 
appointing parties, and so that travel more or less stays with 
the number of commissioners. It was anticipated it would be 15.
    There is a little bit of staff travel, but there is notvery 
much. So the travel line was set up the year before last on the basis 
that we would have a combined commission of 15 members, and everybody 
estimated that line pretty well.
    Again, the printing--it was printing or main frame that you 
wanted?
    Mr. Porter. Computer programming and then main frame.
    Ms. Wilensky. The programming, in large part, is a question 
of how much of the enormity of the information that we need to 
be assessing as a result of BBA we are actually able to do. 
That is not something that ought to go down, frankly, in the 
future.
    The Congress made more changes in Medicare in BBA than 
probably the 33 years previous to that, and rightly have 
directed MedPAC to report on the effects of these changes in 
terms of participation by physicians and access for the 
seniors, the effects of attempting to do risk assessment and 
risk adjustment.
    So there is an enormous amount of work to be done in terms 
of programming. And we tend to do most of our programming not 
by contract outside of the group. We actually have some 
contractual work with a software analyst group that help do it, 
but we don't typically--this year is a little exception--we 
don't farm out the entire research budget. So it is a question 
of being able to actually do the research.
    And I think the same is more or less true in terms of 
computing expenses, although, to be perfectly honest, we will 
have a better assessment of exactly what are our computer costs 
when we have been in existence more than six months.

                    medicare reimbursement policies

    Mr. Porter. While we only have jurisdiction over your 
administrative budget, can I ask you a question about policy?
    Ms. Wilensky. The most interesting part.
    Mr. Porter. Often, people will say that there is no sense 
to what HCFA decides in terms of reimbursement devices or 
pharmaceuticals, and that the whole process needs to be looked 
at and have some sense made of it.
    This is fairly harsh criticism. As director of HCFA, and 
now of the commission, can you tell me whether you agree with 
that or whether you see a need for changes to be made to make 
decisions as to what HCFA pays for and what it doesn't pay for?
    Ms. Wilensky. Well, I think there is a lot of truth to it, 
and it goes to the very heart of how we run Medicare now. 
Medicare is basically an administered pricing program. Another 
way to call that is it relies on price controls to try to slow 
down spending. And for the most part it doesn't even do it in a 
way that really produces savings, because it doesn't have a 
spending limit, except for the physician part where the fee 
increases are tied to total spending on physician care.
    As an economist, I don't think that is a terrific way to 
run a program. But if you choose to run a program through 
administrative pricing, you shouldn't be surprised if you get 
some arbitrary pricing. It makes economists remember why 
relying on markets has some advantages. The relative value 
scale is attempting to price 9,000 codes--that is a lot--and 
trying to get them to make some sense with each other relative 
to each other is very difficult.
    We are still basically using the framework of the 1983 DRG 
payment system. We have updated them for inflation and we have 
added a dozen or 20 new codes, but basically the relative 
prices that were constructed in 1983 are the relative prices 
that exist in 1998 DRGs. And, undoubtedly, the real relative 
prices of what it takes to do a hospital stay have changed 
significantly.
    But in order to try to get around that problem, it is not 
really an issue of directing HCFA to be more sensible, because 
that goes along with the territory of having administrative 
pricing. I think there are better ways to redesign Medicare. 
Personally, I would rather have the government have a premium 
contribution role, more like it does with the Federal 
employees' health care plan, and be responsible for making sure 
that plans deliver the benefits that they promise, and that 
they don't discriminate, and they provide good information to 
seniors, or the government provides good information to 
seniors, and not try to be in the business of deciding what 
price a particular service or a particular piece of equipment 
should get and whether it's appropriate that it be delivered 
and whether the quality is adequate, because I think that's a 
hopeless job for the Federal Government to do.
    But as long as the bulk of Medicare is traditional fee-for-
service medicine, and it is 87 percent that way now, and 
according to CBO even in another 10 years will be predominantly 
fee-for-service, HCFA will have all those jobs and they will 
continue to do them as best they can but with an arbitrary 
component.
    Mr. Porter. Why, when we have capitated alternatives 
available, will it continue to be so heavily in fee for 
service?
    Ms. Wilensky. For several reasons. Probably the biggest 
one--well, the most important one for an economist who looks at 
financial incentives--is that financial incentives neither 
encourage nor reward seniors to make the most cost-efficient 
plan. In order to do that, you would want to have the payment 
by the government be the same, no matter what plan is chosen.
    And now there is a very big difference between what the 
government spends in traditional Medicare and what may be spent 
in the capitation programs. And that is going to growover time 
because there are a bunch of rules that got included in the Balanced 
Budget Act about how fast the capitation program should grow.
    So part of the reason is that the kind of financial 
incentives that might have seniors look more seriously at their 
options are not present because of the way the government pays.
    Up until now, the options that have been available to 
seniors have been quite limited. Unlike the under-65 market 
where it is flexible, and getting the advantage of a low 
premium if you stay in the plan but being able to opt out and 
go to anybody outside the plan, other kinds of more flexible 
networks have not generally been available to seniors. So the 
people who had the least history of using capitated plans had 
the most rigid options offered to them.
    Now, it's gotten better, or it will begin to get better as 
these get phased in over time. But it does raise the final 
issue, which is that for a lot of the Medicare population, it 
is a less common way of receiving care, although they are now 
clearly outside the mainstream. In the mid-1960s, a lot of 
effort was made to make Medicare look like the health care 
everybody else got. And, in fact, it is what happened.
    We sometimes describe Medicare as being vintage 1965 Blue 
Cross/Blue Shield, because that is more or less what it is, 
both in terms of the benefits and the way that providers are 
paid. So all of those have come together to keep that small but 
growing.

                         premium contributions

    Mr. Porter. As an economist, you said, I think, you would 
provide premium subsidies or premium----
    Ms. Wilensky. Contributions.
    Mr. Porter. Contributions. In other words, you would 
basically give every eligible person a voucher and they could 
go buy in the marketplace, except I guess that the government 
would designate a minimum package that had to be provided.
    Ms. Wilensky. And provide--I always get a little nervous.
    Mr. Porter. Provide some ombudsman services for giving 
people some help in making those choices.
    Ms. Wilensky. And that is very important. Vouchers got a 
bad name in the 1980s, so I usually shy away from them. But the 
idea is to have plans that meet some government set of 
approval, the way they do for the Federal employees plan, to 
make sure that people have information they need--and that is 
already a requirement of the Balanced Budget Act--maybe even 
information like the Consumer Checkbook, which is very good, 
that Federal employees are able to obtain--and to then have 
people choose the kind of plan that suits them.
    Personally, I would have that contribution be higher for 
low-income people and smaller for high-income people. But that 
would be against what we have had in the past in terms of the 
social insurance program. That is a decision Congress can make 
independently.
    Mr. Porter. You would means test it, to some extent?
    Ms. Wilensky. I would.
    Mr. Porter. Don't we really have this kind of system when 
you say, as seniors, you can choose among these options and we 
will pay? In effect, they have a voucher to go to any of the 
capitated programs.
    Ms. Wilensky. Yes, it is----
    Mr. Porter. Isn't it the same thing?
    Ms. Wilensky. Except you are missing a really important 
component, and that is if you stay in the more expensive a la 
carte fee-for-service world, Medicare will pay that, and that 
has no natural limits.
    Mr. Porter. But on part of that you have a premium.
    Ms. Wilensky. You have a premium anyway. It is only a 
question of whether or not the HMOs choose to invoke the 
premium. You do have the premium. And in the past, you not only 
got to save the premium frequently, but most people had zero or 
low monthly payments.
    Now, that might start to change, because with putting a 
floor under payments to make sure that cappings didn't get less 
than $365 per senior per month, we might have some 
redistribution going on that seniors would be asked to pay some 
premium, although far less than the Medigap, which runs about 
$1,200 or $1,300 a year.
    But the real way to change what it is that seniors would 
see and therefore probably choose, is to have a premium 
contribution that is the same, adjusted for health status. If 
someone takes a fee-for-service plan or a network plan or a 
Kaiser or other staff model HMO, it ought to be the same 
payment, given their age and sex. In many ways, more or less 
like the Federal employees. It is not a perfect plan, but it is 
pretty close to what I am describing.
    Mr. Porter. And would you have any restrictions on what 
providers can be assembled to compete? In other words, could 
doctors and hospitals provide a PPO?
    Ms. Wilensky. Right. Yes
    Mr. Porter. And compete with an insurance company, HMO, or 
any others?
    Ms. Wilensky. Absolutely. I think the doctors and hospitals 
would find managing financial risk harder than they think, but 
they ought to have the opportunity to try. And, in fact, with 
the new Medicare rules, once HCFA issues the regulations, they 
will have the opportunity; although, as HCFA always does 
things, with a big regulatory hand of government on top of it.
    HCFA has a PPO, a network where you can opt out. But ifyou 
do not opt out and go to a doctor outside the network, almost all the 
rules that apply under Medicare anyway still exist for that doctor. So 
it is a PPO, but it is a very funny kind of PPO. And one of the 
questions is might we have a few less regulations on some of these 
network plans.
    Mr. Porter. And how much is HCFA going to listen to the 
commission in regard to all these matters?
    Ms. Wilensky. We will see. Nancy Min Deparle, the new 
administrator, has at least indicated an interest on several 
occasions of my opinion. She has a very nice style about her. I 
think there will be a better relationship than sometimes 
exists. That relationship has been sometimes good and sometimes 
rocky. We are going to be meeting in the next week with HCFA to 
try to establish that.
    Basically, though, we assume that even when HCFA won't, the 
Congress frequently will listen to these commissions, and it 
would be better if both did.
    Mr. Porter. Well, we are delighted that you still have your 
hand officially in this really most important subject for the 
American people, and we hope that HCFA will take your advice. 
Because, very frankly, Dr. Wilensky, I was saying the same 
thing--and maybe I got it from you at the time. I can remember 
back in 1992 when we began really discussing how to organize 
health care and the Clinton plan was put out there--we were 
saying why don't we just empower our senior citizens to make 
their own judgments in the marketplace and move government 
largely out of the micromanagement that the President wanted to 
get us deeper into.
    Ms. Wilensky. They are very price sensitive, and if given 
some information, they and their helpers, their children and 
family members, can help make good decisions for them.
    Mr. Porter. Oh, surely. And they network and talk to one 
another so much that they determine where the good care comes 
and where it doesn't come very quickly. And I think it would 
work very well.
    Well, we have a lot of questions for the record. I am 
sorry, Mrs. Northup.
    Mrs. Northup. I was so quiet, you didn't see me.
    Mr. Porter. You snuck in there.

                            home health care

    Mrs. Northup. That is fine. I am so glad to hear what you 
have to say and have such appreciation of your perspective on 
these issues, and I have to share the Chairman's interest in 
how much this administration and HCFA and Medicare authorities 
listen to your advice, because I think we are all eager for 
out-of-the box new paradigms on approaching these questions. 
Sort of what the relationship is, is of great interest to me.
    I do want to ask you a couple of very specific questions. 
First of all, I want to ask about home health; in particular, 
the venipuncture rule. I have gotten really fewer people that 
have had home health and no longer have it than probably the 
anger that comes from the home health companies, visiting 
nurses, organizations that are so angry about the new rules. 
And I just wondered if you are all having any second thoughts; 
whether or not you think we drew the line at the wrong place.
    Ms. Wilensky. Four months ago, I wouldn't have been able to 
explain clearly what the problem was, but because I did a 
number of call-in radio shows between Christmas and New Years, 
and that was the single most frequently asked question, I did 
find out more about it.
    I don't think it was a wrong decision. Let me explain it, 
at least as I understand it, what the decision was and why I 
believe it was appropriate.
    HCFA and Medicare will continue to cover the services for 
people who need a needle stick for venipuncture. What was 
happening before is that if you needed that alone done, you not 
only had Medicare pay for it, but you were then eligible to 
receive every home care benefit that was available, whether or 
not you had anything else that would justify that.
    Mrs. Northup. Can I interrupt?
    Ms. Wilensky. That is at least my understanding. Yes.
    Mrs. Northup. When you say HCFA will still pay for the 
needle stick, do you mean they will pay for it in your home, or 
if you go to the doctor?
    Ms. Wilensky. No, no. My understanding is that the actual 
venipuncture visit will be continued to be paid for by Medicare 
wherever provided for, including in the home. What it will no 
longer do is cover unrelated home care visits, and this was 
something that was happening.
    People who had nothing else that would otherwise qualify 
them to receive home care, by virtue of needing the 
venipuncture would then qualify for all of home care, which as 
you probably know has no coinsurance and basically unlimited 
use as long as you meet the home-bound definition and are 
certified by a doctor.
    So what HCFA did--through administrative ruling, it was not 
something, anything the commission had anything to do about, 
but I actually believe this was a reasonable decision--is to 
say we will continue to pay for that event, but we will not 
automatically make you therefore eligible for any and all home 
care. If you have something else that would qualify you other 
than needing the venipuncture, then you continue to be.
    Mrs. Northup. Well, is the problem that the home health 
companies will not take a patient that just needs a needle 
stick because it is not profitable?
    Ms. Wilensky. No; I think they are just unhappy therewere a 
lot of other services they were providing, some of which may well have 
had some benefit but don't meet the requirements of the definition to 
qualify for home care.
    The home care, as you know, has grown explosively in this 
decade.
    Mrs. Northup. Yes.
    Ms. Wilensky. Both the number of people served and the 
number of visits. And if you have people who are older and 
frailer, there is a line between whether somebody could benefit 
by having somebody drop in and take a look and provide some 
services and whether they meet what at least nominally ought to 
have been pretty strict requirements as being home bound and 
needing certain kinds of skilled care.
    What I think has happened through a number of avenues, this 
just being one of them, is that people who previously would 
never have qualified became eligible by virtue of something, 
and in this case having a real medical need, that is the 
venipuncture, but not otherwise having something that would 
qualify them for home care. And I think that there really--if 
we want to redefine the need criteria for home care, Congress 
ought to do that explicitly. I think this was just slipping 
through the back door.

                             Long-Term Care

    Mrs. Northup. Let me now broaden the question about home 
health care and tie it to long-term health care.
    It strikes me one of the arguments people make for home 
health care is that it helps keep people from having to go into 
nursing homes. I certainly understand that as being a good 
objective. But the fact is that Medicare does not cover for 
long-term care.
    Ms. Wilensky. It covers 100 visits. And those are skilled 
nursing requirements, not chronic care that is not requiring a 
skilled component.
    Mrs. Northup. So are you telling me that if somebody needs 
a needle prick, and maybe more services, that Medicare will pay 
for it, but at the end of 100 visits it is--
    Ms. Wilensky. No; the needle prick is part of home care. On 
that, there is no limit. In addition to home care, there is a 
skilled nursing facility that has 100 visits.
    Let me explain what people usually get, because it will 
clarify the kinds of people. If you have a stroke and need some 
rehabilitation, if you have a hip replacement or a knee 
replacement and you need some rehabilitative services, those 
are the kinds of people that frequently will go for 30 or 50 
days to a nursing home, have this kind of skill; or, they may 
go to a rehab hospital, have this; then sometimes they go from 
there to home care, and then they may or may not continue.
    Mrs. Northup. But my point is this.
    Ms. Wilensky. Does it really save money?
    Mrs. Northup. I feel like if you walked out on the street 
today and you stopped 25 people that were 30 years old or 40 
years old and say when you are 85, if you need nursing home 
care, who do you think is going to pay for it, they would say 
Medicare. And then what happens is their mother or they 
themselves get to that age where they need to go into a nursing 
home and they are surprised to find out that there is no long-
term care associated with Medicare.
    And so politically you have candidates or people that say 
Medicare ought to pay for long-term care. But, of course, there 
is no money in Medicare. That was never the insurance policy 
you paid into. And so one of the ways to access care and also 
not be in a nursing home, where your Medicare doesn't cover it, 
is to have in-home care.
    I would say in terms of quality of life, and staying out of 
a nursing home is a very valuable objective, and most of us 
would want our moms to be home, but if there is a way to get 
Medicare to pay for it, that is better than paying for it 
ourselves if we don't have long-term care. So home health was a 
way to have those people that were too fragile to live without 
any care to actually not have to go into a nursing home.
    And a lot of the stories we are hearing seem to be maybe 
people that are medically fragile, and I just sort of wondered 
if we are having trouble overall drawing the line between what 
is long-term care and what is the care that Medicare is 
supposed to provide.
    Ms. Wilensky. Well, you have hit on some issues that 
definitely are going on. People do prefer staying out of 
institutions, although sometimes if they have multiple 
problems, it is very difficult to care for them any other 
place.
    And there is little doubt in my mind that one of the 
reasons that home care has increased so dramatically is people 
who might otherwise have found themselves in a chronic care 
facility are finding themselves on home care. States have been 
quite interested in that, since they were paying the Medicaid 
for them to have skilled nursing facilities. And if they get 
home care provided, the Federal Government pays all of that 
rather than only 55 percent of that.
    The experience has shown that while it is intellectually 
appealing to think that you could prevent a lot of nursing home 
visits by having a lot of home care, in fact it is very hard to 
predict who is going to otherwise really be at risk for a 
nursing home. So our experience hasn't been very good that 
providing home care keeps people out of nursing homes. But 
maybe for some of the people it is a wash.
    The question of what we really want in that Medicare 
package is a very difficult question, and it needs to be 
reexamined. I spoke this morning before the Bipartisan 
Commission on Medicare. That is clearly an issue they 
aregrappling with, as well they should.
    Medicare not only pays doctors in terms of vintage 1965 
Blue Cross/Blue Shield, but the benefit package is vintage Blue 
Cross/Blue Shield of 1965 as well. So the whole configuration--
and where pharmaceutical coverage outside of the hospital is, 
because we do so much more out of the hospital than we used to, 
where it belongs, where nursing home belongs.
    My view is if we continue making discrete payments a la 
carte, we will just spend more money. The only way to try to 
capture those savings is through some kind of a premium 
contribution support, a capitated support, where people can 
pick different kinds of plans. It would be better if they 
included long-term care in the plan, because you have the best 
ability to provide care in the most sensible way if it covers 
the whole continuum. But if we already pay home care separately 
and skilled nursing separately and hospital separately and 
physician separately, we will not see any savings.
    Mrs. Northup. That was where I was finally going with this, 
is that we have never figured out what happens at the end of 
Medicare. More people are living beyond the Medicare. In other 
words, you may have gone in the hospital, had a heart attack, 
had Medicare pay for it, and maybe you didn't live another 
year, or the stroke or whatever. Now, more and more people are 
living later and later, and it seems to me that we did offer 
last year some, some, a little bit of tax credits for long-term 
care. But if we don't leverage money, private money----
    Ms. Wilensky. Right.
    Mrs. Northup. Because there is no public money for long-
term care, unless we dramatically increase what everybody's 
contribution is. If we don't leverage private money in, so that 
I have an incentive to get out there and get a long-term care 
policy, so that if I am one of the people--so that those people 
who don't use it pay for those people who do need it--we are 
going to sink the Medicare and the Medicaid budget.
    When you start talking about a smorgasbord or a cafeteria 
of plans, if long-term care were included in that, you really 
could cut out a lot of the sort of decisions that we are 
finding torturously difficult today.
    Ms. Wilensky. I agree, and I think encouraging it, on the 
same footing as acute care insurance, is important.
    You have to be careful. We don't need to duplicate all of 
the mistakes we have made in terms of how we have encouraged 
insurance, but we do need to encourage people to be fiscally 
prudent and take care of their own long-term care needs. Before 
1990, there really were not any options around. That is no 
longer true. And the Portability Act started that, and making 
it a more rational integration with the rest of insurance would 
be a good idea.
    Mrs. Northup. Okay. I know I went over my time.
    Mr. Porter. You can have all the time you want. Do you have 
other questions?
    Mrs. Northup. I have one more question.
    Mr. Porter. Fine.

                              Managed Care

    Mrs. Northup. One more area. I want to ask you about 
managed care. We are looking at PARCA legislation and other 
legislation that is being proposed, and being from Kentucky and 
having been through health care reform that drove our prices 
through the ceiling, I am very concerned about the popularity 
of that.
    I do know that you all are conducting a study right now 
that is due out in June, and I wondered if you could give us 
any sort of a preview.
    Ms. Wilensky. Let me make a plea first. There is so much 
change going on right now that you need to be really careful 
not to stop the evolutionary changes that are going on with 
regulation. People need information. They need to know what 
they are buying into. And any way that you can help make sure 
that people have good information about the plans they are 
buying, whatever we know about outcomes, whatever we know about 
consumer satisfaction, that is terrific. That would help them.
    I am very worried that in the name of protecting consumers, 
we will basically just make these plans very rigid. So much of 
what has happened in the last 20 years is because we are 
finding we can do things out of the hospital that we couldn't 
do before because of technological changes. We can do things in 
the home that we used to have to do in a physician's office or 
the hospital.
    We are finding that because people don't like it if they 
can't see a specialist, the HMOs that are growing are the ones 
that have open access programs or that are finding different 
ways to pay the specialist versus the primary care physician so 
they can make their enrollees happy. Otherwise, they are not 
likely to be with them very long. The market really seems to be 
in enormous change, and the Congress can help make sure people 
have good information. But I worry that some of the other 
requirements don't do anything to improve quality and could do 
a lot to increase cost or to rigidify the system.
    Medicare may provide some interesting insights because of 
the requirements that were in the Balanced Budget Act to 
provide information to seniors starting in the fall. It is 
going to be hard. HCFA is really struggling, and they probably 
aren't going to do so terrific a job initially, but we need to 
remember relative to what. We have had seniors choosing Medigap 
plans and HMOs for 35 years and HCFA hasn'thelped them one 
whit. Whatever you found out, sometimes there was a good aging 
administration in your area, or your church was really active, but in 
terms of formal information, seniors have managed for 35 years and the 
world hasn't stopped.
    I say that only because the first year this information 
will be better than they have had, but not perfect. And we 
shouldn't judge it relative to what we like but relative to 
where we have been. So I just hope that you won't----
    Mrs. Northup. I agree that the worst thing we could do is 
to solidify sort of what we have now and stop the evolution. 
Because I do think there are some policies that are coming in 
some States that are very creative in both containing costs and 
giving choices and giving--where people have some bit of 
choice, not just of who serves them but exactly what the 
payment scheme is and so forth.
    But if the report that comes out on HMOs and Medicare is 
very negative about HMOs' management, it could feed this frenzy 
that is going on on both sides of the aisle and at the other 
end of Pennsylvania Avenue.
    Ms. Wilensky. I don't think there will be anything in our 
report that would suggest that, although I will certainly go 
back to look. Right now we simply, among other things, don't 
know very much. What we have seen in the past, in work that the 
Physician Payment Review Commission did, is that for the most 
part seniors who were in managed care were satisfied. They got 
a lot of extra benefits at very little cost: preventive care 
and vision care and mainly outpatient pharmacy care. And if 
they weren't happy, it was a mistake, I believe, but the fact 
is in 30 days they could be out and into something else.
    So there is very little reason to believe, I think, that we 
have significant problems with HMOs per se. What we do need to 
do is figure out how to better adjust payments to acknowledge 
that small numbers of people use a lot of health care resources 
because they are very sick. That is always true; true in this 
country and every other country; true for the elderly and true 
for the under 65.
    And this process of being able to figure out how to risk 
adjust is a difficult problem and we have to start that. The 
Secretary is due to report next spring and to implement changes 
the year after. I am not aware, though, of anything that would 
suggest we are seeing something that ought to make us try to 
stop the forward progress. I am more concerned that the 
Congress not do something that stops this forward progress.
    If the Congress really wanted to respond to what I 
sometimes hear as the most serious complaint, that an 
individual doesn't like the plan that their employer is 
providing, they might think about whether they would ever let 
people deduct their health care premiums if they chose 
something other than their employer-sponsored plan. You can't 
both take the exclusion of having your employer sponsor a plan 
and deduct your own plan, but you might have it as an 
alternative and let people really vote with their feet if they 
didn't like what their employer offered.
    That is a little more aggressive than Congress may wish to 
be at the moment, but there is some legislation already being 
raised.
    Mrs. Northup. Another example would be to allow private 
institutions, whether associations, maybe Chambers of Commerce, 
to collectively contract for like a Federal employees 
smorgasbord, so a small business that doesn't have the capacity 
to negotiate eight different policies for just 60 employees, 
for example, could offer those employees their purchasing 
alliances.
    My worry with purchasing alliances is we will wind up with 
government being the purchasing alliance instead of private 
contracting. But if we allowed associations to be that and 
provide them the ERISA protections that we provide right now, 
we could probably offer pretty affordable insurance through 
company policies
    too.
    Mr. Porter. Thank you, Mrs. Northup.
    Dr. Wilensky, why was 30 days a mistake?
    Ms. Wilensky. It encourages bad behavior on the part of 
both people in the plans. When you go into a capitation 
program, the way you gain any advantage is by having the plan 
make a commitment to you because they have got you as a 
patient, and you make a commitment to the plan. Being able to 
move in and out in 30 days exacerbates risk selection.
    What we know is that while almost everybody who chooses a 
capitated plan stays there, usually in their original plan, 
occasionally they go to another plan, especially if they run 
through their prescription drug limit. But some of the people, 
the 3 or 4 percent of the people who leave, tend to have very 
high expenditures right when they leave.
    Now we don't know whether they knew they were leaving and 
decided to go back into a la carte fee-for-service medicine 
where they could pick anyone and anyplace they wanted, as much 
home care as they wanted, get that all done and then go back; 
or whether they might have been nudged out by their plans. But 
the 30 day in and out, which nobody in this room has, 
exacerbates the kind of behavior that we would like to 
discourage.
    Mr. Porter. So you would keep them in whatever plan they 
choose for a year.
    Ms. Wilensky. A year. I think, in fact, where the Congress 
moved, which was slowly over 4 or 5 years to anannual 
enrollment, giving seniors the first 60 days to change their mind is 
not unreasonable. I wish it happened 5 years ago instead of 5 years 
from now, but I think that is a much more sensible approach. And for 
most people it will be the approach they always knew; that is they 
chose a health care program for a year.
    Mr. Porter. I think that is probably right. Although I 
think the authorizers were concerned, they didn't want to--they 
wanted people to experience alternatives without feeling 
captured by them; in other words, failing to take the 
opportunity to go to an alternative plan because they felt they 
would have to stay a year and if they were dissatisfied, there 
was nothing they could do about it.
    Ms. Wilensky. And I think that is a legitimate concern. And 
there also needs to be some protection so that if a plan makes 
a wholesale change in their primary care providers, that ought 
to be a justification for allowing people to make a change. You 
ought to have some rules that if a plan does X and Y during the 
course of the year, then that automatically opens up until you 
get back into the rest of the cycle.
    And I understand, especially for those seniors who haven't 
been as familiar with capitated plans, it was a way to try to 
encourage them. But it takes the single most troubling part of 
Medicare right now, risk selection, and it worsens it. So while 
I appreciate your concern, on balance I will be glad when we 
get into the annual enrollment.

                            risk adjustment

    Mr. Porter. How do you risk adjust?
    Ms. Wilensky. Well.
    Mr. Porter. Isn't the concept you have to take anybody, 
regardless of what the risk is, if they want to enroll?
    Ms. Wilensky. That is really an open enrollment, in terms 
of who comes in. The risk adjustment has to do with the 
payments; how you pay plans.
    Right now the way we pay plans is it depends on the 
spending in your area, in certain age and sex categories. And 
while age predicts some health care use--older people do use 
more health care--it isn't nearly the predictor that you would 
like. And so what people are proposing, although there is a lot 
of debate about how to exactly do this, is to use some health 
status measures and/or some diagnoses combinations.
    Mr. Porter. Of the region where--
    Ms. Wilensky. No; of the people actually in the plan.
    Mr. Porter. In the plan? Oh.
    Ms. Wilensky. So that if you happen to be unlucky as a plan 
and get lots of cancer patients or AIDS patients, that you 
would get an added payment; or if you had an unusually small 
number of sick patients, you would get a reduction from your 
average payment.
    And you don't have to predict whether you are going to be 
sick this year or I am going to be sick this year, which is 
good because we will never be able to do that; what you really 
agree to do is look at the distribution of high spenders and 
high users in a plan, whether that follows a distribution that 
you would expect in a sizable population. And to the extent 
that there are health risks or diagnoses that are well 
correlated to be high expenditures, that is really what you 
have to capture. You don't want to look at just the high 
spenders, because that would encourage plans to spend a lot of 
money, but to look at some measure that is correlated with the 
need for a lot of medical resources that is not the dollars 
spent.
    There is a fair amount of work that HCFA has been 
sponsoring, and some work that PPRC had been doing to try to 
push that along, and initially we won't be as good as 
ultimately we will become, but what is really important is to 
capture the 5 or 10 percent of the high spenders, because 
that's where all the money is. And you want to make sure that 
if they are systematically in traditional Medicare or in 
certain health care plans, that they get some acknowledgment. 
If they are mostly in traditional Medicare, you will spend more 
if you give the average payment to HMOs. If they start 
congregating in certain plans, for whatever reason--because the 
plan has the world's best endocrinologists or cancer 
specialists--if that plan doesn't invest some extra money, it 
will be put out of business and it will probably find a way to 
shed its expertise.
    So it is really to try to acknowledge that relatively small 
numbers of individuals account for high spending, and we need 
to adjust for that. They need to know they will get some 
adjustment after the fact if that happens to them; otherwise 
you will encourage them as a plan to behave in bad ways, and 
you will not give the kind of care to sick people that you 
want.
    Mr. Porter. I can see that, except I can see also that is a 
kind of a guarantee that normal markets don't make.
    Ms. Wilensky. Well, you can make an adjustment to the 
payment--I mean, what you need to have is a pool, like a 
catastrophic risk pool, that you can use to provide added 
payments to plans that end up with unusually sick people. 
Otherwise, what you will do is reward plans that aren't more 
efficient but are successful at swinging out or shooing away 
sick people.
    Mr. Porter. I see the reason why it is there.
    Ms. Wilensky. But it actually messes up the market if you 
don't acknowledge that. Now, to the extent it is just random, 
just happens in one year, and you have a big population, that 
is really not a problem. It becomes a problem when it is 
predictable and recurrent as opposed to random and 
unpredictable.
    Mr. Porter. So this will be part of your advice?
    Ms. Wilensky. We have been looking at this issue for a 
number of years. We will continue to look at it. It is 
difficult. There are several people on the commission--I have a 
lot of interest but only some expertise. There are a couple of 
commissioners who have a lot of expertise in this area and some 
staff as well, and we will continue to both observe what HCFA 
does and assess critically what they are doing.

                               Conclusion

    Mr. Porter. Well, it is always fascinating to talk with 
you, and we planned to get you out of here in 15 minutes, but, 
obviously, we have spent a whole hour talking with you. We very 
much appreciate getting the chance to do so and really are 
happy that you are there and providing the kind of expertise 
and advice that HCFA definitely needs.
    Ms. Wilensky. Thank you for your support in making it one 
commission. I think that it was a good decision, and I know 
that you and your staff were very helpful in that role. So 
thank you.
    Mr. Porter. Thank you. The subcommittee will stand in 
recess until 10:00 a.m. tomorrow.
    [The following questions were submitted to be answered for 
the record:]


[Pages 946 - 976--The official Committee record contains additional material here.]



                                          Wednesday, April 1, 1998.

                INSTITUTE OF MUSEUM AND LIBRARY SERVICES

                               WITNESSES

DIANE FRANKEL, DIRECTOR
LINDA BELL, DEPUTY DIRECTOR, BUDGET AND PLANNING

    Mr. Porter. We will continue our hearings this afternoon 
with the Institute of Museum and Library Services, and we are 
pleased to welcome the Director, Diane Frankel.
    Ms. Frankel.
    Ms. Frankel. Good afternoon, Chairman Porter.
    Mr. Porter. Good afternoon.
    Ms. Frankel. I would like to introduce Linda Bell, who is 
the deputy director for Budget and Planning at the Institute of 
Museum and Library Services.
    Mr. Porter. I was just going to suggest that you do that. 
Welcome. Why don't you proceed with your statement, please.

                           Opening Statement

    Ms. Frankel. It is a pleasure to appear before you and the 
distinguished committee to discuss the President's budget 
request of $146,340,000 for the Institute of Museum and Library 
Service, Office of Library Services.
    Last year, Congress increased our Federal funding for 
libraries by $10,000,000, and I thank you for showing such 
great confidence in this fine agency.
    As the first director of the Institute, I am proud of what 
we have accomplished since we last appeared before you. I have 
learned so much about libraries in this past year. I have 
always used libraries, but I never thought about the variety of 
libraries and the complex issues that they face. I have learned 
about the different types, the public, the special, the 
research libraries--and the multiple services that they 
provide. I had no idea that technology played such an important 
role--unlocking whole new worlds for library users--online 
catalogs, inter-library loans, on-ramps to the Internet, and 
linkage of State-wide networks.
    Technology is not replacing, however, the important sense 
of place that libraries create in their communities. I have 
visited a number of public libraries over this past year, and I 
am so impressed by their relationship to Head Start, by the 
evening hours that they provide for children doing homework and 
for adults being trained for job interviews.
    I am so impressed by what libraries are accomplishing and 
proud to be their spokesperson here. I would like to spend a 
few moments telling you about our grant programs, and I will 
first mention our National Leadership grants.
    These competitive awards focus on four areas: education and 
training, research and demonstration projects, digitization and 
preservation, and library and museum partnerships. Countless 
museum and library professionals contributed to the development 
of these new guidelines, and the American Library Association 
has called the guidelines ``a model of accommodation and 
balance.''
    The deadline for this program is just 16 days away, and we 
expect to be deluged with outstanding proposals, and I look 
forward to telling you more about this in September when we 
make our first awards.
    Next, we have had a productive dialogue with leaders in the 
Native American Library Service. Through discussions, we have 
determined that Federal money could be well used to provide 
grants for technical assistance to help these libraries achieve 
professional standards. We are basing this program on a similar 
program that we have had in place for small museums, which has 
helped thousands of museums improve their public service. We 
will be able to measure the results of these programs after 
they have been in place for a year.
    Finally, we have developed responsive and effective 
communication with the States. The Government Performance and 
Results Act is evident in all that we do. However, the most 
challenging aspect of implementation is in working with the 
States to, as you said last year, compare apples with apples 
and oranges with oranges. The States have taken up this 
challenge with enthusiasm, but I must tell you that the 
challenge is daunting. A complicating factor for us is that 
libraries are at the front line in the technology revolution, 
and technology is changing the way all of us have access to 
information, and the impact that that will have on libraries 
will be profound; yet, at this point, cannot be fully known.
    While we are in the midst of such great change, trying to 
develop measurement standards, it requires great efforts, as 
you can imagine. The project is daunting, and I heard Ms. Cantu 
say the word ``daunting'' as well. So I think it is really 
true. And the process is difficult and can be expensive, but we 
remain committed to encouraging that process along.
    We have spent much of this past year in meetings with the 
chiefs of the State library agencies, working together to 
identify programs that cut across the States. Once these are 
established, we will attempt to identify ways to measure the 
impact.
    I would like to also mention four ways that Federal monies 
are going to be spent in the IMLS grant programs, to expand 
services. The first, and above all, is for libraries. For 
libraries, public service is the key, and reaching out to the 
entire community is a priority. Young mothers in Tampa Bay, 
Florida, learned about the importance of reading to children, 
even before their babies are born. Born to Read incorporates 
parent education and the importance of literacy.
    Second, technology is being used to serve people in very 
new and useful ways. A man in Jamestown, New York, was 
diagnosed with an inoperable brain tumor. Doctors told him he 
had only months to live. His wife was distraught, and she went 
to her local Jamestown library to do research on her husband's 
illness and the treatments that were available. The reference 
library showed her how to search the electronic health 
reference database. Using this technology, she stumbled upon a 
new treatment.
    She took this information to her doctor, who then contacted 
the center with the new treatment. Her husband was able to 
receive this treatment, and he is responding well.
    Third, libraries are creating a sense of place while using 
sophisticated technology at the same time. Teens in Antioch, 
Illinois, were suddenly coming to the library in greater 
numbers, and everyone wondered why. New technology provided a 
welcome gateway to information, and it was very attractive to 
these young teens.
    To help librarians meet the needs of their new patrons, the 
State is providing training to youth librarians with a 
specialty in technology.
    Finally, libraries are entering into creative public-
private partnerships that expand access to critical resources. 
Many of these programs spark public-private partnerships that 
extend the life of the program long after the Federal money is 
gone. A wonderful example of this is JobSmart in California. 
JobSmart is a web site that helps job-seekers get current, 
reliable, and local information about job openings.
    Here is a testimonial from one of the 4,000,000 users of 
this award-winning site. ``This is the best and the easiest job 
site I have ever heard of. The others are either 
toodisorganized and/or do not have enough information. This site is not 
only free. It comes from the public library. So I know that you have my 
interest at heart.''
    I think that we should all be proud of the work libraries 
are doing across this country. I am optimistic about the reach 
and the accessibility of library service in our country, and I 
am confident that the Federal role helps to sustain and 
encourage public and private support for libraries. I would 
like to urge you to continue to make this wonderful investment, 
and I use the word ``investment'' in a real sense, in the 
Nation's libraries and to support the President's request of 
$146,340,000 for the Office of Library Services at the 
Institute.
    [The prepared statement follows:]


[Pages 980 - 986--The official Committee record contains additional material here.]



                          Future of Libraries

    Mr. Porter. Ms. Frankel, before I call on Ms. Pelosi, could 
you do something for me? And that is, libraries used to be 
books on shelves, and they have become far more than that now, 
but can you look 20, 25 years down from now and tell us what 
you think a library might look like, a typical library in a 
typical town in America, 25 years out?
    Ms. Frankel. Well, I think that many of them will look very 
much the way they still look on the outside, but on the inside, 
they are going to have a lot more technology accessible.
    Plus, I think books will remain, and I think there will 
always be good places for people to read and people to talk to 
teach other, and there will be great community centers as well.
    I think the accessibility that they will provide will be 
for people who do not have computers in their own home, and 
that will only increase. And I think that is terrific because 
we have seen in States like Illinois and in Florida just the 
ability to reach across the State and give people online 
capability to find out all kinds of information.
    Mr. Porter. Maybe the librarian of the future will be an 
expert in cutting through all of the data and finding what you 
want to find----
    Ms. Frankel. Yes.
    Mr. Porter [continuing]. Because there will be so much 
information. There is already so much information to reach----
    Ms. Frankel. Yes.
    Mr. Porter [continuing]. A particular bit that you might 
want, and maybe we will have the capacity not to keep books on 
shelves, but to print them out as we need them for each 
individual so that we do not have any over-supply.
    Ms. Frankel. I cannot imagine, but that is possible, sir.
    Mr. Porter. Yes. Who knows? I just wondered what you might 
think.
    Ms. Frankel. Librarians have called themselves often 
``information navigators,'' and I think that is exactly what 
you are talking about.
    Mr. Porter. Right. Yes, exactly.
    Ms. Pelosi?
    Ms. Pelosi. Thank you very much, Mr. Chairman. That was an 
intriguing notion or idea that you just presented us. I am 
trembling at the thought of the intellectual property 
ramifications. [Laughter.]

               Balance of Evaluation and Support Services

    Ms. Pelosi. I love that.
    Mr. Chairman, I am so proud of Diane Frankel and the work 
that she does at the Institute for Museum and Library Services. 
She was a constituent of mine, and will be, I guess, hopefully 
one of these days again, but, in the meantime, she is doing 
excellent work. She is a prize of our community, and we are so 
pleased that she was willing to have our entire country benefit 
from her experience at the Institute.
    I used to be on the Library Commission in San Francisco. It 
was my first official capacity in the early 1970's when I had 
all of these little babies, and we wanted to build a new 
library in San Francisco. We lobbied for a new library, and I 
was thinking of it when you asked the question if you could 
project 25 years out. It was probably a good thing we did not 
succeed with our lobby efforts at the time because, even 10 
years later, when a site was chosen and a new librarian was 
there with all of the knowledge and technology that become 
available, the library that we have today is certainly taking 
us into the future. I am not absolutely certain that would have 
happened if our initial lobbying had succeeded.
    Now, Lord knows what that means for the future, but I 
think, technologically speaking, we are at quite a different 
place than we might have been if we had built a library 25 
years ago. But this is an amazing thing. What are libraries? 
They are a place where we get information. They also afforded 
to many of us a level of serenity in our youth, to go there and 
read, and although information is very important and we want to 
make it accessible to everyone, still, hopefully, people will 
continue to read books.
    I do not know if it is healthy for them to read everything 
off the computer or what the ramifications are. They have 
implications for intellectual property laws that we are not 
even dreaming about right now.
    In any event, in our family, what you do has a very high 
value, Ms. Frankel, and, therefore, I hope that the committee 
will at least honor the President's budget request.
    I did have one question. As you mentioned, encouraging the 
library field to perform results-based evaluation is necessary, 
we all agree, yet very complex and expensive. With your limited 
budget, how do you weigh consideration between supporting 
evaluation and supporting services to the public?
    Ms. Frankel. Well, I think that is a critical part of it. I 
think that is a critical question, Congresswoman Pelosi, 
because we do have to weigh how to use the limited resources.
    As you point out, measuring things that are longitudinal--
and you cannot say exactly what is going to happen when someone 
comes into the library, uses the information, and measure the 
results of that. It is very difficult. Privacy is also an issue 
when it comes to how people use the library as well, and so, 
while the States certainly are very interested in being able to 
pick measures that cut across the different States, we are 
working closely to make sure that the resources that we use--
the limited resources are confined to things that we really can 
measure.
    Ms. Pelosi. I appreciate that answer. Thank you very much.
    I was intrigued by some of the examples that you had used. 
We never talked about any of these issues at our Library 
Commission meetings in the early mid-1970's, just to show how 
far along things have gone in terms of accessing information 
about adopting a baby, and what I think some of us were reading 
to our babies before they were born. It was not as respected a 
pursuit as it may be now. So I applaud what Library Services 
are able to do, especially in underserved areas. That also 
points to the idea that we really do need to make sure that 
everyone has access to this information, and that has been a 
perennial problem even when the library was just books on the 
shelf. Now it is more so with the advent of the technology.
    Thank you for your leadership.
    Ms. Frankel. Thank you very much, Congresswoman Pelosi.
    Ms. Pelosi. Thank you, Mr. Chairman.

                        Administrative Expenses

    Mr. Porter. Thank you, Ms. Pelosi.
    Ms. Frankel, you project that your administrative expenses 
for library activities will decline by over $1,000,000 and 25 
percent in fiscal year 1999.
    Ms. Frankel. Yes.
    Mr. Porter. As the justification notes, the request for 
administration is less than 2 percent of your requested 
appropriation and less than the 3 percent set-aside permitted 
under law.
    First, we want to congratulate you on your request. It is 
unique among agencies we have reviewed this year.
    Second, we would like to encourage you to share your 
secrets with the Department and the other agencies that we 
oversee.
    Third, I note that while personnel costs increased 
slightly, allocations for contractual services and equipment 
costs comprised the bulk of the decrease. Why are these costs 
decreasing, and do you expect that future requests for 
administration will remain substantially below the 3-percent 
statutory cap?
    Ms. Frankel. Let me start with the first part of the 
question. The decreases in contractual services and in 
equipment really were because we had a transition year, and we 
had a great change in bringing people over from the Department 
of Education and making sure that we had equipment and we could 
move them and so forth, and we had a major change in our 
computer service.
    I cannot say we will always remain at 2 percent, but we 
will certainly remain under the 3 percent. That is our goal, 
yes.
    Mr. Porter. What happens to the money that you are not 
using for administration? Is that reallocated to State grants?

                          carry-over authority

    Ms. Frankel. Yes.
    Mr. Porter. Ms. Frankel, you are requesting that all funds 
appropriated for fiscal 1999 remain available until expended. 
Under the old authorization, only construction funding was made 
available under these circumstances. As you know, construction 
is no longer a permissible activity under the Act.
    Last year, no part of the appropriation was made available 
on a no-year basis. The new authorization does not permit the 
appropriation of funds on a no-year basis. The justification 
does not indicate a rationale for this policy change. Why is 
the change necessary, and what would be the impact if we did 
not include the no-year provision in the appropriation?
    Ms. Frankel. The implication for it, and the reason we have 
asked for it, is because if we have program funds that are not 
appropriated, it is really nice to be able to carry them over 
because we can just give additional grants the next year, 
certainly in the Native American program and in the National 
Leadership grants. So that would be the justification for it.
    Mr. Porter. Why would you carry them over?
    Ms. Frankel. Well, if you do not expend them. I mean, if 
for some reason----
    Mr. Porter. Why wouldn't you expend them, since they are 
grants mostly?
    Ms. Frankel. Well, because, for example, if the Native 
American grant numbers did not come in and we did not have as 
many applications as we had anticipated, we might have a couple 
of--some money left over. We have done that in Museum Services 
from time to time.
    Mr. Porter. So this would not be contemplated to be a 
significant percentage of the money available?
    Ms. Frankel. Oh, no, a very minimal percentage, but it just 
gives you the freedom to carry it over, so that if you do not 
expend it, you have it for the next year.

                          systems integration

    Mr. Porter. All right. Last year, we discussed your request 
to fully integrate your grants management system. Tell us 
generally, are all of your systems, including finance and 
grants management, now fully integrated to deal with both 
library and museum programs?
    Ms. Frankel. That is exactly what we have been working on 
through this whole year, and I cannot say it is totally 
completed, but it is at the point where people are working on 
it. Staff is working together very diligently to make sure that 
that will happen by the time we give out grants in Library 
Services.
    [The information follows:]

    Mr. Porter. When will all of your systems, including finance and 
grants management, be fully integrated to deal with both library and 
museum programs?
    Ms. Frankel. To fulfill the spirit of the Museum and Library 
Services Act (MLSA), the Director of IMLS is committed to providing 
high quality service while streamlining the agency's functions wherever 
possible. The creation of IMLS in 1997 provided many opportunities to 
pursue these goals creatively.
    Procedures for the management of the new LSTA grant categories are 
in the process of being developed by Office of Library Services program 
staff in close collaboration with the Director of IMLS. Valuable 
guidance and input has been provided from the program staff of the 
Office of Museum Services in an effort to make use of procedures that 
work well for museum grantees that may be similarly effective for 
libraries. The National Endowment for the Humanities' Division of 
Preservation and Access has also generously contributed its expertise 
in the library field and library professionals and is providing advice 
on the establishment of review procedures for the new collaborative 
museum/library program.
    Management of IMLS has worked closely with the budget, finance, and 
legal offices of the Department of Education throughout this transition 
period to identify areas of responsibility to be provided by the 
Department until all former library program grants awarded by the 
Department are closed, as mandated by the MLSA. Through an interagency 
agreement, these services include the preparation of state allocation 
tables for distribution of state formula grants, management and 
payments of unexpended and unobligated balances of expired 
appropriations for library programs through 1997, and preparation of 
reports for Treasury and OMB, and other similar services. The Office of 
Library Services staff works closely with the staff of the Department 
in order to provide the clearest communication and technical assistance 
to library program grant recipients on matters concerning grants 
awarded prior to 1998.
    In all day-to-day matters the new IMLS functions today as a fully 
integrated agency. In 1998 the agency's local area network was upgraded 
in order to unify the system under which all staff is working and to 
make all agency activities more accessible to the public. The agency is 
working toward a comprehensive new relational database to replace the 
outdated WANG system as planned. Input on development of new policies 
and procedures is elicited from all staff of the new agency both 
informally as well as through biweekly staff meetings. As a result, new 
procedures for staff orientation, in-house procedures, and 
communication have been developed. The full staff will participate in a 
retreat to address other avenues for improvement over the summer of 
1998.

                           independent audit

    Mr. Porter. Does the Institute contract for an annual 
independent audit?
    Ms. Frankel. We do not.
    Mr. Porter. If not, why not?
    Ms. Bell. We do receive an internal audit through the 
auditing that is done of the National Endowment for the 
Humanities' internal services. Many of the administrative areas 
of that agency also service ours as well. So, as they are 
audited, so are our services in finance, administration, 
personnel, and some other areas.
    Mr. Porter. Can you provide a copy of the audit to the 
subcommittee?
    Ms. Bell. Sure.
    [The information follows:]

    IMS is provided the services for audit and investigative 
coverage, as well as Information Resources Management and 
accounting services, through an interagency agreement with the 
National Endowment for the Humanities. Through this agreement, 
IMS is also included with the annual evaluation undertaken by 
the National Endowment for the Humanities in which internal 
control and financial systems are evaluated. In 1997, no 
material weaknesses or material non-compliance were found.
    A copy of the most recent semiannual report to Congress 
which details the inspector general's investigation of internal 
services is hereby provided for your reference, as promised in 
our hearing held April 1, 1998.


[Pages 992 - 1011--The official Committee record contains additional material here.]



                 government performance and results act

    Mr. Porter. Ms. Frankel, even the Institute has to answer 
GPRA questions.
    Ms. Frankel. Yes, we do.
    Mr. Porter. I understand that because you are a new agency 
administering new programs, you may be a little behind the 
other agencies. Your process is also unusually collaborative, 
which we appreciate.
    Will you tell us generally when you expect to have chosen 
indicators, baselines, and targets for library programs?
    Ms. Frankel. We are working with the States, and our hope 
is by August of this year.
    We have just finished an analysis of the State plans, a 
content analysis, and we are distributing that to the States. 
And our hope is that by August of 1998, we will have those in 
place.
    Mr. Porter. You have had ongoing discussions with the staff 
about GPRA. The goals of your authorizing statute generally 
relate to the capabilities and resources of libraries.
    We are more concerned with end users; in this case, the 
general public. To the extent that you can, we would like you 
to tell us how many people are using library enhanced resources 
and what benefit they are deriving rather than describing the 
quality and quantity of the new capabilities. Further, we 
strongly encourage you to collect data in comparable formats, 
so that we may be able to compare data across the States.
    Will you describe generally the process you are undergoing 
to develop your GPRA plan, and will you tell us the type of 
indicators you expect to select and the types of quantitative 
measures you expect to adopt?
    Ms. Frankel. Well, I would like to do that for the record 
since, again, we are really working diligently on that and have 
not completed the process.
    [The information follows:]

    Mr. Porter. How are you ensuring that GPRA data will be collected 
in comparable formats so we develop a national picture of libraries 
rather than 50 separate state pictures?
    Ms. Frankel. The State Programs are designed to be flexible, which 
means the states are choosing to implement different programs. States 
have different needs and different resources.
    Despite this, we are working with the Chief Officers of State 
Library Agencies (COSLA) to establish a format to standardize reporting 
of LSTA activities. One COSLA committee has surveyed the states to 
determine what data could be collected. Another committee is being 
formed that will help address terminology so we can use a common 
vocabulary to discuss and report their programs. A matrix to structure 
reports of selected programs is being designed in collaboration with 
COSLA. The goal will be to provide in-depth information on outcomes in 
projects being implemented by a number of states. We are also 
discussing a pilot project to better address the evaluation of 
outcomes.
    There are a variety of studies being implemented and data being 
collected (FSCS/NCES for example) to provide a national picture of 
libraries. We will be working with these groups to incorporate their 
findings into our reports and plans.

                       national leadership grants

    Mr. Porter. Page 8 of the justification indicates that you 
intend to award 20 new national grants in fiscal year 1999, but 
page 3 indicates that you will award 50 new grants at about 
$110,000 each. Which one is correct?
    Ms. Frankel. Fifty is the answer, and 20 will be model 
projects.
    Mr. Porter. Model projects, all right.
    Are the national grants multi-year or single-year grants, 
and what is your rationale for your policy?
    Ms. Frankel. Potentially, people can use the money up to 2 
years. We really want them to be excellent programs, and 
sometimes you cannot determine how you are going to spend that 
in one year. We want to give people the opportunity to spend it 
over a 2-year period. I think it makes much more sense.
    Mr. Porter. How is the Institute ensuring that the national 
grants will be collaborative efforts involving both museums and 
libraries?
    Ms. Frankel. We have four different areas, as I mentioned 
before. One of those areas is collaborative programs between 
museums and libraries, and those grants will come in and be 
reviewed by peer panels of museum and library people. As well, 
money is coming from both sides of our budget, from both the 
library and the museum side, to ensure that.
    Mr. Porter. The justification indicates that you 
anticipated receiving 200 applications for national grants. 
What was the actual number you received?
    Ms. Frankel. We do not know. It is not on until the 17th, 
and I----
    Mr. Porter. Oh, that is right. You said that.
    Ms. Frankel. And I have a feeling that we are going to 
receive many more than that.
    Mr. Porter. Do you know how many you have received so far?
    Ms. Frankel. Yes. One, from the State of Georgia.
    Mr. Porter. One. So you expect them all to come in at the--
--
    Ms. Frankel. They will all come in on the--yes. They--
postmarked on the 17th.
    [The information follows:]

    Mr. Porter. The justification indicates that you 
anticipated receiving 200 applications for national leadership 
grants. What is the actual number you received?
    Ms. Frankel. We are currently reviewing about 250 proposals 
submitted for FY 1998, with total funding requested exceeding 
$42 million.

                      disposition of no-year funds

    Mr. Porter. You testified last year that you anticipated 
carrying forward $24 million in FY 1997 funding related to 
construction activities to FY 1998. What is the disposition of 
that funding, and do you anticipate any carryover into 1999?
    Ms. Frankel. We carried it over. We had to get quite a bit 
of it out in the draw-downs that were appropriate. We do have 
money that we are carrying over into this year, and I will 
report back to the record about how much we will be carrying 
over into 1999.
    Mr. Porter. Shouldn't that have been in your justification, 
the carryover?
    Ms. Bell. Since the funds were awarded prior to the 
creation of IMLS, we did not feel that it related to our 
request for new funding for this agency. We can provide a 
status report on the disposition of those funds in whatever 
manner you would like.
    [The information follows:]

    Mr. Porter. What is the disposition of all no-year funds available 
either to the Department of Education or the Institute of Museum and 
Library Services?
    Ms. Frankel. We are confident that the Department of Education is 
determining the outstanding balances to be transferred as expeditiously 
as possible. Some unexpended funds in the former LSCA program were 
transferred from the Department of Education to IMLS at the end of 
1997, and continue to be transferred in fiscal year 1998. We do not 
know how much remains to be transferred or when the final transfer will 
be made; in the meanwhile program, budget, and accounting staff of IMLS 
have developed streamlined procedures so that grantees are able to draw 
down these funds after they have been transferred. We understand from 
grantees that this process is working smoothly in 1998.
    The amounts of funds transferred from Department of Education 
through 5/1 are as follows:
    9/30/97: $18,791,474.08 (Indian, Native Hawaiian, and Public 
Library Construction).
    9/30/97: $10,490,809.81 (Indian, Native Hawaiian, and Public 
Library Construction).
    9/30/98: $15,587,042.61 (Unobligated and unexpended FY97 Public 
Library Construction).
    3/20/98: $697,043.88 (Indian, Native Hawaiian, and Public Library 
Construction).
    4/02/98: $13,944.46 (Native Hawaiian construction funds).
    Total: $45,580,314.84.

                      accountability & evaluation

    Mr. Porter. All right. Last year, I asked you about the 
increased evaluation and accountability required by the new Act 
and how such accountability would be incorporated in the GPRA 
process. You responded that these activities would be 
determined through collaboration with State agencies. Can you 
tell us more specifically today how accountability and 
evaluation will be integrated into the grant-making in the GPRA 
process?
    Ms. Frankel. All of the programs do have an evaluation 
component that the States give out which goes back to our 
performance indicators that we will choose with the States. The 
States are very aware of that, and they understand that it is 
important to identify not only outputs, but outcomes. So, 
again, those are being integrated into the way States will be 
reporting.

                        amount of grants awarded

    Mr. Porter. Last year, the justification indicated that the 
Institute would make 108 State grants in FY 1998 compared to 54 
in FY 1997, and you testified that the additional grants were 
related to the carryover construction funding.
    The budget justification for FY 1999 indicates that only 59 
State grants will be awarded in fiscal year 1998. Why has the 
fiscal year 1998 number declined again, and does the Institute 
intend to carry forward construction funding?
    Ms. Frankel. We are giving the grants to the States and to 
the territories, and those are the primary grants. Again, we 
will be giving grants, but the States draw down the money at 
their own rate, and so we are never quite sure how much will be 
drawn down in a particular year, but we can give that to you 
for the record as well.

                               conclusion

    Mr. Porter. The staff questions began by saying we find 
this to be generally a very well-run agency and have difficulty 
developing a full complement of hearing questions, you might be 
interested to know.
    Ms. Frankel. Thank you very much.
    Mr. Porter. Our staff feels that, obviously, you are doing 
an excellent job, and I feel the same way----
    Ms. Frankel. Thank you.
    Mr. Porter [continuing]. Based upon our meeting and the 
answers you have given today, and we thank you for doing that 
fine job----
    Ms. Frankel. Thank you very much.
    Mr. Porter [continuing]. And for coming here to testify. We 
have run out of questions to ask you, and, obviously, you are 
doing very, very well, and we appreciate that.
    Ms. Frankel. Thank you, Congressman Porter.
    Mr. Porter. Thank you, Ms. Frankel.
    Ms. Frankel. We appreciate it.
    Mr. Porter. The subcommittee will stand in recess until 
10:00 a.m., April 21st.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1016 - 1045--The official Committee record contains additional material here.]



                                         Wednesday, April 22, 1998.

                     SOCIAL SECURITY ADMINISTRATION

                               WITNESSES

KENNETH S. APFEL, COMMISSIONER OF SOCIAL SECURITY
DAVID C. WILLIAMS, INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

                       Introduction of Witnesses

    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the budget for the fiscal year 1999 
and welcome Kenneth Apfel, the Commissioner of the Social 
Security Administration.
    Mr. Apfel, we are very pleased to welcome you before the 
subcommittee for the first time in your role as Social Security 
Commissioner. We know you well from your previous lives at 
Office of Management and Budget [OMB] and Department of Health 
and Human Services [HHS]. I served on this subcommittee a long 
time under the chairmanship of Bill Natcher. Every year he 
would tell the Health Care Financing Administration [HCFA] 
Administrator that he or she had the third hardest job in 
Washington. We were never told what the other two were. I think 
that perhaps you now may have the third hardest job in 
Washington, and I still don't know what the other two are. You 
not only have to deal with the long-term issue of solvency, you 
have to manage an agency that has undergone dramatic work-force 
downsizing and has substantial performance problems.
    I hope you will take the opportunity in your first 
appearance here, either in the course of your prepared 
testimony or immediately following it, to give us a brief idea 
of the direction you intend to lead the agency and to tell us 
what you see as your major challenges, your major opportunities 
and your major priorities as the new Commissioner. We would be 
pleased to hear your opening statement.

                           Opening Statement

    Mr. Apfel. Thank you, Mr. Chairman. It is a pleasure to be 
here again before this subcommittee.
    When I was appointed the Commissioner of Social Security, I 
established priorities for the agency. The first was to work 
toward resolving the long-term financing issue facing the 
Social Security program. As you know, the President has put in 
place a process that can lead to a national consensus and 
bipartisan action on meaningful reform. I can think of no more 
important issue facing this Nation. I will be designating a 
significant amount of my time personally, as well as the 
agency's, towards this endeavor.
    The other priorities I identified for the Social Security 
Administration (SSA) were to improve SSA's policymaking process 
and long-range planning processes. These are particularly 
important now that the Social Security Administration is no 
longer part of the Department of Health and Human Services 
(HHS), as well as to provide responsive and equitable service 
for all claimants and beneficiaries, and to ensure the 
integrity of our programs. This budget request reflects an 
emphasis in each of these areas. I will outline those 
momentarily.
    First let me place this budget request in context.
    SSA's overall fiscal year 1999 budget totals $427 billion. 
More than 90 percent of this amount is permanently appropriated 
and will be paid out in retirement, survivors and disability 
insurance benefit payments. The appropriations request we have 
before you today covers our overall program administration 
costs of $6.448 billion, and our-general-fund financed programs 
cost of $31 billion, which is primarily for Supplemental 
Security Income [SSI] benefit payments.
    First let me turn to the major discretionary spending 
request before this subcommittee, the Limitation on 
Administrative Expenses [LAE] account. Our FY 1999 request for 
$6.448 billion includes $6.043 billion for basic day-to-day 
operating expenses and $405 million in funding to conduct 
additional continuing disability reviews [CDRs], as well as 
redeterminations of nondisability factors of SSI eligibility.
    Our budget request includes two legislative proposals that 
directly affect our administrative budget request. The first is 
a representative fee proposal that authorizes SSA to assess 
claimant representatives the cost for services that the agency 
provides to them. We estimate that $19 million in assessments 
would be collected from claimant representatives in 1999 and 
$26 million for each year thereafter. These funds for SSA 
administrative expenses are dependent upon congressional 
action.
    The second legislative proposal relates to SSI 
nondisability redeterminations. This proposal, which is part of 
the CDR cap, would give us authority to conduct additional 
redeterminations of the nondisability factors for SSI 
eligibility and reduce the number of incorrect SSI payments. We 
project that this $50 million investment will lead to $216 
million in program savings over a 5-year period. We must manage 
the SSI program better. This proposal will give us a better SSI 
program on integrity issues.
    Even with this additional $69 million from these proposals, 
our request reflects an increase of only $39 million over our 
1998 funding level, about .6 percent. This administrative 
budget request also represents less than 2 percent of our 
overall program cost.
    As I noted earlier, I established several agency priorities 
upon being named Commissioner. Two of these were to improve our 
policymaking process and to improve our long-range planning 
efforts now that we are no longer part of HHS. Strengthening 
the agency's policymaking process is essential if we are to 
effectively address the central issues facing our programs, 
such as long-range solvency and changing national demographics. 
I have recently created a new executive position for a Deputy 
Commissioner for Policy to help in this endeavor.
    Similarly, the long-range planning by SSA fulfills the 
current strategic management and accountability standards of 
the Government Performance and Results Act. But our strategic 
planning needs to be strengthened to ensure that the agency is 
ready to handle the administrative challenges represented by 
the retirement of the baby boomers.
    Since becoming an independent agency, SSA has taken steps 
to strengthen its research, evaluation and policy analysis 
infrastructure. But we need to do more. Our 1999 budget request 
of $30 million will focus on long-range solvency issues, the 
impact of looming demographic changes on future workloads, and 
the development of effective return-to-work strategies for 
disability recipients.
    The budget will also support another priority, providing 
responsive and equitable service to our claimants and 
beneficiaries. I am pleased to report that, last year, we met 
or exceeded the performance commitments in the areas of 
disability claims, CDR case processing, 800-number service, 
Personal Earnings and Benefit Estimate Statement [PEBES] 
issuance, automation for front-line employees and reducing 
waiting times in our field offices. This request funds 
initiatives that are key to maintaining and improving world 
class service and to help shape an agency that works better and 
costs less.
    As you are aware, the redesign of the disability process is 
also critical and central to our efforts to improve service. I 
believe it is critically important that we push forward with 
this initiative to achieve long-run results. While the final 
redesigned disability process will not be exactly what SSA 
originally envisioned, it will be a process that improves the 
service that SSA provides to claimants with disabilities from 
their first contact through final administrative appeal. I know 
we have been testing these initiatives for several years within 
Social Security. It is my strong desire and conviction that we 
move beyond the testing stages and into the implementation 
stages later this year. That is going to take some tough 
decisions, and I am sure some stresses and strains everywhere, 
but I believe it is time to now move forward, make decisions 
and put them in place.
    Another priority is assuring the integrity of our programs. 
In this regard, I would like to thank the committee for 
providing additional funds for the continuing disability review 
[CDR] workloads. Taxpayer-financed disability benefits should 
go only to those who are entitled, and CDRs help ensure program 
integrity. In 1997, SSA processed more than 690,000 periodic 
review CDRs, a 38 percent increase over the previous fiscal 
year. We project that 1.6 million will be conducted in 1999.
    The legislative proposal that I noted earlier, which 
provides the agency with authority to conduct an additional 
268,000 redeterminations of nondisability factors of SSI 
eligibility, is also of critical importance to program 
integrity. It will help improve the SSI program integrity by 
reducing the number of incorrect payments.
    We are also developing an SSI Management Improvement Plan 
that focuses on enhancing payment accuracy rates, increasing 
fraud prevention and detection, and improving our debt 
collection activities.
    The Office of Inspector General [OIG] remains the focal 
point for program integrity efforts. The OIG will continue to 
focus its audits and investigations on SSA's four core business 
practices: enumeration, claims, earnings and postentitlement, 
as well as on SSA's financial and general management. Our 1999 
budget request of $52 million for the OIG will support this 
effort. If Congress approves the IG budget request, the 
investigative staff will have doubled since 1995, a very 
important initiative that this committee has helped with 
enormously.
    Finally, let me say that this budget request is in keeping 
with the President's emphasis on fiscally responsible 
government. Equally important, it supports the President's 
commitment to one of the Nation's core values: providing 
financial security for older Americans and for American 
families after the death or disability of a wage earner.
    Today, more than 144 million workers and their families are 
protected by Social Security. More than 30 million people 
receive retirement benefits; 7 million receive survivors 
benefits; and 6 million receive disability benefit payments. 
The President has said that we should work to strengthen and 
protect this venerable program for the 21st century while 
maintaining our hard-won fiscal discipline. Our administrative 
budget request--$6.448 billion, including the $69 million 
dependent upon congressional action--is the minimum level of 
funding needed to support this endeavor.
    I have submitted a written statement for the record, and I 
will be happy to answer any questions that you have, Mr. 
Chairman.
    Mr. Porter. Mr. Apfel, thank you for your excellent opening 
statement.
    [The statement of Mr. Apfel follows:]


[Pages 1051 - 1075--The official Committee record contains additional material here.]



                       DISABILITY CASE PROCESSING

    Mr. Porter. We had a talk yesterday about Social Security 
reform and about the tight budget that you have sent to us. You 
impressed on me the need to adequately fund your administrative 
budget to avoid organizational chaos at a time when we may be 
entering wide-reaching reforms. I will make every effort to do 
that. In return, I have to have your commitment that you will 
be going to remedy the substantial performance issues we have 
been dealing with for years. I have to count on you not only to 
be a top idea person, but to be a very strong manager as well.
    It will not come as a surprise to you that I am very 
concerned about the disability case processing. Your testimony 
includes a table that indicates SSA processed about the number 
of cases you had estimated you would. The number of cases 
pending and initial processing times were well below estimates 
primarily because you received far fewer claims than were 
anticipated. You expect these targets to increase slightly for 
fiscal year 1998 and 1999.
    The real problem is still in hearings. In 1997, the agency 
processed fewer hearings than anticipated, had more hearings 
pending, and the processing time increased by 11 percent to 
almost 400 days. I understand the full cycle time on a 
disability case is over 600 days, or almost 2 years. This is 
simply unacceptable. Your performance plan indicates that 
processing times will decrease substantially in fiscal year 
1998 and fiscal year 1999, but the agency's track record in 
predicting this target has been, in the past, poor.
    Mr. Apfel, some progress can be made in this area without 
implementing redesign proposals, but real progress will come 
only with reform. You touched on this. But when will you make a 
decision to roll out a redesigned system, and what is your 
schedule for actual implementation?
    Mr. Apfel. Mr. Chairman, the resources that have been 
provided by this committee have helped us work down that 
waiting time. If we look at the Office of Hearings and Appeals, 
the nearly 2,000 FTEs that we have shifted over are starting to 
pay off with some results. We have actually hired a couple of 
hundred extra ALJs.
    On the resource issue, we believe, which I think is the 
number one issue, first issue, is: are the resources there now 
to handle this issue? I think they are. I think the dollars, 
the appropriate level of resources, are now within the Office 
of Hearings and Appeals to start to work on this issue. 
Certainly it takes some time after you hire a bunch of new 
people for efficiencies. That is happening now. I swore in 
several months ago the last group of new ALJs. I think we will 
see some real results in terms of activities.
    But you go to the issue which I think is a much more 
important one, which is what are we really going to do about 
the overall process? As you know, this administration has 
committed for several years to a redesign process that I 
strongly support in principle. A number of tests have been 
conducted on a number of different parts of this. It is my 
strong conviction that we need to move out of the testing 
stages through active decisions by the end of this year and 
start the actual implementation of a redesign process next 
year. That is my time line, to be able to assess all the pilots 
that are out there and the information we have.
    And it is going to be, in part, an easy call, I think. 
Other parts are going to be tougher calls. We are not going to 
have all the information we would like. But if we wanted to 
wait another 2 years and do more fulsome pilots, we would have 
better information to make decisions, but it is my belief that 
rather than that, we need to start moving into the final 
decisional stage.
    I would expect to be making decisions at the end of this 
year for the start of implementation next year on the redesign 
process on a couple of different fronts, both on how we can 
strengthen process unification activities, as well as how do we 
redesign workloads within OHA and State Disability 
Determination Services [DDSs] to handle work.
    Mr. Porter. The difficulty for this subcommittee, and 
obviously you are the new Commissioner, but the agency has 
promised improvement in disability since well before the time I 
became Chairman, and I have been Chairman 3-\1/2\ years now. We 
have talked about this a great deal. We simply have not seen 
the improvements come about. While you cannot be held 
responsible for that, obviously you are placing this at a high 
priority, we simply want to urge you to do everything you 
possibly can to reduce initial case processing time, reduce the 
time taken through hearing processing and the total cycle time. 
It seems to us 600 days is just disgraceful. No citizen in this 
country should be put through that kind of wait to have a 
determination made. I know that you agree with that and are 
addressing this issue as best you can.
    Mr. Apfel. I entirely agree with that, Mr. Chairman.

                    REFINING PERFORMANCE INDICATORS

    Mr. Porter. Mr. Apfel, I want to commend you on the 
agency's achievements with regard to the indicators for which 
you obtained your commitments. I think we now have to refine 
some of the initial indicators we selected to encourage better 
balance in the agency management and to obtain a more 
comprehensive picture of agency performance.
    As I mentioned earlier, we have been looking at certain 
components of the disability process that we consider 
particular problems, but as the agency focused resources on 
reducing processing times at certain stages of the process, 
other stages have been neglected. The result, I understand, is 
that overall cycle time has not improved even though processing 
times for certain stages have changed.
    Likewise we focused on the agency's ability to respond to 
800-number calls. As resources were shifted to the teleservice 
centers, we lost track of the fact that field offices were 
increasingly unable to answer their incoming calls. We take the 
blame for these deficiencies.
    Are there problems you see with the current Government 
Performance and Results Act [GPRA] measures, and do you concur 
with my assessment that the performance plan should be refined?
    Mr. Apfel. I think the performance plan should be refined, 
and I think we are always looking at new performance measures 
to measure our performance. One of the achievements of the 
Social Security Administration is the establishment of solid 
performance measures. That has frankly been, at least in part, 
due to the efforts that you have pushed this agency to do with 
the Porter commitments.
    I would say that expanding the number of performance 
measures is a very important thing for us to look into. I can 
tell you this is an agency that follows those commitments very 
carefully. They are discussed at my executive staff meetings on 
a regular basis on where we stand. So establishing quantifiable 
performance measures is the right thing for this agency to do. 
It was the right thing for it to do, and we should improve it. 
I am proud of the activities that this agency does to try to 
live up to its commitments.
    Are there areas that we should continue to develop new 
performance measures on? I would say yes. I agree with your 
assessment that we need to improve it. If we look at the 
performance plan, this is an area that there are questions 
about, whether there is a need for added quantifiable measures 
that have been raised. We will look at that and figure out what 
we can do to improve it.

                 INSPECTOR GENERAL AND GPRA INDICATORS

    Mr. Porter. Thank you, Mr. Apfel. Because we didn't have 
time this year for a separate hearing with the IG, I would like 
to ask a couple of questions of Mr. Williams directly, if I 
may.
    Mr. Williams, we are asking all the IGs to participate in 
GPRA in two ways. First we would like to provide some 
management consulting. We would like you to provide some 
management consulting for the subcommittee. We have asked you 
to review the GPRA indicators and to recommend modifications to 
us. Second, we have asked you to develop a plan to, in effect, 
audit the collection and reporting of GPRA data.
    Would you describe generally the plan you have developed 
for us and submit a comprehensive answer for the record?
    Mr. Williams. Yes, sir, we would be very pleased to do 
that. If you would like, I can give you a brief overview of it 
now and a more extensive one in writing.
    [The information follows:]
                   Plan to Audit Performance Measures
    The Office of the Inspector General has adopted a four point 
approach to reviewing SSA's performance measures 1) assess SSA's system 
capacity to produce performance data; 2) assess whether reported 
performance measure data is valid; 3) ensure that SSA has the 
appropriate measures to indicate vitality of its programs; and 4) 
ensure that the performance measures fully capture the program segments 
that they are intended to capture.
    Our Office of Audit has already begun to address all of these 
points. The audit team that is responsible for monitoring the 
implementation of GPRA has begun to evaluate the data sources that are 
being used to measure performance. We believe that a performance 
measure is only as good as the data behind it. The GPRA issue team 
plans to review SSA's data capacity for all of its performance 
measures, including the Porter commitments to ensure that they provide 
accurate and reliable information.
    We recently completed our first audit that reviewed the data used 
for a performance measure. We examined the system used to measure the 
timely issuance of Social Security number cards. Our audit revealed 
that there were flaws in the data (i.e., the math did not add up) used 
to assess how quickly SSA processes Social Security number cards that 
could result in an inaccurate reporting of performance in this area. 
This first completed effort displayed the need to review all data 
sources being used to measure performance. Audits and evaluations will 
help ensure that the performance data reported by the Agency are 
accurate and valid. The Office of the Inspector General has other 
similar audits and evaluations currently underway and more are planned 
for the immediate future. In addition, we will also assess SSA's 
Performance Plan for FY 1999.

    Mr. Porter. Please.
    Mr. Williams. We have created a team, in New York, of 
auditors that will focus on the implementation of the GPRA 
work. Our team intends to focus on four central questions with 
regard to each of the 67 measures. We first want to find out if 
the agency has the capacity to produce the performance data, 
the so-called systems capacity. We then want to look at the 
measure and to assure ourselves that it is the proper pulse 
point that will measure the vitality of that program, and that 
they are the best measures for each of the programs. We also 
want to make sure that the measure captures the program segment 
that it tells us it does, rather than a fragment of it and that 
it represents what they are actually measuring. And the last is 
whether the measure is valid, whether the math adds up with 
regard to the level of performance.
    As I said, there are 67 measures. We have the team. We will 
be working on those measures through our audit cycle. Our 
normal audit cycle is a 5-year period before we get back to the 
first one where we began.
    The second effort that is going on is we are tying 
performance to the budgeting effort. I know you are well aware 
of that through the Results Act. And we are working with the 
agency to assure that each of the programs measures its actual 
cost so that decisionmakers and the public can understand what 
they are receiving for the money invested in each program. The 
agency is aware and we are working with the agency to try to 
make our cost accounting system strong enough to comply with 
GPRA. That will be a vigorous effort that will be occurring 
between the agency and our financial team. That brings our 
second audit team for GPRA. We are prepared to provide an 
initial briefing to you and to your staff. We will certainly 
provide that in writing as well.
    [The information follows:]
            Tying Program Performance to the Budget Process
    We believe that one of the main goals of GPRA is to tie program 
performance to the budget process. This fact has been highlighted by 
the Government Performance and Results Act Amendments, passed by the 
House of Representatives on March 12, 1998. The Amendments, in part, 
call for the Office of Management and Budget to require all Federal 
agencies to have performance indicators that include a determination of 
full costs of each program activity, as defined by the Statement of 
Federal Financial Accounting Standards (SFFAS) Number 4. The Office of 
the Inspector General is working with the Agency to strengthen its Cost 
Accounting System (CAS) to ensure compliance with the requirements of 
GPRA.
    Changes are needed in the CAS. Previous work by Price-Waterhouse 
highlighted problems with SSA's cost assignment methodology and CAS. 
Price-Waterhouse found that modifications would be necessary to bring 
the CAS into compliance with SFFAS Number 4, which establishes 
Managerial Cost Accounting Standards, as well as provide the data 
necessary for the proper implementation of GPRA and the Chief Financial 
Officers Act. Price-Waterhouse concluded that SSA's cost assignment 
methodology was not equitable and accurate and that the CAS was 
inefficient and in need of significant modifications. Price-Waterhouse 
further concluded that the CAS did not provide cost information to 
promote improvement in SSA's operating efficiency.
    In response to these findings and our own concerns, we are working 
with SSA to strengthen its cost accounting information. For example, 
our FY 1998 Chief Financial Officer's (CFO) audit includes steps to 
review SSA's cost accounting system and determine its impact on cost 
data reported in the Agency's annual accountability report. There is no 
assurance that the initial Price-Waterhouse audit and our CFO audit 
identify all of the deficiencies within the Agency's cost accounting 
system. However, we believe these audits will provide essential base-
line data that will direct more in-depth audits of the Agency's cost 
accounting methodology.

                      disability fraud initiatives

    Mr. Porter. While I have you here, Mr. Williams, I have one 
other question. What initiatives have you undertaken to deal 
with disability fraud, and what actions have you taken or what 
recommendations have you made to improve disability case 
processing?
    Mr. Williams. As Commissioner Apfel said, this committee 
has been largely responsible for our ability to expand our 
investigative services. With that expansion came a heightened 
interest on the part of our employees in SSA and the public to 
get involved as well in the seamless attack on fraud. For 
instance, our hotline this year is receiving about 65,000 
allegations of fraud as contrasted with 18,000 last year and 
only 800 in our first year. We have opened about 5,400 criminal 
investigations, which is up from about 1,000 when we began. Our 
criminal convictions have risen from 500 to 2,500 over the past 
year as a result of the arrival of the new resources. 
Disability fraud has been targeted as a top priority for us. We 
have doubled our number of disability convictions over the last 
year.
    We are supporting all of this with nationwide operations 
that we have made your staff aware of, and that have been 
targeted at disability fraud. One operation that is ready to 
launch is Operation Contender, which puts State and IG 
investigative units inside the DDSs. We think the first thing 
that will result from that is that we will find claimants that 
are making fraudulent claims. We hope, though, to find service 
providers, attorneys and doctors, as a result of that. That is 
the main reason for their being there. That flowed from a 
Washington State project in which we found 600 Cambodians that 
had been involved in suspicious fraudulent claims for 
disability, and there are 31 convictions to date on that 
project.
    Some of our other operations, Border Vigil caught 156 
recipients that were pretending to live in the United States 
but actually did not and were receiving benefits improperly. 
Water Witch was another operation. We have found 300 fugitives 
to date on that brand new operation. Many of them have also 
been apprehended. They have all been cut off from disability 
and other kinds of benefits.
    The thing that we are most concerned about is employee 
fraud. We are focusing on the disability processing and 
adjudication systems at SSA, making sure that they are clean 
and free of fraud. And if there are allegations, assuring that 
we respond very quickly to those.
    Mr. Porter. Thank you, Mr. Williams.
    Mrs. Lowey.

                    women and social security reform

    Mrs. Lowey. Thank you, Mr. Chairman, and welcome, 
Commissioner Apfel.
    I was very interested in the op-ed by Kathleen Feldstein of 
the New York Times last week. I don't know if you saw it. I 
think the whole issue of women and Social Security has been one 
that has concerned many of us over the last years. Her op-ed 
was particularly interesting when she noted that although the 
current Social Security system doesn't fully recognize the 
differences in work patterns between men and women, the reform 
proposals to establish a system of personal retirement accounts 
would not necessarily end this disparity.
    Monthly retirement benefits for women average about 25 
percent less than men's, I understand, according to the 
information I have, and even though women's labor force 
participation has grown dramatically, they still take time out 
for child rearing, to care for elderly parents much more 
commonly than men, and their wages are also on average lower 
than that of men.
    Additionally, if you look at the article, a married couple 
can receive 150 percent of the benefits to which the higher 
earner is entitled. A widow is entitled to receive 100 percent 
of the benefits of her husband.
    I can go on and on. You know all the specific facts. But 
the bottom line is that women are greatly disadvantaged. I 
wonder if you can offer a perspective to us as to how some of 
the reform proposals will affect women in light of their labor 
force attachment and earning disparities compared to men.

             current status of women under social security

    Mr. Apfel. Thank you. The current Social Security system is 
gender-neutral, but Social Security provides currently a number 
of very important features that help provide support for women 
that I think need to be reiterated first.
    When we look at the life expectancy issues, with women 
living longer than men, the inflation-protected benefit that 
Social Security provides is a centrally important feature that 
provides a benefit that women can count on even after the loss 
of a spouse for as long as they live, even if their savings are 
gone. As you pointed out, there are the widows and the spousal 
benefits that Social Security provides.
    I would also point out, as you did, the importance of the 
progressive benefit structure that Social Security has that 
provides higher replacement rates for lower-wage earners or for 
people who haven't been in the labor force quite as long. That 
helps provide a higher level of support for women who are 
working if they are earning less than men. So there are very 
important features the current Social Security system has for 
women.

                  proposals to modify social security

    But one of the issues that needs to be talked through is 
whether the Social Security system should modify to some extent 
the payments that are provided for working spouses given the 
changes in the labor force that have taken place over the 
course of the last 20 to 30 years, whether a higher proportion, 
or greater earnings sharing should be provided for benefits or 
a higher level of support. Possibly also the widows benefit, 
whether the widows benefit should be modified. If we look at 
the average income of an 85-year-old widow, it is about half 
the level of a 65-year-old single woman now. Income is a very 
major feature for very elderly women.
    If we look at individual accounts, there are a number of 
issues that we need to think through in terms of individual 
accounts in terms of women. Given the lower earnings rate, that 
means lower accruals potentially into an individual account. 
And also given higher life expectancy, longer life expectancy, 
if the amount that is accrued, will that be sufficient to cover 
the person through that longer life expectancy?
    So the whole issue of whether--if there should be 
annuitization of individual accounts, if that is one of the 
things that is out there, how would that have a gender impact? 
Should there be requirements that all people, men and women, 
receive the same annuitization so that women's wouldn't be 
lower than men's? These are all issues that have to be thought 
through as we enter this debate.
    In addition, what needs to be taken a look at, on all the 
different proposals that are out there, we need to be able to 
provide information on the distributional impact by race and 
also by sex. If we look at, say, the proposals for increasing 
the retirement age or for increasing the number of years that a 
person would pay into Social Security for the determination of 
benefits, how would that affect different groups? It is our 
hope that some of the research that we are doing with our 
research budget and some of the work in our policy office can 
help shed light on all of these issues in the course of the 
year ahead.
    We are starting a major debate in this country. I believe 
it is the single most important debate that this Nation faces 
as we look at the aging of our society. There are a number of 
major ideas that are now on the table. What the President has 
called for is an open discussion, an open discussion of the 
trade-offs of all of the different options that are out there. 
The way to get to that open discussion is to understand how 
different things, different ideas, will affect women, 
minorities, lower-wage earners, upper-wage earners, et cetera. 
We hope to be able to provide that from Social Security as this 
debate unfolds.
    Mrs. Lowey. I appreciate that, because I was very 
interested in Kathleen Feldstein's article, but this is an 
issue, as you know, that has been debated for quite a few 
years. I would appreciate any information you currently have 
that would reflect some light on this. When Social Security was 
first designed, more women were staying at home, certainly, 
than were in the work force. The statistics havechanged 
drastically.
    Mr. Apfel. Absolutely.

           senator moynihan's social security reform proposal

    Mrs. Lowey. I think we have to certainly make Social 
Security relevant to the reality. I would appreciate that 
information.
    Commissioner, I would be interested if you could offer your 
thoughts on Senator Moynihan's Social Security reform proposal. 
You were quoted in the National Journal last week as saying 
that the Senator's proposal does meet the test established by 
the President of ensuring the Social Security system's long-
term stability. You also said that for those who want to 
radically privatize the Social Security system, his proposals 
would be anathema. Would you comment?
    Mr. Apfel. Yes. One of the priorities that the President 
established for the use of the surpluses was the Social 
Security system would be saved first. There are some proposals 
that have been discussed to use the surpluses for other 
activities, not for fixing the Social Security system. One of 
the tests that the President established was that we need to 
reform the Social Security system so it will be there for 
generation after generation. Senator Moynihan's proposal does 
meet that test. It establishes long-term solvency for the 
Social Security system.
    The President also said that we need to have a benefit that 
people can count on, no matter how long they live, even if they 
have outlived their savings or their retirement. Senator 
Moynihan's proposal does establish a continued benefit that 
people can count on.
    There are also issues that deal with, say, the adequacy of 
the benefit that need to be assessed in the Moynihan proposal. 
There are individual features of the Moynihan proposal that 
need some careful consideration. The 1 percent CPI would be 
one; the increase in the retirement age would be another.
    The administration has not at all endorsed the Moynihan 
proposal and has not concluded that this is the right overall 
approach, but believes that it does provide a whole series of 
important ideas for discussion that should be on the table as 
we talk through this issue. It is within that context that my 
comments were offered to the National Journal.

                           800-number service

    Mrs. Lowey. If you could also share with the subcommittee 
how the agency's toll free 800 number has improved services to 
Social Security recipients and others, and how will your budget 
request affect the service that callers to the 800 number 
receive?
    Mr. Apfel. The budget request maintains the current level 
of services for our 800 service. The same level of overall 
staff support will be provided. We get about 65 million calls a 
year now. It is a very important activity. Our goal is, by the 
year 2000, to be able to use the 800 service when an individual 
calls in for a retirement claim, that on that actual call, that 
the whole claim would be able to be taken. That is going to 
take some added work. I believe we can meet that by the year 
2000.
    We are trying to improve service within our current levels 
of activity. We have, as many know, increased the number of 
individuals not only in our teleservice centers, but that are 
in our processing centers who are available during high 
workload demand times for the 800 number. This is something 
that we have got to be able to do. This is a very important 
service to the American public. Our field offices are centrally 
important, but so is that 800 number.
    Actually Chairman Porter had mentioned about the telephone 
service in local offices. I wanted to say this is another area 
that we need to improve beyond the 800 service, which is how do 
we establish a better telephone mechanism within our field 
office structure? We will be investing, this year and next in 
upgrading virtually all of the telephone services for all but 
some of the very smallest offices--I haven't yet decided what 
to do about the smallest offices--but to invest, to upgrade 
those telephone systems so that we will have a better 
communication mechanism with the public both in our field 
offices, consistent with what the Chairman said, as well as our 
800 number. So staff resources for the 800 number will be about 
the same. We will have spike services available for increased 
demand, and our projected goal is higher levels of service 
delivery by 2000 by being able to--on a one-time basis be able 
to have someone be able to get a claim done from that first 
telephone call to the 800 number.
    Mrs. Lowey. Thank you.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mrs. Lowey.
    The subcommittee should be informed that we are operating 
under the 10-minute rule, and we will have a second round.
    Mr. Hoyer.
    Mr. Hoyer. Thank you very much.
    Mr. Apfel, welcome to the Committee.
    Mr. Apfel. Thank you.

                         official time expenses

    Mr. Hoyer. Mr. Apfel, as you know, official time has been 
an issue. I would like you to speak to that. I notice that 
official time expenses are scheduled to go down by $2.4 
million. We may or may not have a discussion about that this 
year, I do not know, but I would like to have something on the 
record.
    In addition, you mentioned the treatment of partnership 
dollars. One of the questions that might be raised is; are we 
shifting the 18 percent reduction in official time to 
partnership time? Would you comment on that?
    Mr. Apfel. Official time and partnership time. In 1996, the 
Social Security Administration, the expenses were $14.7 million 
for official time. In 1997, that was down to $12.4 million. So 
there was a sizable reduction that took place. You are 
correct----
    Mr. Hoyer. Excuse me, you are right. I was referring to 
fiscal year 1997.
    Mr. Apfel. Correcting the right dates. So therefore, there 
has been a reduction in the amount of official time. I have 
made a decision to report separately partnership time, but that 
is not starting--it actually started this January 1. So this 
reduction has nothing to do with a shell game of sorts of 
shifting dollars from one thing to the other. We have had 
official time for many, many years in government, needless to 
say. What the President established with partnership was an 
attempt to try to change the culture, to try to change the 
dynamic, and to have labor and management working together to 
try to improve customer service. I think those are very 
important activities that are not official time to me.
    What I decided to do was to have partnership time be 
counted separately and provided to the committee; to have 
official time, consistent with the committee, reported as well. 
So both will be there. But I think there are two very different 
functions. Partnership is aimed at changing the cultural within 
organizations. I believe it has a tremendous potential to do 
that. But the reductions that you saw from '96 to '97 was--it 
is not as if the partnership time took off during that time. 
But it is possible that over time, greater reliance on 
partnership could reduce overall official time if we create the 
right climate and the right cultural changes within the 
organization. We will have to be looking at in the years ahead 
to determine how partnership changes the whole labor-management 
relationship, as well as customer service.

                 full-time equivalent (fte) projections

    Mr. Hoyer. The Chairman referred to the time it took to get 
a hearing. What is your projected FTE for fiscal year 1999?
    Mr. Apfel. My projected FTE for fiscal year 1999 is 63,900.
    [Clerk's note.--Later changed to ``about 63,900.'']
    Mr. Hoyer. How does that relate to last year?
    Mr. Apfel. 65,700.
    [Clerk's note.--Later changed to ``about 65,700''.]
    We are coming down as an organization. Actually if we look 
back to the 1996 levels, between the State disability systems, 
DDSs and Social Security proper, our work years, we are about 
80,000. We expect in 1999 to also be at about 80,000.
    We spiked up in 1997 and 1998 for very good reasons. One of 
them was welfare reform. If you remember, the DA&A caseload, 
the SSI kids caseload, immigration caseload led to a need for 
expanded staff. We are now seeing most of that workload coming 
through the system. DA&A is done.
    Immigration is done. We are left with some of the childhood 
cases. By next year they will be in OHA, and be out of the 
State disability determination system.
    In addition, we are seeing the impact of the automation 
improvements. The automation will be fully implemented by June 
of next year. That leads to savings in terms of work years as 
well as actually the steps in the paperless processing, which 
saves work years.
    So we are coming down as an organization. As I pointed out 
to Mr. Porter, this is a tight budget. We are coming down as an 
organization, but we still believe that even within that, and 
holding the Office of Hearing Appeals basically to its current 
levels, we can work down those workloads in the OHA.
    Mr. Hoyer. You anticipated my question, which was to be, do 
you believe there are sufficient personnel resources to 
accomplish the objectives of your responsibility?
    Mr. Apfel. I believe there are. I believe that we can 
accomplish the 1998 to the 1999 levels of dollars and still 
meet our objectives; yes, I do.
    Mr. Hoyer. Thank you. I have no further questions, Mr. 
Chairman.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mr. Obey.

                         SSA's Five-Year Budget

    Mr. Obey. Thank you, Mr. Chairman. I don't want to take 
much time because I know others were here before I was. I would 
just simply ask a couple of quick questions about your budget.
    Do you know what a politician is? A politician is generally 
somebody who makes a stupid decision and then blames the 
pointy-headed bureaucrats for not being able to carry it out 
months and years down the line. I am concerned about your 5-
year budget, the budget that was included in that wondrous 
budget agreement that was passed last year. As I understand it, 
that budget recommends a 23 percent reduction below current 
services baseline over the next 5 years. Is that about right?
    Mr. Apfel. The targets that were included in the 
President's budget did level-fund many activities. Those 
decisions are made on a year-by-year basis. But the projection 
that was included in the budget, even though every year we 
redecide this issue, as you know, with the Appropriations 
Committee and the President's request, would be basically a 
freeze for the 5-year period.
    Mr. Obey. Which results over time because of inflation, 
according to the estimates that were in the budget last year, 
in about a 23 percent reduction in current services?
    Mr. Apfel. I believe that number is correct, below current 
services.
    Mr. Obey. Right. That comes at a time when your workload 
projections and numbers of beneficiaries are going to be 
increasing. In the context of public debate on the future of 
Social Security, I just want the record to show I have 
substantial doubt about the wisdom of simultaneously knocking 
the legs out from your agency just before the baby boom bulge 
begins to hit the rolls. If your agency is not able to offset 
those cuts with much more efficient ways of doing business that 
have yet to be designed, what impact would those budget numbers 
have on your agency's operations by 2002, especially with 
regard to your ability to meet your strategic plan goals and in 
terms of service to the public?
    Mr. Apfel. First, Mr. Obey, I wanted to reiterate that 
these are decisions that are made on an annual basis. Every 
year we will be in reassessing these numbers. The outyear 
projections, as we know, are outyear projections.
    Mr. Obey. I am assuming that we lock into the decisions 
that were made in the 5-year budget.
    Mr. Apfel. If the Social Security Administration were held 
to a freeze level for the next 5 years, staffing would go down 
from about 80,000 to about--that is, within Social Security as 
well as the State disability system--by about 15,000, down to 
about 65,000. I have not developed efficiency mechanisms to 
date that would come near meeting those reductions in staff. 
Therefore, if that took place, there would be a significant 
impact on performance.
    But as I said, the annual decisions as to what the levels 
of support should be for the Social Security Administration are 
made on an annual basis. I submit my budget. The President 
submits the budget. The Congress then acts. If I believe that 
there will be a significant deterioration in workload and a 
disservice to the American public, I will be before this 
committee to argue for different levels.

                     Commissioner's Budget For SSA

    Mr. Obey. It is my opinion if we stick to those 5-year 
levels, you are going to have the same politicians who voted 
for that budget deal 5 years ago pounding on the Social 
Security Administration, crying all the way to the nearest 
press release, blaming your agency for ineptitude and 
mismanagement because they are not able to meet public demands 
for services which they themselves squeezed by their support of 
that deal.
    Just two other questions. By law, as you have probably 
talked about already, the Commissioner is supposed to support a 
bypass budget directly to the Congress. Your 1999 bypass budget 
is $259 million above the President's request. What is the 
impact of that difference between your budget and the 
President's budget?
    Mr. Apfel. My budget request was $257 million, $257 or 
$259, higher than the levels that the President submitted. 
About $160 million of the difference, Mr. Obey, was due to some 
later-than-anticipated reductions in disability caseload. In 
other words, when I submitted my budget, we expected new 
disability workload to be coming in the door at a higher level 
than the actual that was predicted later in the year. So that 
is about $160 million of the difference.
    About $50 million of it was due to added automation 
investments that I had initially proposed to move--this 
committee, and we thank you enormously, provided the full 
amount of money for automation investments over the 5-year 
window. I had contemplated whether to start up a new round of 
investments so that we were ready to plan in the future. That 
was one that could be easily shelved for a future date.
    An additional $50 million was for overtime. The FTE levels 
that were included in the President's budget request are 
consistent with my FTE levels, but I had initially proposed an 
extra $50 million for overtime to try to work down more of the 
backlogs in disability case processing and in field operations. 
The main difference in terms of once you take into account the 
disability changes and the $50 million in automation, was that 
$50 million in overtime.
    Mr. Obey. I have got one other question which I will simply 
submit for the record and ask you to respond to on your own, 
without benefit of OMB interference.
    Mr. Hoyer. Would you yield on the last question?
    Mr. Obey. Sure.

                       Adequacy of Budget Request

    Mr. Hoyer. My question was did you have sufficient 
resources. I perhaps did not go into it deeply enough. Am I 
understanding your perception is that you will not be able to 
get the backlog down as quickly as you deem appropriate because 
of the lack of that $50 million, which will therefore either 
negate additional personnel, or, as I understand it, overtime 
payments so that people can work an hour or two extra a day to 
get that backlog down?
    Mr. Apfel. The $50 million in overtime was both for--in the 
hearings area, but a large proportion was in the field offices 
to be able to handle our ongoing workloads. A piece of that, I 
would say, would probably not be in the areas of the hearings 
and appeals backlog; only part of it would be. But it was 
basically to handle overall workloads within the agency.
    Mr. Hoyer. Mr. Apfel, I am obviously not trying to get you 
to criticize the Administration. We are dealing in a world of 
trade-offs, which is what Mr. Obey said. We cut resources, you 
cannot do the job, somebody is going to take the blame. My 
suggestion to every administrator with whom I talk is tell it 
like it is. You have x number of dollars, you can do y number 
of cases or workloads.
    I guess what we are asking is that Mr. Porter said that he 
thought the level of backlog was unacceptable and the time to 
handle cases was unacceptable. I agree with him, but that is 
obviously a function of the numbers of people and how long they 
work. Again, I ask you, are we going to have an adverse impact 
on the level of resources allotted in the budget on the ability 
in this case specifically dealing with backlogs, but any other 
services provided by your agency to the public?
    Mr. Apfel. It is my belief that the President's budget 
request will--we can live with the performance commitments made 
in the President's budget. I think those are good, strategic 
commitments. Certainly my initial request for an added $50 
million would have helped to improve reducing backlogs further 
and providing added activities in the field structure to be 
able to provide better service delivery. But we can still meet 
the performance commitments that were made without that $50 
million. I wanted a little extra to be able to do a little bit 
more.
    Mr. Hoyer. Thank you, Mr. Obey, and thank you, Mr. 
Chairman.
    Mr. Obey. I would simply say in summing up, I think the 
message is pretty clear that if we want an improvement in the 
ability to provide timely service to people, we will need to 
provide resources. Certainly my judgment on the basis of common 
sense and your responses that we are not likely to get adequate 
resources if we stick to the 5-year decision framework that was 
laid out in the budget last year, one of the many instances 
where a temporary generic good news will be balanced off by 
specific bad news when people come to understand what will 
happen when we translate the generalized numbers into specific 
program decisions. There are going to be a hell of a lot of 
people in this country who are expecting lots of stuff the 
government isn't going to be able to deliver that are going to 
be, I think, mad as hell about it when they see the erosion in 
quality of services over the next 5 years.

                   Funding From Legislative Proposals

    Mr. Apfel. Mr. Obey, if I could make one other point. The 
administration's budget also includes a request for $69 million 
in added money; $50 million of it is part of----
    Mr. Obey. That is the other question I wanted to submit to 
you for the record.
    [The information follows:]
              Impact of Not Enacting Proposed Legislation
    SSA's budget includes $69 million for legislative proposals which 
would authorize SSA to impose a monetary assessment on certain claimant 
representatives ($19 million) and would adjust the discretionary 
spending cap for funds for SSA to conduct additional redeterminations 
of the non-disability factors of SSI eligibility ($50 million).
    A key element in SSA's strategy to make the SSI program the best it 
can be, and to deal with the General Accounting Office's (GAO) 
criticism of the SSI program, is the $50 million in additional funding 
to enable SSA to conduct an additional 268,000 SSI non-disability 
redeterminations. Without additional funds to finance the 
redetermination proposal, more SSI recipients will continue to be 
under/over paid; and SSA would not realize $97 million in program 
savings for FY 1999 and $216 million through FY 2003.
    SSA's proposal to charge claimant representatives for the work it 
does in withholding money from past due benefits and issuing payments 
is in keeping with the Administration's policy to impose a fee for such 
special services.
    From a practical perspective, failure to approve these proposals 
would also result in serious operation problems:
    With little replacement of losses and minimal overtime already 
budgeted for FY 1999, SSA is working on the edge within a very narrow 
operating margin.
    With $69 million less to work with, any flexibility would be all 
but eliminated and service to the public would suffer.
    Taken together, the $69 million will finance about 1,500 full-time 
equivalents (FTEs) in FY 1999.
    FTEs currently budgeted for FY 1999 decline by about 1,800 compared 
to FY 1998. With attrition at about 3 percent (yielding an annual 
reduction of about 2,000 FTEs), limited hiring flexibility and minimal 
overtime budgeted should help deal with spot shortages, so this FTE 
reduction can be managed.
    With $69 million less to work with, FTEs would need to be cut even 
more and overtime further reduced. Performance would clearly 
deteriorate, by some amount not presently calculable, especially in our 
inner city field offices where workloads are highest and turnover is 
greatest. These are the offices which traditionally service our 
neediest constituents.

    Mr. Apfel. I just wanted to be able to say that that is 
primarily not this committee's immediate jurisdiction, I don't 
think, but any help you can provide on that would be very much 
appreciated, because to meet our performance targets, we need 
that $69 million. We need to be able to not only for 
performance, we need those resources to support our overall 
staff levels that we have.
    Mr. Obey. The reason I asked you to respond to that 
question without benefit of OMB participation is so that people 
understand when they read the response that this is based on 
the straight skinny from your agency without any political 
involvement from any White House operation.
    Mr. Apfel. Yes, sir.
    Mr. Obey. I thank you.
    Mr. Porter. Thank you, Mr. Obey.
    Ms. DeLauro.

                  Investing Social Security in Stocks

    Ms. DeLauro. Thank you, Mr. Chairman. I want to thank you, 
and welcome.
    This morning's Los Angeles Times had a front page story 
saying that the GAO Calls Stocks a Risky Fix for Social 
Security. Let me just quote a couple of things from the 
article. It talks about potential investment scenarios. It 
says, the potential returns are promising, but the risk is 
real, the GAO said. Quote, riding out a stock market downturn 
could be difficult for the Trust Fund as it faces growing 
numbers of retirees. The more the Trust Fund is counting on 
stock sales to raise cash, the greater its vulnerability in the 
event of a general market downturn. The GAO offered a 
historical reminder to stock market enthusiasts. Stocks 
fluctuate, a reality some may overlook in the current bull 
market. Quote, there is no guarantee that investing in the 
stock market, even over two or three decades, would match the 
market's long-run average return, the GAO said.
    I don't know if you have seen the report. This also makes a 
comment, it is an admonition actually is the way they describe 
this, as many Members of the Congress are expressing enthusiasm 
about proposals to allow workers to funnel some of their Social 
Security payroll taxes into personal investments to help 
bolster their retirement income. Again, I take it you haven't 
seen the report. I have just got the article. I guess all of us 
are going to try to get ahold of it to take a look at it.
    My question to you is just to have you comment on the 
sketchy information, albeit from a news article, but you all 
have had to have talks about this direction we appear to be 
taking in privatizing Social Security.
    Mr. Apfel. There are a number of different options that are 
before the American public as to how to move the Social 
Security system to the 21st century. In terms of investingin 
equities, there are two different ways that that can be done as well, 
if that is the direction that people choose to move. One would be to 
invest some of the Social Security Trust Fund in equities. The other 
would be to have individuals invest something on top of Social Security 
or as part of Social Security individual accounts and possibly invest 
those in equities.
    There are trade-offs to both options, needless to say. If 
we look at investing--as you know, Ms. DeLauro, Social Security 
invests solely in government securities currently. It is a 
relatively low rate of return from government securities. Some 
would argue that changing the portfolio to invest some in 
markets could potentially increase the amount of returns that 
Social Security would receive over time, thereby reducing the 
overall size of the changes that would have to be made to 
Social Security. That could potentially provide a plus. On the 
downside are whole issues of corporate governance and of the 
United States Government investing in the corporate stock 
market.
    In terms of individual accounts, again there is the 
potential for higher rates of return through the stock markets, 
but with added returns or potential returns comes added risk, 
whether it be when an individual moves to retire, whether it 
coincides with a downturn in the market, what have you, or 
whether an individual makes poor investment choices over their 
lifetime. These are all the issues that we have to weigh in the 
course of this next year as we move toward this Social Security 
reform endeavor.
    What the President says we need to have is to talk about 
all of these options openly, directly; talk about the pros and 
the cons to the various options that are out there.
    Perhaps one of the thorniest issues that we will be 
confronting is the one that you have discussed, is investing in 
markets and whether or not to create individual accounts. The 
administration has not ruled out a form of individual accounts. 
What the President did say is that we need to have a benefit in 
Social Security that we can count on over time, even if the 
individual outlives their savings or their pensions, a benefit 
that is there for that 80-, 90-year-old widow, no matter how 
long she lives. But whether as part of this debate there would 
be changes in investments in the Social Security Trust Fund 
reserves or the creation of individual accounts are all things 
that we believe this year we need to have discussions about.
    Ms. DeLauro. Just a couple of things, because the article 
does talk about--I understand that there are individual 
accounts, but it appears to talk about actually moving it from 
Treasury investment into the market, and it talks about the 
riskiness of that effort. As I say, I want to get ahold of this 
and take a look at it, as I am sure you do.
    You are right when you talk about this has to be something 
people count on. Fundamentally, that is something we are trying 
to deal with here are people's lives, whether it is the 
function currently there now or the baby boomers coming through 
where there is a potential risk.
    What worries me--and I am asking the agency, your agency 
and you, you know this system, this is being administered at 
some point, and I am not asking you here today what is going to 
be in the best long-term interest for the people in this 
country. Not a feel-good, quick-fix, cash-immediately system 
that undermines the fundamental principles upon which Social 
Security was based and what it means for the future.
    There is a lot of money to be made in some of these efforts 
by folks who do the investing, and that is terrific; I don't 
begrudge them any money. But there are a lot of little folks 
out there whose whole life they view as tied up with this very 
fundamental system which has been one of the sole efforts to 
raise seniors out of poverty in this country.
    I am asking you as an agency and your folks to take the 
hardest look at the level of discussion, about where the 
discussion is going, where it is, and talk with us about what 
your views are and to what is in the long-term best interest of 
this effort, and that this not become the realm of the 
political. And as I say, the quick-fix effort on this thing--in 
my view, it needs a lot of time, a lot of study, and not a rush 
to judgment as to whether or not we begin to privatize, whether 
the individuals do it or whether an agency does it.

                 review of disabled children's benefits

    If I can move on. After the implementation of the welfare 
reform law, there was an outcry from many parents of disabled 
children. I know you are reexamining the 45,000 cases. Can you 
tell us how many people had their benefits reinstated and how 
you are trying to correct the problems that led to some of 
these things?
    Mr. Apfel. When I was confirmed, the first priority that I 
laid out was reexamining the SSI kids' program. We were 
starting to lose some of the legitimacy, the broad-based 
legitimacy of the program that we needed to restore. After a 
very careful examination, I reopened appeal rights for every 
individual who had been terminated from the program, and 
targeted where we saw the potential--potentially the largest 
areas of potential question marks between the area of mental 
retardation and specifically reopened those cases.
    We have just finished, within the last month, retraining of 
the State disability determination staff, with new information. 
Right now we are starting the process of reviewing those cases. 
I can get you, for the record, the actual number of individuals 
who have applied for--who have appealed their benefits. They no 
longer had appeal rights. We gave them a new appeal round. They 
will be reassessed first this year in the State disability 
system and then, if individuals want, on to the hearings 
process next year.
    It is premature to know entirely what the changes will 
mean, but I can point out that when the legislation was 
enacted, we originally assumed that after appeals, about 
135,000 kids would be removed from the rolls because of the 
eligibility changes. Our projections are still around 100,000, 
so there will be a significant number. That is partly because 
of the number of people who originally came through and were 
allowed, as well as some of these new activities. So to put it 
in context, there are about a million children on the SSI's 
kids; roll, so when the changes are done, it will be about a 10 
percent reduction in the number of children receiving SSI 
benefits.
    Ms. DeLauro. They are still under review; is that correct?
    Mr. Apfel. Those are under review. Within the last month, 
we started to redo the cases. I will provide for the record if 
we have even initial cases of the numbers that are coming on 
based on State action, but it is very early in the 
redetermination process.
    [The information follows:]
                     Review of SSI Childhood Claims
    Of the approximately one million children receiving SSI benefits, 
about 288,000 were subject to eligibility redetermination under the 
provisions of the welfare reform law. Approximately 272,000 have 
received decisions and another 8,800 children were terminated for non-
medical reasons. As of April 25, 1998, there were 129,000 cessations. 
SSA estimates that once all cases are reviewed, the number of children 
impacted will decline to approximately 100,000.
    We are reexamining about 59,000 cases for children who had their 
SSI disability benefits denied or ceased under stricter eligibility 
provisions. It is too early in the review process to provide outcomes 
on any of these cases.
    In addition, families of children who lost benefits and who did not 
appeal that decision were given a second opportunity to do so. As of 
April 18, 1998, 17,574 (27.8 percent) of the 63,278 renoticed families 
of children who were ceased have filed appeals for reconsideration of 
the decisions.
    Although we will keep track of the number of cases coming back on 
the disability rolls based on State Disability Determination Services 
action, it is too early in the review process to provide outcomes on 
cases reviewed.

    Ms. DeLauro. Thank you very much. Thank you, Mr. Chairman.

          using the budget surplus to protect social security

    Mr. Porter. Thank you, Ms. DeLauro.
    Since the issue was raised, we are going to have a surplus 
in our budget this year. No one knows exactly how much.
    What specifically is the President proposing to do with 
that surplus to protect Social Security, and how does he 
propose to do it?
    Mr. Apfel. What the President said is that we should not 
drain those surpluses through tax cuts or through spending 
increases until we reform the Social Security system. What the 
President did not say is we should use every dollar of the 
surpluses to give to the Social Security Trust Fund or any 
other option. What he said was let's not drain away the 
surpluses until we fix the Social Security system. I understand 
there have been a few proposals that have been introduced to 
actually establish some form of special account to hold those 
surpluses until the Social Security issue is resolved.
    [Clerk's note.--``The President's proposal was not to give 
the surpluses to the Social Security System'' was later changed 
to, ``the Presidents proposal was not necessarily to give the 
surpluses to the Social Security system.'']
    The Ways and Means Committee has such a proposal. It is out 
there that we would be willing to discuss with the Congress 
that the President's proposal was not to give the surpluses to 
the Social Security system; it was to reserve those surpluses, 
pending Social Security reform. The effect of that would be to 
write down the debt over the short term, until that Social 
Security reform initiative is enacted next year.
    Now, as you pointed out, there are now some early talks of 
surpluses accruing this year. We had anticipated earlier this 
year that the surpluses were going to be starting to come next 
year and that Social Security reform would even be done before 
the first surplus would accrue, because the surpluses would not 
be known until October of 1999, and our expectation is Social 
Security to be reformed next year. There are reports of 
surpluses generating earlier, and we would be willing to 
discuss options with the Congress if there was a desire to 
create some form of a special account of some kind.
    Mr. Porter. Don't we have a special account called the 
Social Security reserve? What if we just put the money in 
there.
    Mr. Apfel. Well, if an action was taken to designate that 
the amount of the surplus, the unified budget surplus would be 
provided to the Social Security Trust Fund, that would have the 
effect of increasing the amount of money of the Social Security 
Trust Funds over and above what we now have in the trust funds, 
and that would take a law change to do that. That is one of the 
options that is possible----
    Mr. Porter. Then by law we would immediately loan the money 
to ourselves and spend it, which is why there is nothing in the 
Social Security Trust Fund but a lot of IOUs that have to be 
redeemed at some point in time if we are going to pay benefits 
from it correct?
    Mr. Apfel. Well, the effect of adding, as a hypothetical, 
$100 billion in surpluses, would be to move the date of 
insolvency of Social Security by about a year. But it is true 
that during the 1980s, and particularly in the 1980s, the 
surplus that started to accrue based on the 1983 reform was a 
very small component, given the massive budget deficits that we 
had during that time. It was clear these dollars were used for 
other activities. I would also point out, though, those dollars 
are invested in the safest investment known, which is 
government securities.
    Mr. Porter. Well, Mr. Apfel.
    Mr. Apfel. I think it is the most important reason why it 
makes no sense to drain the surpluses away now, for either tax 
cuts or for spending increases, until we address this centrally 
important issue for this country.

                 long-term solvency of social security

    Mr. Porter. Well, my point is that we have special 
accounts, we have said for years we are going to protect Social 
Security, we are supposed to be building a huge $3 trillion 
reserve in terms of 1990 dollars so we can have the funds on 
hand to provide the baby boomers with the same good benefits 
that have been received by seniors now, and yet everybody knows 
that what the account contains is a lot of IOUs that the 
government can only, when the big drain comes down, when baby 
boomers start to retire and the drawdown begins to occur, we 
would have to go back to the market, borrow huge amounts of 
money in relatively short times, driving up the cost of money 
greatly. And I don't think anybody believes that the trust fund 
concept has worked to protect Social Security one bit.
    We really have three options, unless we do something now to 
truly protect Social Security, and one is to engage in this 
massive borrowing I mentioned; the other is to cut benefits; 
and the third is to raise taxes. And nobody wants to do any of 
the three things, and they are all really politically and 
economically impossible.
    So we are in the situation now we face the Social Security 
system that is facing serious problems when the baby boomers 
begin to retire, and at least we are beginning to talk about 
it, but nothing has been done that meets that challenge or puts 
us in a position to preserve the system as we know it today, 
that I know of.
    And while the President stated something that ought to have 
been stated a long time ago, we ought to protect Social 
Security, I frankly don't know how you do that within the 
context of this government, without putting the money out of 
the reach of either the administration or the Congress or both. 
Because you can say we ought to not do something, and this 
Congress might not do it, but the next Congress might do it or 
the next Administration might do it. There is really no way to 
protect surpluses from the kind of deficit spending we have 
seen over the last years.
    The Social Security Trust Fund has simply been spent to 
cover other expenses, and we have left IOUs, and this is the 
reason we can talk about it all we want, but unless we are 
going to change the nature of the system, we are always going 
to be at the risk of irresponsible fiscal policy that we have 
seen so much of in the last 30 years.
    And I would add something, and let me agree with Ms. 
DeLauro: Don't put that trust fund in the stock market. That is 
the dumbest idea that has been advanced to date, I think, to 
protect Social Security. She is exactly right. If people are 
considering doing that, please, please, please, don't do it; it 
isn't the way it ought to be done at all.
    The only true way to protect Social Security is to create 
the kind of system we would have created had we had the 
resources to do so in the middle of the Great Depression, that 
is a fully-vested, fully-funded system, owned by the American 
workers, that they have in their hands; not in the hands of the 
government and Washington, either Administrations or 
Congresses. And I believe very, very strongly that we shouldn't 
jump into anything, as has been said here. I believe very 
strongly this country is in the position right now to create 
the kind of system, if we have the will to do so, and provide 
people, workers in America, people who in many cases have never 
been able to save a dime during their working lifetimes, with 
the kind of benefits that will make poverty in senior years 
absolutely impossible in the future; a minimum return of three 
times the amount that has been received by Social Security 
today, with people understanding that it is theirs and nobody 
can mess with it, and they have the investments that allow them 
to have true security in their senior years. But don't put it 
in the Trust Fund. That is the kind of halfway measure that 
makes absolutely no sense, and people keep talking about it, 
and that would be absolutely crazy.
    I think the idea is to simply say we now have the 
resources, we have a country that is strong enough economically 
to create the kind of system we would have created in 1935. We 
can do it, we can make it strong, we can make it owned by the 
workers, and we can get the misuse of Social Security funds out 
of the hands of government so it can never happen again and 
people will be truly protected from that kind of fiscal 
irresponsibility that has put us in the position where the baby 
boomers really, truly are at risk and their benefits are truly 
at risk unless we do something really smart to protect the 
trust fund and the SocialSecurity system in the future. That is 
my sermon. Do you want to respond to that?

                   national debate on social security

    Mr. Apfel. Just briefly, Mr. Chairman. You have certainly 
joined the debate. This is the debate America is going to be 
having in the course of the next year and there are a lot of 
different viewpoints on this. I believe we could not have had 
this debate 2 and 3 years ago when we were running $100 and 
$200 and $300 billion deficits.
    Now in terms of the unified budget, we have some modest 
operating surpluses projected for many, many years into the 
future. That does increase the number of options that are 
available. All the way in the political spectrum, it increases 
options that are available for resolving this. So the time is 
now. I think we would be doing the American public an enormous 
disservice if we didn't have the major national debate this 
year, and then, move on next year to ensure people's retirement 
security for the long run.
    And, clearly, there are a lot of different viewpoints that 
were even expressed here today. What the President hopes is, by 
the end of a year-long discussion with the American people, not 
just with think tanks in Washington but with the American 
public, it will come in a bipartisan and a reasoned way to 
economic security for future generations.
    Mr. Porter. If I can respond to that, you are exactly 
right. We couldn't have had this debate. I put in legislation 
in 1989 that would have protected the Social Security reserve 
by putting it back in the hands of the American workers who 
earned it, and nobody wanted to talk about Social Security at 
all. You would whisper the word Social Security in a room full 
of politicians and you would find yourself alone. Today we are 
talking about it, that is progress; but 9 years have passed and 
you can tell me, if you will, how many IOUs of the U.S. 
Government are in the reserve today; that is, what does the 
reserve account amount to?
    Mr. Apfel. There are about $700 billion that have now 
accrued to the Social Security trust funds.
    Mr. Porter. How much is it accruing per year at the current 
rate? In other words, how much will be added in the next year?
    Mr. Apfel. About $100 billion a year. Half of that is in 
terms of added payroll taxes over expenses and half in terms of 
interest.
    Mr. Porter. What will be the maximum rate before we reach 
the drawdown, the add per year? It is something about 200 
billion, if my memory serves me correct. That is the maximum.
    Mr. Apfel. Yes; and peak at about $3 trillion.
    As of 2012, that will be the first year, under current 
projections, where receipts coming into the Social Security 
Trust Fund from payroll taxes, not from interest, will be less 
than the amount of expenses; then by 2029, that is the date 
that basically all the reserves will be gone and the system 
will bring in about 75 cents in terms of revenues for $1 in 
benefit obligations.
    Mr. Porter. So the problem is evident to everyone.
    Mr. Apfel. The problem is real. I disagree somewhat with 
the characterization that the money is not real. I think the 
commitments to Social Security have been iron clad in the past. 
If we go back to 1983 when the Social Security Trust Fund was 
in very major jeopardy, I know you were aware then and involved 
very much in those endeavors, but that tended to focus the 
American public's mind on the fact we had to take action.
    The problem we have now is we have a problem that is 20 and 
30 years away. In 1983, we had a problem that was acute, it was 
immediate; it was what was going to happen to the July of 1983 
checks. The public discussions that took place in 1981 and 1982 
and early 1983 set the stage for some open bipartisan action by 
the Congress and the executive branch to ensure that Social 
Security would move forward.
    We don't have that same circumstance today. We don't have 
the 1983 insolvency looming. This is a long-term issue; it is 
not a short-term crisis. We can prevent a crisis from ever 
occurring if we take action in the short term. So what we have 
to be able to do is still have the public discussion and create 
the sense of urgency with the American public, because it would 
be fundamentally wrong if we were sitting here 10 years from 
now and not taking action on this front.
    Mr. Porter. Since the beginning of the drawdown occurs 15 
years from now, it is obviously not such a long-term problem.
    Mr. Hoyer.

                    social security rates of return

    Mr. Hoyer. Mr. Chairman, I was starting to leave, but I was 
interested in your observations of this conversation.
    Trust fund is rhetorical; it is never a reality. What you 
set up to be a reality is a transfer payment. And, in my 
opinion, Senator Moynihan was correct. We have overbilled 
middle-income workers very badly. If there ought to be a tax 
decrease, it ought to be a tax decrease in the FICA tax. That 
is the tax, Mr. Chairman, very frankly, nobody on your side 
talks about when they want to reduce taxes, but it is the tax 
that is, in my opinion, the most inequitable tax we have in the 
country, in that it is a tax on gross receipts of income of 
lower- and middle-income workers, and all us rich guys get 
exempt from it halfway through the year.
    And we do not have any surplus. There is no surplus. We 
talk about a surplus because we have the Social Security 
receipts, but in terms of what we are buying and what we are 
getting, we do not have a surplus. We are buying more money 
than we have, if in fact 1983 was real, and I understand what 
you are saying, and I agree with you, Mr. Apfel, that 
commitment on behalf of the government is real.
    But I have three daughters, 27, 29 and 34. Now the 34-year-
old is probably a level of income that is pretty equitable. She 
is a college graduate, she is doing pretty well, she has got a 
good job. The 27- and 29-year-olds are getting really socked, 
so that their grandmother, who is 83 years of age, can get 
benefits far beyond what she paid for. And her generation, and 
the generation that is succeeding her up until relatively 
recently, got a better deal than my kids are going to get, a 
much better deal. And in order to do that----
    Mr. Porter. Not necessarily. We can change it.
    Mr. Hoyer. We can change it, but under present 
circumstances, my mother-in-law, who is 83 years of age, got 
her full payout in about 3 or 4 years, of what she put in. My 
kids will never get a full payout.
    Mr. Apfel. Well, I don't think I agree with the assessment 
they wouldn't get a full payout.
    Mr. Hoyer. If they live, how long will it take them?
    Mr. Apfel. Rates have certainly declined, and certainly 
will as well.
    Mr. Hoyer. They will be 67 years of age when they get 
Social Security benefits. Well, they may be older if we change 
that. But let's say right now they are going to be 67; right?
    Mr. Apfel. Right.
    Mr. Hoyer. How long will it take to recoup the money they 
have paid in?
    Mr. Apfel. I would have to get you that exact number.
    Mr. Hoyer. Twenty-five, 30 years?
    Mr. Apfel. How old is she?
    Mr. Hoyer. The youngest is 27.
    Mr. Apfel. The rates of return have declined, certainly, 
within Social Security.
    [The information follows:]
                             Payback Period
    As an illustration, for an average worker retiring in 2035 at age 
67 (age 30 today), it would take 12 years for this worker to recover in 
retirement benefits, the amount of his/her OASI taxes, plus interest. 
If both employer and employee OASI taxes are considered, the recovery 
period would be 30 years.
    These calculations were done on a profile which assumes constant 
average earnings throughout life. Soon the Social Security Actuaries 
will have a model allowing for calculations based on more realistic 
earnings histories which would begin with entry level work with 
subsequent increasing salaries.
    Note: Payback times are based on intermediate assumptions in the 
1998 OASDI Trustees Report.

    Mr. Hoyer. Unlike those we talked about before, you were 
going to get it back in 3 or 4 or 5 years max, and the 
wealthier you were, the longer it took you to get it back, 
because we make it fair by inverting the payout. We make it 
more aggressive.
    Mr. Apfel. I think it is important, rates of return is an 
important issue and we need to confront that this year during 
the debate. But it is not the only issue in Social Security. If 
we look at the importance of the survivors program and the 
disability program, nearly a third of benefits are paid to 
survivors and disability payments.
    My wife was a young girl when her father died, leaving her 
mother and four kids, alone. That Social Security check, it is 
an important part of Social Security, as well as the 
progressive benefit structure which provides higher rates of 
return for lower-income workers to provide that foundation of 
support.
    Mr. Hoyer. We agree. What we have done, from the 1935 
enactment, we expanded benefits greatly. In 1972, [Wilbur] 
Mills and President Nixon made a gargantuan mistake that we had 
$1 million and we could really go to town, and they were wrong 
and changed it 5 years later.
    And what I am saying is, Senator Moynihan said, look, in 
effect, you are overcharging this generation to subsidize 
previous generations who were not taxed nearly as hard as they 
were. What is going to happen is subsequent generations will 
depend upon what we do, as you pointed out, in terms of policy, 
and we are obviously going to have to do something. None of 
those three alternatives are very popular.
    I voted for the Balanced Budget Amendment Charlie Stenholm 
moved for in 1993, and it had a cost-of-living adjustment. 
There were not a whole lot of us who voted for that the first 
time. But my perspective was then, as now, we have to be real. 
And, yes, I think those securities are going to absolutely be 
honored. If they are not, the country is going to be in the 
dumpster, so it will not matter. And then none of it will be 
very good when they put in a stock market and government 
securities.
    But the fact of the matter is that I am of the opinion that 
workers earning between $20,000 and $40,000 dollars are really 
getting hit hard because of the gross tax on their income. The 
wealthier Americans avoid that. And forget about capital gains 
and all the other stuff, but just in terms of wages earned. And 
I think Senator Moynihan has touched on that a number of times.
    And when you talk about a surplus, I think the President is 
absolutely right. I am supporting the President in his 
objective. I think that is exactly the way to go, because it 
does not have a positive effect. But we are talking as to what 
the Congress does and what we thought we were doing in 1983, 
but we do not have a surplus, except as you consider, vis-a-vis 
the way we account it, that we do have.

                     need for administrative budget

    Mr. Apfel. Basically the budget is a cash flow budget, and 
in cash flow terms, there is a surplus, but there are long-term 
obligations for sure. I would hope the committee, as it engages 
in this debate, also remembers my administrative budget, which 
is really important, too.
    Mr. Hoyer. This is a nice theory. You want to know how much 
money you are getting next year right? You know what? You are 
like every other American. Thank you, Mr. Chairman.

                        intergenerational equity

    Mr. Porter. I was listening with interest, Mr. Hoyer, as 
you were talking about recoupment. My grandfather recouped 
instantly, because he went broke in the middle of the 
depression, his business went bankrupt, he had nothing, and 
never paid a cent into Social Security but went on Social 
Security because that is the only thing that saved him, so he 
never had any investment in it.
    Mr. Hoyer. That points out it really was a pay-as-you-go 
program where current workers supported retirees.
    Mr. Porter. And the difficulty----
    Mr. Hoyer. Which was fine when we had fewer retirees and 
more workers.
    Mr. Porter. Right. I don't want to reduce the FICA tax. The 
FICA tax, if it is there for people, is a forced-saving system 
that requires them during their working years to put money 
aside for their retirement years. The concept of it is a very 
good one. It is the execution of it that we have had some 
serious problems with. This has been a wonderful program, up to 
this point. It has largely eliminated senior poverty. It is an 
icon of this----
    Mr. Hoyer. We are not going to argue about that. We agree.
    Mr. Porter. It is an icon of this entire country. And yet 
you have young people in this country who don't believe they 
will ever get a penny out of Social Security, don't believe in 
it at all. And when you have something that is so important and 
central to your country and its policy, that is not believed in 
by a large segment of your population, you have problems. And 
we have problems today, and we are going to have to address 
this problem and gain back the confidence of young people that 
they are going to have a Social Security system that is just as 
good, or I would say substantially better, than the one we have 
had in the past. If we don't do that, we will go straight 
downhill. We just must do this. To my way of thinking, it is 
very, very significant we turned the corner on the discussion 
and we are having it.
    Mr. Hoyer. Mr. Chairman, will you yield on that. My point 
in FICA is that in the 1980s, we all talked about reducing 
peoples taxes, we kept the Social Security fund in 1983 whole. 
There was a crisis, we overfunded it, and we used the money. 
And we used the money notwithstanding the fact we were cutting 
other wealthier people's taxes. So middle income--and when I 
say that, $45, $50,000 and less--their income was getting taxed 
more heavily, so that richer people could cut their taxes, and 
still bought defense and still bought domestic.
    In the Congress, we wanted to buy domestic. The 
Administration wanted to buy defense. We said, all right, we 
will buy both. I supported most of the spending on defense and 
the domestic side, so I am not criticizing the purchases. I am 
criticizing not paying for it, and we did pay for it, but we 
paid for it by overtaxing, and I want you to understand what we 
are saying. I understand you do not want FICA reduced, but the 
fact is what we did is we subsidized tax cuts for wealthier 
people by overcharging the pay-as-you-go plan. That is what it 
was. That is why your dad could take you out immediately.
    Mr. Porter. Great grandfather; yes.

                       tax payer-to-retiree ratio

    Mr. Hoyer. Yes; could take you out immediately, because 
workers of that day were paying the freight. There happened to 
be, what, about 15 of them to every retiree at that point in 
time.
    Mr. Apfel. That was about 30 years ago.
    [Clerk's note.--Later changed to ``50''.]
    Mr. Hoyer. And now there are what, 3\1/2\?
    Mr. Apfel. About 3.

           national debate over the future of social security

    Mr. Hoyer. So now we have fewer workers supporting us so 
the freight has to be higher. But if your theory was correct, 
if the theory was originally a pay-as-you-go program, we 
overfunded it on the theory we were going to put it into some 
annuity. That is what everybody thought. You are saying we did 
put it into an annuity, into government securities, and of 
course that is correct. But the fact is, as the Chairman points 
out, the American people are going to have to pay off that 
debt, and they are the same people who are going to be paying 
the FICA tax in 2005 or 2010 or 2015.
    Mr. Porter. If the gentleman will yield, it seems to me the 
lesson in all this is you can't trust the government with a 
surplus; it is going to be spent, and it is not going to be 
saved and protected. It won't happen. That is my point. And if 
you don't get it out of the hands of the government and into 
the hands of the workers, it is going to be gone, as it is 
right now; it is gone, we spent it. There is no reserve at all. 
There is a bunch of IOUs and a promise they will be redeemed by 
more borrowing in the future.
    Mr. Hoyer. Where does that take us, Mr. Chairman?
    Mr. Porter. To a fully-funded, fully-vested Social Security 
system that is owned by the American workers and can't be taken 
away by a government who wants to spend the money for something 
else, which is what the government has done. There is no doubt 
about it. You said it, and I agree with you completely. We saw 
that big bunch of money there and spent it, and robbed people 
perhaps of their future. And now we are trying to backtrack and 
save that future by some means. And as I suggest, all of the 
ones that have traditionally been used--more borrowing, raising 
taxes and cutting benefits--those aren't options, they really 
are not options. If we are going to sit here and do nothing 
about Social Security and wait for the baby boomers to start 
retiring, we are going to have a disaster on our hands for our 
entire economy that will simply be unacceptable to anyone.
    Mr. Apfel. I would point out that 6 months ago--that over 
the last 6 months, the debate really has changed, though; that 
6 months ago, when the first glimmers of surpluses came along, 
there were a number of proposals out there to immediately use 
them up. I think holding off on utilizing those surpluses was 
an absolutely appropriate activity until we can determine what 
to do about the Social Security system. The debate has changed 
in a very fundamental way.
    Mr. Hoyer. Can I say somewhat cynically, about 2 weeks ago 
we spent----
    Mr. Apfel. The highway bill?
    Mr. Hoyer. Yes. And we don't have $28 billion. We don't 
know where it is coming from. It may come out of the hide of 
this committee, people who need food, people who need health 
care, people who need education and job training. It may come 
out of their hide, as it did before when 800,000 were put out 
on the street, out of housing, which is one of the offsets we 
passed in the supplemental, as you know, or cutting out 
AmeriCorps.
    Mr. Porter. The Chairman hopes we can resolve this by 
taking it out of the hides of the tobacco industry, personally, 
and hopes that the President and others will push on the agenda 
a great deal.
    Mr. Hoyer. A far, far better prospect.
    Mr. Porter. But, again, if there is a surplus, it is going 
to be spent. There is just no doubt about it. And if you start 
with that as a given, you know that you have to do something 
different about what we have done to protect Social Security. 
It hasn't worked, and it won't work, and it won't work in the 
future. So let's open our minds to what we can do to put in 
place a really good Social Security system that will produce 
for people and will be out of the clutches of future Congresses 
and Administrations that can't resist spending anything that 
even looks like a surplus, obviously.
    Mr. Hoyer. Mr. Chairman, if I can finish my remarks, there 
should at least be enough money next year to make sure it works 
well for 12 more months; right, Mr. Apfel?
    Mr. Apfel. You took the words out of my mouth.
    Mr. Porter. All right. Back to the mundane questions.
    Mr. Hoyer. Thank you.

                         legislative proposals

    Mr. Porter. Thank you, Mr. Hoyer.
    Mr. Apfel, you explained that your request for 
redeterminations and claimant representative payments is 
critical to the agency's ability to perform adequately. Both of 
these initiatives require authorizing legislation that is not 
proposed for inclusion in our bill. Have you been in touch with 
the authorizing committees on these matters, and do you expect 
that we will have the necessary legislative authority to comply 
with your requests?
    Mr. Apfel. That is our hope and expectation. We certainly 
have been in contact with the authorizing committees and we 
hope to be working with the authorizing committees, the 
appropriations committees and the budget committees. We will 
work with anybody. We want to see this proposal be enacted into 
law. If it is not there, we have a sizable hole that we need to 
determine what to do with. We have been in touch with them. I 
am optimistic that action will take place and would hope for 
your support in this endeavor.

                 office of program and integrity review

    Mr. Porter. Your authorizing committee asked us to look 
into the Office of Program Integrity Review on their behalf. In 
fiscal year 1997, what was the budget for OPIR and how many 
FTEs were assigned to it?
    Mr. Apfel. Fiscal year?
    Mr. Porter. 1997.
    Mr. Apfel. I don't have 1997. OPIR in 1995, halfway through 
1995, was 1381 FTEs. I will get you the dollars for the record, 
sir.
    [Clerk's note.--Later changed to ``FTPs''.]
    [The information follows:]
                        FY 1997 Budget for OPIR
    The FY 1997 budget for OPIR was $88 million and included 1,192 
full-time permanent (FTP) staff.

    Mr. Porter. All right. Mr. Apfel, critics of your 
automation rollout have suggested that the 100 megahertz 
processors you purchased are obsolescent. They can't handle 
your software efficiently and will need to be upgraded shortly. 
Is there any other enterprise of your size and complexity using 
100 megahertz processors, and does the agency have a technology 
refreshment contract as opposed to an obsolescence contract?
    Mr. Apfel. Can I go back to the first question for one 
second, which has to do with the roles of OPIR and the Office 
of Inspector General?
    Mr. Porter. Oh, sure.
    Mr. Apfel. When I was first confirmed, one of the issues 
before the agency was the respective roles and responsibilities 
of OPIR and the Office of Inspector General, and some tensions 
existed about the roles and responsibilities of the two 
organizations. One of the actions I took was to definitively 
articulate what the roles and responsibilities of the two 
activities are, and I believe that the Inspector General could 
comment on this as well.
    It is, from, say, the 1995 to 1998 period of time, the 
Inspector General's Office will be increasing staff 
significantly, by roughly 200. OPIR has gone down by about 300 
during this period of time, so there has been a shift that 
continues in terms of resource allocations. [Clerk's note.--
Later changed to ``200''.] But it is very important, that 
function that OPIR handles is a very important one for the 
Commissioner, and I believe the Inspector General agrees with 
this, to provide management analysis, to provide insights, 
reviews, for me, and needless to say, the roles and 
responsibilities of the Inspector General are also centrally 
important.
    What I have asked for and what I will be receiving in the 
future is a plan of work activities for both organizations, 
which I think will help ensure the appropriate separation of 
responsibilities. But are both functions important? Absolutely.
    Mr. Porter. Thank you. You just answered question 9.

                    one hundred megahertz processors

    Mr. Apfel. The second question you asked?
    Mr. Porter. One hundred megahertz processor.
    Mr. Apfel. One hundred megahertz processor. I have received 
several briefings on this. I remain convinced that the decision 
to go forward with the current contract is appropriate and 
cost-effective. One hundred megahertz systems fully meet the 
needs of the Social Security Administration through the IWS/
LAN. Going to larger computers would cost a heck of a lot more, 
Mr. Chairman, and I don't see any cost-effective way to justify 
such an activity.
    Could we spend more money for larger systems? We probably 
could. Will we need to do some operating, as we look to the 
future, to some form of technology upgrade? That is entirely 
likely for the years ahead. But the purchase that we made was 
appropriate for the needs of the organization, for one; and, 
two, cost-effective; and I think it was the right thing to do. 
And, clearly, if somebody would--clearly, somebody would like 
to sell us more expensive computers. I don't think that makes 
cost-effective sense, and it is a waste of American taxpayer 
dollars.

                         technology refreshment

    Mr. Porter. Do you have a refreshment contract?
    Mr. Apfel. We do not have a refreshment contract per se. We 
have a clause in our contract to enable upgrades, but it is not 
a specific refreshment contract, if I am correct in that. We 
have a changes clause and the technology substitution clause, 
and with those we believe we can accomplish anything we might 
need to accomplish. But, again, it has been my assessment that 
this would be a waste of money at this point in time.

                  expenses related to union activities

    Mr. Porter. All right. On January 27, you sent us a letter 
indicating that expenses relating to union activities conducted 
on official time have declined substantially to $12.4 million. 
Do you use the same methodology to compute these expenses for 
1997 as in previous years, and if so, what is the reason for 
the decline in the use of official time?
    Mr. Apfel. I believe, Mr. Chairman, that the 
methodologyfrom 1996 to 1997 was identical for official time. We now 
have just put in place a fairly sophisticated reporting system to be 
able to track hours of official time. That went up, I believe, within 
the last month, month and a half. I am unaware of any specific 
methodology change between 1996 and 1997, in terms of the calculations 
of official time.
    Mr. Porter. What is the reason for the decline, then?
    Mr. Apfel. The decline is due to the reduction in the 
number of hours, and actually a similar reduction in the number 
of full-time union representatives. It is basically personnel 
reductions, the number of hours of official time has declined. 
We have also seen a decline in the number of unfair labor 
practices, grievances, as well. So there has been a decline in 
the personnel costs side of official time, as well as a modest 
reduction in the number of full-time workers who are engaged 
in--who work for Social Security that are 100 percent--they are 
called 100 percenters, which is full-time union activities.

            continuing disability review cost-benefit ratio

    Mr. Porter. We provided the CDR funding based on the CBO 
assumption that such spending would have a substantial benefit/
cost ratio. As SSA looked back as the results of CDR processing 
to determine how much has been saved, what are the savings and 
what is the ratio of savings to expenditures? If you could 
provide a comprehensive response for the record, and explain 
the methodology, we would appreciate that as well.
    Mr. Apfel. I will, sir. Right now the historical rates are 
somewhere around 11 to 1 in terms of savings. We expect that to 
decline in the future to about 6 to 1, because we are picking 
the low fruit at this point in time in dealing with some of the 
easier cases, frankly. As we move to a larger volume of cases, 
we expect that to decline some, but still be in the range of 
about 6 to 1. And we will provide for the record a specific 
analysis of how we came to those figures, both historically as 
well as future projections.
    [The information follows:]


[Pages 1104 - 1113--The official Committee record contains additional material here.]



          long-range goals for disability claims and hearings

    Mr. Porter. The performance plan indicates targets of 26 
percent of SSI disability claims decided within 60 days of 
filing and only 15 percent of hearing decisions made and 
notices sent within 120 days of filing. What is a reasonable 
long-term goal for these indicators, what should we expect SSA 
to be able to do ideally in these areas, and why did you choose 
60 days and 120 days as your thresholds?
    Mr. Apfel. I think that was the appropriate threshold, 
given my confidence in changes to the system over the long run. 
What I would like to be able to do is reassess by next year 
those targets, after we have made decisions on disability 
redesign, and determine whether more appropriate levels are 
called for. I think these are appropriate for now. I would like 
to revisit them this year.

             old-age and survivors (OASI) claims processing

    Mr. Porter. You indicated a target of 83 percent of OASI 
claims processed by the time the first regular payment is due, 
or within 14 days of the effective filing date. What has been 
your historic rate for this indicator and why shouldn't this be 
closer to 100 percent?
    Mr. Apfel. I am going to have to get an answer for the 
record on that, Mr. Chairman. I am unaware of this statistic.
    [The information follows:]


[Page 1114--The official Committee record contains additional material here.]



      comparison of performance commitments to actual performance

    Mr. Porter. Can you submit for the record a chronology of 
the agencies' performance commitments and actual figures, 
beginning with the fiscal year 1996 budget hearing?
    Mr. Apfel. Absolutely.
    [The information follows:]


[Page 1116--The official Committee record contains additional material here.]



                     reconsideration reversal rate

    Mr. Porter. What is the rate at which initial disability 
claims decisions are overturned by reconsideration, what is the 
overturn rate for hearings, and can you provide a table for 
each of the last 5 years?
    Mr. Apfel. We will, sir. The reconsideration rate is 
relatively low. The OHA rate is considerably higher. I would 
point out that one of the main objectives of the disability 
redesign is to try to realign these activities. I think what we 
will have to have are higher approval rates at the DDS level 
and lower overturn rates at the ALJ level. We also need to look 
at the reconsideration step to determine whether it is 
redundant, whether we can establish a system that would not 
have the reconsideration step and, in lieu thereof, ensure that 
there is an individual contact, a predecisional interview with 
the applicant, rather than the reconsideration.
    So we are talking about two things at once here. But one of 
the things we have to be able to do is determine the efficacy 
of the reconsideration process. It is not a very high overturn 
rate but it is another bite of the apple. Can we improve the 
system at the front end so there is no need for the 
reconsideration, which also chews up quite a bit of time, but 
at the same time have some contact with the individual and test 
out whether information is accurate in their files, which would 
come from the face-to-face, or some telephone contact at least? 
That is step one. The other piece of it again is to find ways 
to achieve process unification, where the organization as a 
whole is working on the same framework in terms of decisions. 
It is true, the later in the process, the more detailed the 
records are. Attorneys provide very detailed information that 
wasn't available to the DDS. I understand all that. There is 
never going to be a pure confluence within the system. That is 
why we have an appellate system. But we have to move the system 
forward so that all the players in the process are using the 
same ground rules, the same cultural rules in terms of looking 
at the cases.
    So with both process unification, as well as some of the 
changes in terms of a reconsideration, I believe we will see a 
significant change in those. We have seen a slight increase 
already in the number of approvals, the proportion of approvals 
at the levels of the DDSs, and a lowering within the Office of 
Hearings and Appeals. That is promising, and we will provide 
that for the record, but ultimately we want to keep our eyes on 
the ball. That is the ball we need to be looking at.
    [The information follows:]


[Page 1118--The official Committee record contains additional material here.]



                     workers' compensation expenses

    Mr. Porter. The major component of the automation 
initiative has been the purchase of systems furniture, 
particularly ergonomic components. A primary justification of 
this expenditure is an anticipated reduction in workers' 
compensation expenditures. Data submitted by Dr. Callahan on 
page 1372 of the Fiscal Year 1998 hearing volume indicates that 
workers' compensation expenditures continued to rise. Please 
update the information in that table and tell us why workers' 
compensation expenditures have not decreased as anticipated.
    [The information follows:]


[Page 1120--The official Committee record contains additional material here.]



                          electronic payments

    Mr. Porter. Will SSA fully comply with P.L. 104-134, 
regarding electronic payments, and what percentage of benefit 
payments do you expect will be made electronically by January 
1, 1999?
    Mr. Apfel. The PL you are referring to, this is the 
electronic payments?
    Mr. Porter. Right.
    Mr. Apfel. I will provide for the record the actual 
projections that we now have. We are clearly moving in the 
direction of an increasing proportion of beneficiaries 
receiving their payments electronically, and this is a good 
thing to do. It is good for beneficiaries in terms of lost 
checks, stolen checks. It is a cost-effective measure.
    The question is: Will we need a broad-based waiver 
authority for individuals who cannot or strongly desire not to 
receive their checks electronically? And the answer to that is 
yes. We have been working with the Treasury Department to make 
sure that once the electronic benefit transfer system is 
established to complement the electronic funds transfer system, 
that there be a broad-based waiver authority for people to be 
able to opt out of the system.
    So I will provide for the record the ramp-up taking place, 
which I think is appropriate. But we should never expect the 
number to get to 100 percent because some people do not want to 
and won't be part of this new system.
    [The information follows:]
                          Electronic Payments
    SSA has made significant progress in meeting the objectives of P.L. 
104-134. At present, over 71 percent of Social Security payments and 40 
percent of Supplemental Security Income (SSI) payments are issued by 
means of direct deposit. Further, nearly 90 percent of new Social 
Security beneficiaries are being paid by direct deposit from the outset 
of their entitlement. We expect that by January 1, 1999, 75 percent of 
Social Security payments and between 45-50 percent of SSI payments will 
be paid by direct deposit.
    One of the major challenges facing SSA and other program agencies, 
however, is the ability to meet the January 1, 1999 deadline without 
the availability of a national electronic payment program for the 
unbanked. An estimated 7 to 8 million Social Security and SSI 
recipients do not have a relationship with a financial institution and 
are not likely to be able to establish one without assistance from the 
Government.
    SSA believes the most feasible means of meeting the objectives of 
P.L. 104-134 is to implement the Final Phase requirement at the point 
in time the Department of the Treasury's electronic transfer account 
(ETA) program becomes available nationally. The Final Phase requires 
all persons entitled to Federal payments to be paid by direct deposit 
or some other form of electronic funds transfer by January 1, 1999. At 
the time the ETA accounts are available, SSA will send notices to all 
remaining check receivers. Beneficiaries with bank accounts will be 
informed of the need to enroll in direct deposit. Those who do not have 
a relationship with a financial institution will be encouraged to 
establish one. At the same time, they will be provided with information 
about the ETA program including instructions on how to enroll. All 
check receivers will be informed of the waiver conditions established 
in Treasury's final regulations. SSA believes it can fully implement 
the Final Phase requirements of P.L. 104-134 within 9 months of the 
availability of the national ETA program.

    Mr. Porter. The remaining questions we have are for the 
record.
    We thank you for your excellent opening statement and for 
answering of all our questions, and we know you are going to do 
a good job as our Social Security Commissioner. I would close 
by urging you not to trust government with surpluses or 
reserves. It doesn't work.
    Mr. Apfel. I sensed that you feel that way, sir.
    Mr. Porter. Thank you very much. The subcommittee will 
stand in recess until 2:00 p.m.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1123 - 1308--The official Committee record contains additional material here.]



                                          Thursday, April 23, 1998.

                    CORPORATION FOR NATIONAL SERVICE

                               WITNESSES

HARRIS WOFFORD, CHIEF EXECUTIVE OFFICER
DIANA LONDON, ACTING DIRECTOR, AmeriCorps*VISTA
TOM ENDRES, DIRECTOR, NATIONAL SENIOR SERVICE CORPS
LOUIS CALDERA, CHIEF OPERATING OFFICER
    Mr. Porter. The Subcommittee will come to order. We 
continue our hearings on the Fiscal Year 1999 budget with the 
Corporation for National Service. And we are pleased to welcome 
the Chief Executive Officer, Senator Harris Wofford.
    Senator, it is very good to see you again, sir.
    Mr. Wofford. It is good to be back, Mr. Chairman.
    Mr. Porter. If you would introduce the people you brought 
with you and please then proceed with your statement.
    Mr. Wofford. My team, left to right, is Chief Operating 
Officer Louis Caldera; Tom Endres, the Director of the National 
Senior Service Corps, the three programs of the Senior Corps; 
and Diana London, the Acting Director of VISTA; the two parts 
of our program that are before you again.
    Mr. Chairman and members of the Committee, I am delighted 
to be here. I want to begin by thanking this Committee for its 
history of support for VISTA and the three programs of the 
Senior Corps and for the increases provided last year that have 
allowed us to expand our longstanding and successful efforts in 
education and childhood literacy.
    My written testimony details our progress on many fronts, 
including the growth and accomplishments of national service, 
our collaboration with Big Brothers/Big Sisters, and other 
leading nonprofits, new partnerships with the private sector, 
improvements in our financial management, and steps we are 
taking to expand service opportunities while reaching for 
higher quality and greater community impact.
    The accomplishments listed are just a small fraction of 
what got done, but they give a glimpse of what members of VISTA 
and senior volunteers are achieving in communities nationwide, 
not just in hours served but in outputs and results: higher 
reading levels, lower dropout rates, more children immunized 
and more adults who have moved from welfare to work.
    More than ever before, our programs are focused on: meeting 
serious needs, demonstrating clear results, and building 
sustainability for the long term. And I want to thank you, Mr. 
Chairman and your colleagues, for your leadership, 
encouragement, and support in moving us in this direction of 
results, meeting serious needs, and sustainability.
    Let me highlight our work in two areas. First, we are hard 
at work on a goal shared by governors, school superintendents, 
employers, parents, the President, and former Presidents of 
making sure that all children read independently and well by 
the end of the third year.
    For us this is not a new focus. RSVP volunteers and Foster 
Grandparents have been involved actively in children's literacy 
since the 1970s. And last year they served in more than 8,500 
schools, 2,300 Head Start centers, 2,200 libraries.
    For two decades, VISTA has helped groups like Literacy 
Volunteers of America, Lauback Literacy Action, and Communities 
and Schools recruit, train, and mobilize tutors.
    These and other organizations know the key to successful 
tutoring is having well-trained, reliable, and consistent 
volunteers; something VISTA and the Senior Corps offer.
    The increases provided last year are allowing us to expand 
the reach and effectiveness of our efforts, adding 8,500 RSVP 
volunteers, 1,200 foster grandparents, and more than 2,000 new 
VISTAs to serve as tutors and tutor coordinators in existing 
local literacy programs.
    Second, National Service is creating economic opportunity 
and saving taxpayer dollars. VISTA has worked with more than 
2,000 businesses across the country to obtain employment for 
welfare recipients and others who are unemployed.
    Members arranged development capital for 430 small 
businesses and helped establish or expand nearly 800 
microenterprise businesses in low-income communities.
    Senior companions helped 37,000 frail adults live 
independently. And you save about $35,000 a year for every 
senior that is able to remain at home for a year who might 
otherwise have been in a nursing home; costs that otherwise 
would have fallen on the family or on taxpayers through 
Medicare or Medicaid.
    Results like these can be found in every area of service, 
whether health and nutrition, improving public safety, cleaning 
the environment, expanding affordable housing, helping the 
homeless find shelter and jobs. This service is highly cost-
effective.
    The Westat accomplishment study you received shows that for 
every federal dollar invested in VISTA, $3.30 is returned to 
the community. In total, VISTA members raised $82,000,000 for 
the projects in which they worked last year, and they recruited 
more than 140,000 local volunteers. That is an average of 42 
volunteers and $24,000 generated by each VISTA member.
    The Senior Corps is just as effective. Last year Senior 
Corps projects received $93,000,000 in local support, far 
exceeding the matching requirements set in law.
    A major goal of both the Senior Corps and AmeriCorps*VISTA 
is to expand service opportunities while reaching for higher 
quality and impact. For example, the aging of America gives us 
an extraordinary opportunity to expand senior service. We have 
the largest group of seniors in our history, more than 
55,000,000 who are over the age of 55. And this number will 
double again over the next 30 years.
    But the numbers are neutral. What they add up to depends on 
us. If we tap skills and experience of older Americans, if we 
mobilize senior power in a structured and organized way, then 
we will have a tremendous force for tackling some ofsociety's 
most difficult problems.
    To best use this resource, we have implemented a full-scale 
reform of Senior Corps programs designed to enhance efficiency 
by, above all, increasing opportunities for outcome-oriented 
service. Programming for impact, as we call it, focuses on 
community needs in the planning and development of Senior Corps 
projects and in measuring the results.
    Following your guidance and the goals of the Government 
Performance and Results Act, the Senior Corps has changed the 
way it does business. Programming for impact is now our 
established policy and has been introduced at every level of 
the Senior Corps.
    Then consider VISTA. The core mission of VISTA is 
strengthening the capacity of nonprofits serving low-income 
communities to achieve their goals. Organizations requesting 
VISTAs plan from the beginning to sustain the work which VISTA 
has helped them initiate.
    A recent evaluation found that this works. Nearly 73 
percent of the projects on which VISTA has worked continue to 
operate years after the members had completed their 
assignments.
    Another way VISTA expands service and increases impact is 
cost-sharing. State and local governments and nonprofits are 
increasingly providing funds to expand the number of VISTAs 
while the Corporation For National Service provides only 
education awards and recruitment and training assistance.
    Today some 200 sponsoring organizations contribute over 
$13,000,000 to this effort, up from $5,000,000 4 years ago, 
supporting more than 1,300 VISTAs. And that number is growing 
every year.
    Mr. Chairman, next Monday in Chicago, General Powell will 
give his one-year report to the nation on the progress towards 
the goals for children and youth set a year ago at the 
Philadelphia summit of all the Presidents. While much has been 
accomplished, General Powell will reinforce how far we have to 
go to help turn the tide for millions of at-risk children and 
see that they get the five fundamental resources declared at 
Philadelphia, which they need to live healthy and productive 
lives.
    As in the past, VISTAs and Senior Corps volunteers are in 
the forefront of this campaign helping children, both through 
their direct service and through the volunteers they recruit 
and mobilize.
    Now more than ever, our nation needs their service, not 
just to help at-risk youth have a brighter future but to help 
Americans of all ages and backgrounds make things better for 
themselves, their families, and their communities. That is what 
national service is all about.
    My colleagues and I will be happy to respond to any 
questions and continue to take your leadership, Mr. Chairman.
    [The prepared statement follows:]


[Pages 1312 - 1330--The official Committee record contains additional material here.]



    Mr. Porter. Thank you, Senator, for your excellent opening 
statement.
    Do I get to be a senior if I am 55 now?
    Mr. Wofford. I celebrated my 72nd birthday skiing at Big 
Sky after 12 days of visiting projects in 8 states, and I was 
able to return to my mediocre intermediate-level skiing.
    Mr. Porter. I got my first senior discount at the movie not 
long ago. And then I went again and forgot to ask for it.
    Mr. Wofford. I think you get your----
    Mr. Hoyer. I think, with all due respect, those of us who 
have been there, Congresswoman Pelosi said that you did not 
forget.
    Mrs. Pelosi. If I may respond, will the gentleman yield?
    Mr. Hoyer. Certainly.
    Mrs. Pelosi. What I said, there was a joke that came 
through when you said that there were 55,000,000 seniors in 
America over 55 years of age. And we did not know that was the 
new marker.
    Mr. Porter. Yes, right, exactly.

                     seniors are growing in number

    Mr. Wofford. Actually, it is going up every day. I have 
already shifted to speaking about 60,000,000 seniors. And, by 
the way, one of the things we try to do is recruit more seniors 
who have retired or are free much earlier than before.
    I think the average age of our senior programs has been 
over 70. We would like to see that average go down and attract 
not just the very elderly, who live longer and better lives by 
volunteering, but some people who come out of their years of 
work while they are really ready to try to apply some of the 
things that they are thinking about, not full-time but part-
time. We are making a special effort to recruit a whole range 
of very talented seniors that are not in some of the categories 
that were filling the volunteer programs in years past.
    Mr. Porter. The Subcommittee will operate under the seven-
minute rule. The Chair has to chair a luncheon right at noon. 
So we are going to have to stay on our schedule.
    Senator, an independent evaluation completed in F.Y. '97 
found that nearly 73 percent of AmeriCorps*VISTA-supported 
programs continued to operate years after the VISTAs had 
completed their assignments. Why do you think your program has 
been so successful in getting the community to take over and 
sustain those activities?

                          vista sustainability

    Mr. Wofford. Well, in the first place, they are their--that 
is the community's--programs. We, as in the other parts of 
AmeriCorps, respond to the priorities and needs of local 
nonprofit organizations who usually select their own members. 
They administer them and deploy them. It is very different from 
the way the Peace Corps operates--it selects, recruits, trains, 
deploys--and in a sense runs programs overseas.
    The reason the sustainability I think comes about is the 
talent of the VISTAs and the qualities that they bring to their 
service; the enthusiasm they bring to the job and the success 
of what they do. What they do is what those local nonprofits 
badly wanted.
    Take Habitat for Humanity. Millard Fuller badly wants the 
Habitat for Humanity units, who have no staff and who may be 
doing one house a year, to be jump-started. Those units want 
some help. And they are finding that VISTA AmeriCorps members, 
as well as other AmeriCorps members, can come in and help do 
what they have urgently wanted to do.
    Mr. Porter. The Committee was very concerned when it 
learned that in July 1997 the corporation's Office of Inspector 
General and Arthur Andersen identified 21 material weaknesses 
in reportable conditions.
    It is a priority of the Committee to ensure that these 
problems get resolved in a timely manner. When do you expect to 
receive a clean audit?

                         status of auditability

    Mr. Wofford. There is no higher priority for us. We started 
with 99 findings and recommendations that were identified just 
as I arrived as CEO. We had hoped that we were closer to 
completing all 99, but the report, as you said, found that we 
still had 21 to go.
    We now have an all-out plan with the direct and committed 
involvement and help of top leadership at OMB. They are doing 
with some other agencies facing the same problems. We have a 
plan to get a clean audit for the next fiscal year.
    Our Chief Operating Officer is the key person on that 
front. If you would give him a few words, I think Louis Caldera 
might contribute something to the response.
    Mr. Caldera. Mr. Chairman, Louis Caldera.
    We have set for ourselves a goal that we would have 
unqualified financial opinions for F.Y. '98. We currently have 
a plan that we are executing with milestones and deadlines that 
we issued on March 18th. We have committed to reporting to the 
Congress every 60 days on our progress on that plan. We are 
resourcing it, and we are on our way to accomplishing those 
goals.
    About ten of the items that were on that list last summer 
have been completed, but we want to test to make sure that the 
corrections that have been put in place are working 
effectively.
    Mr. Porter. Thank you, Mr. Caldera.
    Senator Wofford, in F.Y. '99, the America Reads initiative 
will expand from its initial level of 370 service years at the 
end of F.Y. '97, or 12 percent of the overall program, to 
nearly 2,400 service years, or 44 percent of the overall 
AmeriCorps*VISTA program. Is this expansion coming atthe 
expense of existing programs?

                       literacy and america reads

    Mr. Wofford. No, although I think it is important to 
realize that one of the values of having a nationwide goal, 
such as seeing that every child reads by the end of grade 
three, is that it focuses resources. And that focus can be of 
tremendous importance.
    This is a goal that, as you know, the President proclaimed. 
The budget agreement allocated resources to support activities 
that will help achieve that goal. But it is a nonpartisan, 
bipartisan universal goal. Governor George Bush of Texas six 
months before the President did, proclaimed literacy as the 
most profound goal of his administration. City after city is 
doing it.
    We are not diverting resources to achieve that goal, thanks 
to the support of Congress. You have given us extra resources 
for that goal. And it is possible that you would not have given 
us extra resources of this kind if there had not been a 
rallying to this big nationwide goal.
    It is not a nationwide or federal-run program. As you know 
VISTA operates through local programs. Having that goal is I 
think very important to the nation.
    Mr. Porter. So that other regular VISTAs are not declining 
as a result of the increase in America Reads.
    Mr. Wofford. No, they are not.
    Mr. Porter. All right. In addition to your agency, the 
Department of Education is also very involved in the America 
Reads initiative. Could you provide us with examples of ways in 
which you and the Department of Education collaborate on this 
initiative?

                collaboration with education department

    Mr. Wofford. We are cooperating fully in a joint and 
collaborative effort to offer to the diverse additional 
resources going into children's literacy training in regional 
programs around the country.
    Secondly, we have consulted and planned, about how we tap 
the best information from the Education Department, from 
literacy programs around the states, and how they may benefit 
from our own experiences, which is very extensive in this area, 
about the best programs we have discovered at the local level.
    The cooperation is very full. They are seeking 
Congressional authorization to expand in this area. It is an 
area we have been in from the beginning. Our involvement is 
already authorized. And we are fully engaged in it around the 
country. We are making the successful results of what is 
happening in Houston Reads, Baltimore Reads, Boston Reads and 
other programs we are supporting available to the Education 
Department as they plan further their role.
    Mr. Porter. Thank you, Senator.
    Mr. Hoyer.
    Mr. Hoyer. I would----
    Mrs. Lowey. In fact, I was going to yield to Mrs. Pelosi.
    Mr. Hoyer. Mrs. Lowey has to leave. Mrs. Lowey was here 
before and Mrs. Pelosi.
    Mr. Porter. Well, actually, all of you were here at the 
beginning of this segment of our hearing. So I assumed you 
would go in seniority order.
    Mrs. Pelosi.
    Mrs. Pelosi. Thank you very much, Mr. Chairman.
    I appreciate the courtesy of my colleagues because I have 
to chair a briefing right now, at 11:45. But I wanted to 
commend Senator Wofford for his great leadership and his 
associates who are with him today. I wanted to call attention 
to Louis Caldera, who was a former member of the State Assembly 
in California, who was a distinguished member then, and 
commanded the respect of his colleagues. And we were so 
delighted that he wanted to come to Washington and be part of 
this great effort.
    Mr. Wofford knows the admiration that I have for him and 
his commitment to volunteerism. And obviously with his 
associates here, Ms. London and Mr. Endres, you are in the 
leadership of the most wonderful part of our great country: the 
full participation of all Americans.
    I will submit my questions for the record, but I wanted to 
formally welcome Louis Caldera. He was a great resource to us 
in California and now is nationally.
    Thank you, Mr. Chairman. I thank my colleagues.
    Mr. Porter. Thank you, Ms. Pelosi.
    Mr. Wofford. Thank you.
    Mr. Porter. Who do you want me to call on next?
    Mr. Wofford. We thank the California legislature for the 
term limits that enabled us to get Mr. Caldera.
    Mrs. Pelosi. Thank you.
    Mr. Porter. Mr. Hoyer.
    Mr. Hoyer. Let us not go overboard on thanking. [Laughter.]
    I suppose California's loss, however, is the Nation's gain. 
Ms. Pelosi has regaled us all about how beneficial it has been 
for you to be here.
    Mr. Caldera. Thank you.
    Mr. Hoyer. The Senator is also extraordinary beneficial. A 
loss to the people of Pennsylvania, but not to our Nation. I 
think the President chose wisely. You have done an outstanding 
job. I am an enthusiast for this program, as you know, which is 
under some critical challenge from time to time.
    Maybe this question was asked. I was reading along with 
your statement. In terms of the objective of achieving self-
sufficiency for VISTA, how do you at this point in time rate 
that as----
    Mr. Wofford. The objective of efficiency----
    Mr. Hoyer. Self-sufficiency.
    Mr. Wofford. Self-sufficiency, sustainability of programs?
    Mr. Hoyer. Yes, sir.

                            vista's success

    Mr. Wofford. I think the VISTA record, for example, is 
outstanding. It has been evaluated in a major study that you 
recieved and one that you will soon get. I think we have given 
you the draft of it.
    Ms. London. Well, actually, the sustainability study was 
submitted to the committee last year in final. And our 
intention is to update that study in F.Y. '99.
    Mr. Wofford. It was last year's study, I think that showed 
a 22 percent increase in sustainability over the year before. 
And we think you will see further progress reflected in the 
study that is going on now.
    I think one reason that, as far as I know, the VISTA 
Program has not been a lightning rod for criticism is that it 
has been at work for 30-some years. It has been tested. It has 
learned as it went along how to do it better and better. And we 
are very proud of the record of VISTA on every front, 
especially its work in children's literacy.
    Mr. Hoyer. Senator, perhaps it is in the report here or in 
your statement. What do we estimate is the matching resources, 
either in kind or dollars, with respect to all of the programs 
that come under you? Now, the reason I ask that is that we are 
now asking for I guess $278,000,000. Is that the request? Am I 
recalling the number correctly?
    Mr. Wofford. Yes.
    Mr. Hoyer. Two hundred and seventy-eight million, which is 
about a $21,000,000-$25,000,000 increase. How much do we 
leverage from that in the country?

                      leveraging federal resources

    Mr. Wofford. Diana London and Tom Endres may want to add to 
this, but on VISTA, cash contributions found by the Westat 
study for the '97 fiscal year were $37,000,000; in-kind 
contributions, $45,000,000; community volunteers using the 
Independent Sector's of evaluation of volunteer hours, 
$55,000,000, which is $137,000,000. And AmeriCorps*VISTA 
members mobilized $3.30 in local support for every appropriated 
dollar spent on the program in '97.
    I think I mentioned that each VISTA is estimated to recruit 
42 community volunteers and mobilize $24,000 in local 
resources. One of the main things VISTA does is mobilize local 
resources for local projects.
    Maybe Tom Endres would like to comment on the senior 
programs.
    Mr. Endres. In response to your question, Congressman, for 
the Senior Corps programs, first, for the Foster Grandparent 
Program, the nonfederal local contribution to theFoster 
Grandparent Program last year exceeded $32,000,000, which represents 42 
cents for every federal dollar invested, well above the 10 percent 
matching level required by law.
    For the RSVP program, the projects received over 
$42,000,000, exceeding the federal contribution and clearly 
demonstrating broad-based support for the Retired and Senior 
Volunteer Program.
    The Senior Companion Program is the youngest and the 
smallest of the three senior programs. Their nonfederal local 
contribution was over $19,000,000. And that nonfederal 
contribution represented a match of 61 percent, well above the 
10 percent matching requirement by law.
    The senior programs are doing very well in mobilizing non-
Corporation, nonfederal resources to provide increased service 
opportunities across the nation.
    Mr. Wofford. Could I add one other, Mr. Hoyer?
    Mr. Hoyer. Certainly, Senator.
    Mr. Wofford. The other measure of this is the cost-sharing 
that is growing. From 1994, there were $5,000,000 paying for 
560 full-year service by VISTA service years. It has increased 
160 percent in the last 4 years. It is now more than 
$13,000,000 in Fiscal Year '98, contributed by local, state, 
and nonprofit organizations. They are now paying for more than 
1,300 VISTAs.
    Mr. Hoyer. Well, let me follow that. It was $5,000,000 in 
1994?
    Mr. Wofford. Yes.
    Mr. Hoyer. And it has gone to $13,000,000?
    Ms. London. Sixty percent increase.
    Mr. Wofford. No.
    Mr. Hoyer. No, no.
    Mr. Wofford. It is 160 percent.
    Mr. Hoyer. It is more than----
    Mr. Wofford. I figured it out this morning. From 5,000,000 
to 13,000,000 is 160 percent.
    Mr. Hoyer. It may be 260 percent.
    Mr. Wofford. Okay.
    Mr. Hoyer. Ten would be a 200 percent increase, would it 
not?
    Mr. Wofford. Thank you. I yield to higher mathematics.
    Mr. Hoyer. Well, no. I am just----
    Mr. Wofford. It is my mediocre intermediate mathematics on 
this point.
    Mr. Hoyer. No. At the University of Chicago, they are much 
better thinkers, however. I know that. So I will not get into 
that kind.
    I understand that the supplemental reduction is not in 
programs covered by this Committee but, rather, the VA-HUD 
Committee. If we cut the budget, would there be, in effect, a 
geometric reduction? I do not know whether that is the way to 
say it, but a multiple reduction at the local level, so that 
cutting back a dollar might result in three dollars loss of 
service?
    Mr. Wofford. The last calculation I would have to think 
through. But would there be a major reduction? A reduction in 
the programs would naturally follow any reduction in our 
appropriations.
    Mr. Hoyer. Senator, on VISTA, for instance----
    Mr. Wofford. Yes.
    Mr. Hoyer [continuing]. You said there was a 3.3 factor.
    Mr. Wofford. Yes.
    Mr. Hoyer. So if we spend $1 here, locals and volunteers 
spend 3.3. What I was trying to extrapolate is that if we cut 
back on this program, which is generating so much volunteer 
service, in-kind contributions, and others, it is not just 
cutting back a dollar at the federal level. It will have I 
think----
    Mr. Wofford. Yes.
    Mr. Hoyer [continuing]. A magnified effect at the local 
level.
    Mr. Wofford. There is a simple way to answer affirmatively. 
This is essentially a people power program. It supplies people. 
It is the individual VISTA working for a Boys and Girls Club or 
a Habitat for Humanity Unit that mobilizes the volunteers, 
helps raise the money. And if that VISTA is not there, which is 
what happens when you cut this program, those achievements 
would not take place. Both the financial return to those 
agencies and the leadership in carrying out a project that 
those local agencies badly want to carry through would be lost.
    Mr. Caldera. If I may add to that, although there are 
unobligated funds, because of the nature of our grant cycle 
most of those funds, although they have not been obligated, 
have been promised to local groups. So with respect to 85 
percent of the money, commitments have been made.
    So we are talking about gutting programs that are currently 
operating and are planning to operate next year which would see 
their funding taken away. So they would have to let people go 
whom they are already planning to hire and stop programs that 
they are already planning to execute.
    Mr. Wofford. That is particularly true of the grant 
programs that are being used, particularly for the children's 
literacy effort. The VISTAs that are not on grant programs are 
on a direct federal payroll. And when the money for that is 
lost, there is an even faster reduction than when there is a 
little advance time on a grant.
    If you have a grant and the next funds for it are cut off, 
they stop planning for it. But when the government closed down, 
VISTAs stayed on the job, almost all of them with no living 
allowance at all.
    Mr. Hoyer. Thank you, Senator. I know my time is up and Ms. 
Lowey needs to get in before 12:00 o'clock.
    Mr. Porter. Thank you, Mr. Hoyer.
    Ms. Lowey.
    Mrs. Lowey. Thank you, Mr. Chairman. And I join my 
colleague Senator Wofford in welcoming you to this Committee. 
You have had such a distinguished career of public service. And 
we are indeed fortunate that you have chosen to continue to 
serve us in this vital organization.
    I continue to be impressed with the breadth of activities 
that the corporation is involved in. And I am particularly 
impressed with the partnering that you have done with groups 
such as Big Brothers, Big Sisters, and others in order to 
leverage the funds that are appropriated to you. So I want to 
thank you personally for your leadership.
    I am impressed with so many of your areas of service. I 
would just like to focus on a few. First of all, I understand 
that AmeriCorps*VISTA members will be involved in welfare-to-
work activities. And one of these projects is actually taking 
place in the South Bronx.
    I think it would be very interesting for this Committee to 
hear about these welfare to work activities and specifically 
that one if you care to elaborate.

                           high bridge vistas

    Mr. Wofford. That is High Bridge? Diana London cantalk 
about the High Bridge Program. I am looking forward to seeing it in 
action myself.
    Mrs. Lowey. I would love to join you.
    Ms. London. The High Bridge Community Life Center is 
actually located in the empowerment zone in the South Bronx. We 
have had VISTAs there for three or four years working directly 
with low-income residents including welfare recipients on job 
training activities that are leading to permanent employment 
with organizations like UPS and the local hospital that is 
hiring nurses' aides.
    The VISTAs have actually institutionalized a job training 
program that is a direct feeder to those two corporations. It 
has been extremely successful. VISTA's have gotten local 
businesses in the area to commit to a job bank.
    They have hired about 200 local residents in permanent 
employment. We have been absolutely amazed at how successful 
this project has been. And that is just one example.
    Another one I will mention that is a different approach to 
welfare-to-work is Working Capital, which is an organization in 
Massachusetts. We have VISTAs working on a statewide basis with 
peer lending for small and micro businesses in the area. They 
are working on loan applications, loan approvals, hooking up 
micro-enterprise businesses with universities to get business 
training from them.
    And over the past year, we had about 260 micro-businesses 
established as a result of their efforts. It is another project 
that we are really, really proud of.
    Mrs. Lowey. I also serve on the Foreign Operations 
Subcommittee. Congresswoman Pelosi and I have been very 
passionate advocates, as you may know, of micro enterprise. And 
to see this utilized in the United States I think is very 
important. I would like to get more information from you and 
documentation as to its success because it can work.
    You know it can work. And I think if we can expand this 
idea, we can certainly help thousands and thousands of women 
and men enter into jobs and into businesses that can help them 
and their families and the community. So I want to particularly 
congratulate you.
    Another area, AmeriCorps places a significant value on 
enabling programs to achieve self-sufficiency. In fact, in 
looking at your information, one study found that over 70 
percent of VISTA projects continued to operate after VISTA 
members depart. I think that is particularly important for this 
Committee to know that our investment has enduring value in the 
community. This is really terrific.
    Could you discuss with us how this self-sufficiency is 
achieved? Do VISTA members provide organizational and 
management skills to local organizations? I mean, 70 percent is 
tremendously effective. Could you share with us how you achieve 
that?
    Ms. London. Yes. I actually think there are three main 
reasons for that. One is, as Mr. Wofford alluded to earlier, 
VISTAs are there to mobilize resources in low-income 
communities. Mobilizing cash and in-kind resources certainly 
helps to create sustainable programs as does the notion of 
recruiting community volunteers who will stay in the community 
and continue to provide their services.
    I think another aspect of it is what we call VISTA's role 
in organizational capacity-building, where to some degree our 
members are really involved in providing structural 
improvements in organizations.
    They set up procedures. They set up databases. They set up 
training programs. They do community outreach for the 
organizations. They are really enabling those organizations to 
become stronger themselves to continue to promote and sustain 
the programs that the VISTAs have been working on.
    Mrs. Lowey. Why are they so good? Maybe you can tell us. I 
think that is an important question. I would be interested in 
what kind of training you provide to these VISTA volunteers so 
that they can be so effective.
    We were talking in the last hearing about excellence and 
how can we ensure excellence in the programs we fund.
    Ms. London. I think again it is a combination of factors. 
One is that our programs are generally quite small. Our 
projects average about four to five members. Our corporation 
field staff provides a tremendous amount of technical 
assistance in the development of those projects.
    Another aspect is recruitment. VISTAs, whether they are 
recruited locally or from our national pool, are selected 
because they have the relevant skills they need to really carry 
out those assignments. The way we recruit is quite targeted.
    Training is definitely another aspect of it. We instill in 
our project sponsors from the very beginning the notion that 
VISTAs should create a sustainable outcome at the end of three, 
four, five years because we do turn our projects over after a 
few years.
    Mr. Wofford. Could I add two other elements?
    Mrs. Lowey. I would be delighted.

                   selection and training of vista's

    Mr. Wofford. One is that the projects themselves do the 
ultimate selection of the VISTAs. They vary in what their 
requirements are. But they find people who are natural-born 
leaders in one area or another, in many cases.
    Secondly, the training that we do is very important, but in 
many, many cases the training that those local programs do is 
even more important. Take the 400-some AmeriCorps members in 
Habitat for Humanity. Some 200 of those are VISTAs.
    Habitat is very interested in who it selects. They 
particularly like to select people who had been college 
volunteers or volunteers in high school before they became 
VISTAs or AmeriCorps members with Habitat.
    Secondly, they get intense on-site training. When Speaker 
Gingrich and other members of Congress were building a house 
nearby here with the ``Houses that Congress Built''--a 
wonderful idea of Congress sponsoring Habitat houses--it was 
the AmeriCorps team that had organized the great part of the 
site, that was up on the scaffolding telling members of 
Congress what to do.
    In any of the Habitat blitzes, it is the AmeriCorps teams 
that go in. They are there at the beginning organizing it. They 
are there at the end of the day when the other volunteers have 
left. They are there first thing the next morning. And they 
have been trained.
    I was in Americus, Georgia seeing it happen on a big blitz 
a year ago. They get that training with Habitat. We are 
operating on so many different fronts. That is just one 
example.
    Mrs. Lowey. Mr. Chairman, I know the bell went off, but I 
just want to conclude, if I may, in thanking you for another 
successful partnership in Westchester County with the Literacy 
Volunteers of Westchester County. It has been an outstanding 
partnership, and you have really had an impact in adult 
literacy. I personally want to thank you and wish you well in 
your continuing good work.
    And thank you, Mr. Chairman.
    Mr. Wofford. Thank you, Ms. Lowey.
    Mr. Caldera. Mr. Chairman, that is the same training point 
that applies to the literacy programs. The literacy programs do 
a great part of the training of the literacy VISTAs.
    Mr. Porter. Can I ask you two quick questions to end our 
hearing this morning? It has been estimated that 40 percent of 
fourth graders scored below the basic level on the 1994 
National Assessment of Educational Progress. If the America 
Reads initiative is fully implemented, what is your goal and 
timetable for improving on this 40 percent figure? Can you 
really have a significant effect on achieving the goal of 
bringing that up?
    Mr. Wofford. Yes, but immediately we need to recognize that 
the challenge differs tremendously from school district to 
school district. For example Montana, just reported their test 
results. They showed that in Montana, 28 percent of the 
children going into the fourth grade were not able to read 
adequately.
    That is much better than the national average, but there 
were districts in Montana, particularly associated with Native 
American on Indian populations and low-income populations, 
where 50-60 percent were not able to read. VISTAs assignment is 
to work in the low-income communities. So VISTA's will be 
working with tremendous dedication in this most difficult area.
    I have just come back from a trip to such projects in eight 
states. And they are going to be able to prove progress school-
by-school and neighborhood-by-neighborhood. I have seen a 
number of schools that have turned things around--where they 
have made extraordinary progress in the last one, two or three 
years. We have got a record of achievement on that.
    The national progress is going to depend on resources far 
beyond us, however. As proud as we are of all of the things we 
are doing, this campaign for literacy is very widespread. 
Cities are organizing their campaigns in different ways. But 
yes, we will be able to show results school by school and 
neighborhood by neighborhood.
    Mr. Porter. Senator, AmeriCorps*VISTA is partnering with 
over 20 national organizations to make an impact on communities 
in the area of adult and children's literacy education, 
technology, housing, homelessness among a number of other 
issues.
    One of the organizations you work with is the Big Brothers/
Big Sisters Program. How do you work with a program like this 
one? What do you actually do with them?
    Mr. Wofford. One of the interesting things that we were 
doing about a year or so ago was helping Big Brothers/Big 
Sisters recruit, develop and organize high school students to 
become junior Big Brothers and Big Sisters for elementary 
school students. We have a new and very interesting program 
with Big Brothers/Big Sisters and I was lucky to go up and see 
their training at their sendoff program.
    Maybe Diana London could just quickly tell you the details 
on that project.
    Ms. London. Yes. We are working with the national 
organization, but, actually, VISTAs are assigned to 25 or more 
local affiliates, including one in the metropolitan Chicago 
area. And the ojectives of the program are: to increase the 
number of minority mentors, to set up recruitment systems so 
that we can attract more minority mentors into the Big Brothers 
Program; to set up some school mentoring programs; and to try 
to target recruitment efforts toward corporate mentors and 
senior mentors. Each site will have one of those foci as part 
of their activities.
    It is just getting off the ground. I think in Chicago 
VISTAs actually arrived within the last couple of weeks. It is 
a little bit too soon to be able to report on our progress. 
Next year when we come back, we will be able to tell you how it 
is going.
    Mr. Porter. Thank you very much. Senator, thank you very 
much for a fine job you are doing with this agency. And I wish 
we had more time because there is so much breadth to it as well 
as depth.
    Mr. Wofford. Well, I want to make you aware of the role of 
seniors in every one of the priorities that we have discussed. 
Also, we are combining senior RSVP and Foster Grandparents with 
VISTAs in many places very effectively.
    Thank you very much.
    Mr. Porter. Thank you very much, sir.
    The subcommittee will stand in recess until 2:00 p.m.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1342 - 1411--The official Committee record contains additional material here.]



                                           Tuesday, April 28, 1998.

            OCCUPATIONAL SAFETY AND HEALTH REVIEW COMMISSION

                               WITNESSES

STUART E. WEISBERG, CHAIRMAN, OCCUPATIONAL SAFETY AND HEALTH REVIEW 
    COMMISSION
WILLIAM J. GAINER, EXECUTIVE DIRECTOR

                       Introduction of Witnesses

    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the budget for fiscal year 1999 with 
the Occupational Safety and Health Review Commission.
    Mr. Weisberg, Stuart Weisberg, Chairman, will testify. Mr. 
Weisberg, we are pleased to have you with us today. I want to 
start by telling you that we appreciate the work you have done 
at the Commission. We appreciate your willingness to work with 
us to reduce costs, reevaluate your office structure, automate 
the agency, and become more productive and efficient. You have 
developed a very good strategic plan. You have received clean 
audits. You have invested in your employees. We also appreciate 
your efforts to make the appeals process more accessible to 
small employers by reducing the costs and legal hassles they 
have previously encountered.
    We had the Federal Mediation and Conciliation Service 
before us last week and told their director, Dr. Wells, that we 
don't make enough effort to get the good stories about 
government into the media. Everyone knows about the $1,000 
screwdriver, but when government gets it right, nobody hears 
about it. I believe your agency is getting it right and I hope 
that we can get the word out about it.
    If you would introduce the gentleman who is with you and 
then proceed with your statement.
    Mr. Weisberg. Thank you very much, Mr. Chairman. It is 
again a pleasure to appear before you to discuss our budget 
request. I am accompanied today by our Executive Director, 
William Gainer. Mr. Chairman, I have a prepared statement that 
I request be inserted in the record in its entirety.
    Mr. Porter. It will be received.

                           Opening Statement

    Mr. Weisberg. Let me highlight first what we have done to 
assist small employers. In October 1995, we launched E-Z Trial, 
a program which allows small employers to contest cases and 
appear before our judges with as little legal formality as 
possible. Almost 50 years ago, Congress passed the 
Administrative Procedures Act to govern administrative 
hearings. Congress believed that court proceedings were too 
cumbersome and time-consuming. Today many administrative 
hearings are as time-consuming and complex, if not more so, 
than court proceedings. E-Z Trial represents an attempt to get 
back to basics, to create a less formal user-friendly forum to 
adjudicate disputes.
    The E-Z Trial program is working remarkably well. Not only 
are E-Z Trial cases being heard far more promptly and cycle 
time is being reduced dramatically by almost two-thirds but, 
most gratifying, far fewer cases are being dismissed based on 
technicalities.
    What we learned from focus group meetings held earlier last 
year in Cleveland to evaluate the program was that even though 
we have a plain English guide to E-Z Trial, some smallemployers 
who had participated in an E-Z Trial were surprised to learn that it 
was a real trial with sworn witnesses. They had assumed it would be 
similar to an informal settlement conference at OSHA where everyone 
sits around the table.
    To fill this information gap, we recently produced a 27-
minute film entitled E-Z Trial, ``The Case of the Missing 
Guardrails,'' to give small employers and others some 
understanding of what to expect in an E-Z Trial. This short 
film condenses and dramatizes an E-Z Trial based loosely on an 
actual case. We made this film informational as well as 
entertaining. Whenever a case is designated E-Z Trial, we send 
a free copy of the film on videotape to the small employer. The 
film is also shown at small business association meetings and 
conferences.
    I am pleased to report that we were recently notified that 
our E-Z Trial program has won a Hammer Award from Vice 
President Gore's National Performance Review.
    A major new initiative that we are undertaking involves 
settlements. Last month we published for comment in the Federal 
Register a proposal to create a mandatory settlement part for 
all cases involving proposed penalties of $200,000 or more. The 
purpose of this one-year trial pilot program is to facilitate 
the settlement process in some of the bigger, more complex 
cases, cases which are less likely to settle, cases which 
demand a great deal of time and impose a significant burden on 
Commission resources. There would be a mandatory in-person 
settlement conference with the settlement judge. Each party 
must have present an individual who has full authority to 
settle the case. If the case does not settle, a different judge 
will be assigned to hear and decide the case. It is our goal to 
settle enough of these big resource-intensive cases to justify 
the costs involved in providing a settlement judge and holding 
a formal settlement conference.
    In April 1995, we made a deal with this subcommittee. We 
submitted a strategic plan which set ambitious goals and the 
subcommittee provided us with the funding needed to pursue 
those goals. Many of those original goals for improving 
Commission performance have been met and others have seen 
significant progress.
    With respect to our current strategic plan, we continue to 
be on track or ahead of schedule. Let me highlight some of the 
progress to date. We have reorganized our regional office 
structure, closing the Dallas office in 1996 and commencing 
plans to close the Boston office in fiscal 1999. We have 
successfully reduced our annual operating costs by more than 
$500,000. This will increase to $700,000 upon closing the 
Boston office. In fiscal 1997, we reduced the cycle time for 
cases going to trial before our judges from 520 to 335 days. We 
have set up a World Wide Web site which provides people with 
quick access to decisions, rules of procedure, press releases, 
Federal Register notices, et cetera. For example, my prepared 
testimony will be available on our Web page today. We have 
published and widely distributed two user-friendly guides for 
conventional as well as E-Z Trial procedures. We have obtained 
upgraded desk-top computers and software which fully meet the 
job needs of each employee. We also provide laptops for our 
judges.
    We have in operation a comprehensive case tracking/
management system. Over a three-year period, as a result of 
savings and vacancies, we expect to have returned more than $1 
million to the Treasury.
    The biggest problem that we are currently facing at the 
Review Commission, Mr. Chairman, is that we have not had a 
quorum, that is to say, two commissioners, since November 13 
when Commissioner Dan Guttman's tenure as a recess appointee 
ended. I feel like I have been home alone now longer than 
Macaulay Culkin. It is extremely frustrating. Contested cases, 
petitions for interlocutory review, as well as pending cases, 
cannot be acted upon in the absence of a quorum. Nor can our 
new settlement program be implemented until we have a quorum.
    In my testimony last year I made reference to the 
Carpenters and their song, ``We've Only Just Begun.'' Today a 
more appropriate musical group would be Three Dog Night and the 
lyrics from one of their old songs which laments, ``One is the 
loneliest number of them all.''
    Our ability to meet the case processing goals for our 
strategic plan is jeopardized by lack of a quorum. Part of the 
problem is that as an adjudicative agency, we do not have a 
natural constituency or an interest group pushing the White 
House or the Senate to act on appointments. Obviously something 
needs to be done. It is in the best interest of everyone--
business, labor, and OSHA--to have a Review Commission that is 
operational and that has some continuity in its membership.
    Thank you, Mr. Chairman. Mr. Gainer and I will be pleased 
to answer any questions you may have.
    [The prepared statement follows:]


[Pages 1416 - 1426--The official Committee record contains additional material here.]



                            financial audits

    Mr. Porter. Thank you Mr. Weisberg. In October we received 
a copy of the audit of the OSHRC financial statements. Your 
auditor issued an unqualified opinion with no material 
weaknesses or reportable conditions. Obviously, we are pleased 
with the results. Has your fiscal year 1997 audit been 
completed?
    Mr. Weisberg. No, Mr. Chairman. Because we are a small 
agency, we plan to do the financial audit every other year 
because of the significant cost involved.

                             commissioners

    Mr. Porter. Mr. Weisberg, you have already reported 
improvement in your case processing times. We appreciate the 
progress you have made. However, you reported on two potential 
problems in your written statement. The first is Commission 
decisions. Obviously this is out of your control since you do 
not have a quorum. How did we get into this problem? How do you 
expect it to affect your fiscal year 1998 and fiscal year 1999 
cycle times, and do you have any reason to believe this problem 
is going to be resolved any time soon?
    Mr. Weisberg. I think we got into this problem, Mr. 
Chairman, because since 1992, there has only been one 
Commissioner confirmed by the Senate: myself.
    This problem is not a new problem. Let me read something 
that former Commissioner Buckley wrote 10 years ago in 1987: 
``These are not normal circumstances for theCommission. We have 
lacked a full quorum since September of 1986, over 17 months. We have 
lacked a quorum to take official action since April 27, 1987 over 10 
months. I am no longer optimistic that the Commission vacancies will be 
filled in the foreseeable future.
    This is not a new problem, as we pointed out in our 
prepared statement. Since 1985, a period of almost 13 years, 
the Commission has been without a quorum for 27 months or 
roughly 17 percent of the time. During the past 13 years the 
agency has not had a full complement of three commissioners for 
more than 6 years, or 46 percent of the time.
    So it is a continuing problem. It is one that has been true 
in Democratic administrations and Republican administrations, 
Democratic Senates and Republican Senates. The impact it will 
have on the Commission is not only in meeting our strategic 
plan, but it will wreak havoc with our cycle times at the 
Commission level not just in the next year but in fiscal 1999 
as well. When you add 6, potentially 9 months to each case, it 
is hard to decide that case in less than a year.
    Mr. Porter. Has the President sent up the names?
    Mr. Weisberg. No, the President has not sent up any names. 
Commissioner Guttman's name had gone up in 1996, I believe. And 
it was pending before the Senate and then, when the Senate 
recessed, his recess appointment ended. No new name has gone 
forth to the Senate.
    Mr. Porter. What can we do to help this? Can we write the 
White House and suggest they get on this, or is it a problem in 
the Senate with other appointments as well?
    Mr. Weisberg. It is unclear, Mr. Chairman, where the 
problem is. Obviously better communication between the White 
House and the Senate, I think, would help deal with this 
problem and resolve it.

                            alj productivity

    Mr. Porter. We are going to see what we can do to help. 
Obviously we do not want you to get behind in your cycle times 
when you are doing such a good job to get ahead.
    Mr. Weisberg, the other area you flagged for us is ALJ 
decision times. The problem grows out of judicial vacancies and 
uncertainties you experienced in part because you were 
responding to this subcommittee's concern about the efficiency 
of your field structure. How do you expect your cycle times to 
be affected by this problem and when do you expect to see 
improvement?
    Mr. Weisberg. As I indicated in my statement, we had made 
significant progress in fiscal 1997 in reducing our cycle time 
for heard cases before our judges from 520 days to 335 days. So 
far this fiscal year, productivity by our judges is up. However 
as you pointed out, there has been some slippage in our cycle 
time in conventional cases so far in 1998.
    Reasons are several. One, during most of last year we only 
had 12 judges because our first judge in Atlanta retired. It 
took us a little while to fill that position. Also a 14th judge 
slot was encumbered by pending MSPB action. The MSPB matter has 
been resolved. The MSPB reversed their administrative judge, 
ruled in our favor, so that position is no longer encumbered 
and we expect to fill that position in the next 30 days.
    One other problem that we have noticed is with our South 
Pacific cases. As you know, OSHA and we have jurisdiction in 
Guam, Saipan, American Samoa, and the Swan Islands. What has 
typically happened is once a year we would send a judge out to 
hear those cases. Meanwhile those cases would sit around for 
almost a year. In some cases it has take more than a year to go 
to trial. We have a situation where a citation issues two 
months or three months before the judge is set to go out there 
and because of time for discovery in conventional proceedings 
it can be 15 months, 16 months before the case goes to trial.
    What we are planning to do this year is to try to send the 
judge out there every six months or twice a year to deal with 
those cases. We are also trying to provide more assistance to 
our judges, particularly in the big cases, by using law clerks 
or whatever to help them go through the record in writing the 
decisions. As you know, a lot of our cases now that we are 
seeing are the bigger, more complex cases.

                               e-z trial

    Mr. Porter. Mr. Weisberg, we are very interested in your E-
Z Trial initiative here. Your GPRA plan sets goals for fiscal 
year 1999 and beyond of 160-day average disposition time for 
the 30 percent of cases that you anticipate will qualify for E-
Z Trial. How does this cycle time compare to non E-Z Trial 
cases.
    Mr. Weisberg. It is almost two-thirds less. I think it is 
roughly 423 days compared to the 160 days it takes to get a 
decision in an E-Z Trial case.
    Mr. Porter. Do you anticipate any increases in caseload now 
that you have streamlined the appeals process for many cases?
    Mr. Weisberg. What we have found is that a slightly larger 
percentage of E-Z trial cases are going to hearing. From my 
perspective, that is good. That was one of the purposes for 
creating E-Z Trial, to give the small employer his or her day 
in court. They seem to be availing themselves of that 
opportunity.
    Mr. Porter. Do you think 30 percent and 160 days are about 
as far as you can push E-Z Trial?
    Mr. Weisberg. I think 160 days is about as far as we can 
push E-Z Trial, noting that E-Z Trial cases that settle do so 
significantly faster than conventional cases as well. On the 30 
percent, that really depends on our other caseload.
    Mr. Porter. What responses are you getting to E-Z Trial 
both from DOL and from employers?
    Mr. Weisberg. The response from the employer community has 
been extremely positive. As you know, we had some focus groups 
on E-Z Trial, met with people who had participated in the E-Z 
Trial process. They were quite pleased with E-Z Trial and how 
it works and its objectives. From the Labor Department, as you 
may recall, when we first proposed E-Z Trial, the Labor 
Department opposed it. And most of their fears and concerns 
have not come to pass. What I have heard from people in the 
field is basically the sun still comes out tomorrow. It has not 
meant the end of their ability to try cases and so on.
    Mr. Porter. How many of the videotapes have you sent?
    Mr. Weisberg. We have sent roughly, I think, about 250 
videotapes. We don't send it to people who are represented by 
attorneys. We just send it to small pro se employers.

                               news story

    Mr. Porter. I started out by saying that we need to get the 
story out about the successes in government. Last year your 
story got out. Unfortunately, the columnist who published the 
story managed to get most of the facts wrong. He somehow 
managed to turn a great success story into a boondoggle. I know 
you have responded to the article but I wanted to get some of 
this on the record.
    I would like to ask you if some of the assertions and 
implications in the article are factually correct. Can you just 
answer yes or no to most of these questions, please? The 
article states, ``Weisberg insisted on remodeling his office 
with fashionable new furniture at the same time as his agency 
is laying off employees.'' Have you done any remodeling of your 
offices?
    Mr. Weisberg. No, Mr. Chairman; not one nickel has been 
spent remodeling my office. No furniture was replaced. Nothing 
was painted, no recarpeting was done. My office is the same as 
it was four years ago when I moved in, with one notable 
exception. When I moved in there was a large TV set in the 
office, which I had removed the first day on the job. I felt 
that my job was to decide workplace safety and health cases, 
not to watch television, and we subsequently canceled the cable 
service that it was attached to.
    Mr. Porter. Have you laid off any employees?
    Mr. Weisberg. We have not laid off a single employee. When 
we had our reorganization, we gave every employee an 
opportunity to transfer to another region with us paying the 
travel expenses.
    Mr. Porter. Do you have a regional office in Dallas?
    Mr. Weisberg. We no longer have an office in Dallas.
    Mr. Porter. Did you refurbish the Boston office after the 
agency decided to close it?
    Mr. Weisberg. No, we did not. If I could spend about 60 
seconds responding to that, because I think that is an 
important point. In 1995, before we considered closing the 
Boston office, we took certain steps. The reason for that, when 
I went to the office there were electrical hazards. There was 
exposed wiring, there were tripping hazards. We could have been 
cited by OSHA. What we did, we spent a total of $5,000, 
basically removing two walls, moving the two walls. That 
enabled us to then give back space to GSA. We were able to 
reduce, for that $5,000, we were able to reduce our rent from 
roughly $110,000 to $45,000.
    Mr. Porter. So your rent has actually gone down, not up.
    Mr. Weisberg. Yes.
    Mr. Porter. Have your administrative rates for local calls, 
long distance, mail transcription, supplies, equipment, 
maintenance and travel, gone up or down during your tenure?
    Mr. Weisberg. It has gone significantly down.
    Mr. Porter. Have you returned funding to the Treasury for 
four years running?
    Mr. Weisberg. That is correct.
    Mr. Porter. Mr. Weisberg, you are not the only one who is 
mad about this article. The columnist closes by saying that 
``excessive spending under the $1 billion mark doesn't even 
register on the radar screen as far as the Committee on 
Appropriations is concerned.'' The columnist has not bothered 
to attend a single one of the 1,200 agency hearings conducted 
by the subcommittee since I have been a member of it. He 
certainly has not attended any of the 300 agency hearings I 
have held since I became Chairman of this subcommittee in 1995. 
If he had, he would not have made such absurd statements.
    Mr. Weisberg, please insert in the record at this point 
your response to the column and any other written comment you 
would like to make.
    [The information follows:]


[Pages 1431 - 1437--The official Committee record contains additional material here.]



                             Budget Request

    Mr. Porter. Mr. Weisberg, other than for pay and benefits, 
are you requesting any increase in this budget?
    Mr. Weisberg. No, we are not.

                             Case Tracking

    Mr. Porter. Is your case tracking system fully automated, 
and how do you use it to improve your productivity?
    Mr. Weisberg. It is fully automated, Mr. Chairman. And what 
we do with it, not only can we track judges' cases but also at 
the Commission level we are able to enter key dates in the 
system. When a case comes in, attorneys are given time targets 
for different phases of the case processing system, and we are 
able to track that on our system to see when an attorney is 
behind and to see that the time targets are being met 
throughout the process.

                      Financial Management System

    Mr. Porter. When will your financial management system be 
fully automated?
    Mr. Weisberg. We expect it to be fully automated and on 
line by the end of this year.

                          Year 2000 Compliance

    Mr. Porter. You are making greater use of electronic 
communication internally and externally. What is the status of 
your Year 2000 compliance effort?
    Mr. Weisberg. We have no Year 2000 problem.

                                Web Site

    Mr. Porter. That is good news. How have the public and your 
customers responded to the availability of your information on 
line? Do you track Web site usage?
    Mr. Weisberg. We do, based on the first two months of 
tracking results. I believe there are approximately 17,000 hits 
per month.

                         ALJ Case Dispositions

    Mr. Porter. You testified that judicial case dispositions 
are up 20 percent in 1998 and the number of cases being decided 
is up 30 percent. What is the distinction between these two 
statistics and to what do you attribute the increase?
    Mr. Weisberg. The first refers to judicial dispositions. 
That includes cases that have not gone to hearing where a judge 
might be involved in the settlement, the case settles. That is 
a disposition of the case. The latter figure refers to tried 
cases, cases that go to hearing and decisions are issued. To 
the first it goes to larger caseload. As we predicted last 
year, there was a 400-case increase and we expect a similar 400 
case increase this year. The latter goes to more productivity 
by our judges.
    Mr. Porter. Thank you Mr. Weisberg. Ms. Pelosi.

                          Year 2000 Compliance

    Ms. Pelosi. Thank you, Mr. Chairman. I really do not have 
any questions for Mr. Weisberg. I welcome him here. I served on 
the Subcommittee on Government Operations, on Employment and 
Housing, which Mr. Weisberg staffed. He was our chief staff 
person for many years and I know firsthand his commitment to 
the issues under his jurisdiction now. I did not come with any 
questions but I would be interested in knowing how you solved 
your Year 2000 problem because you stand out as a success--many 
others still do have the problem. Is there something we can 
learn?
    Mr. Weisberg. To plan ahead. We started looking at that in 
1994. When we started upgrading our computer system and 
replacing the old computers, we dealt with it at that point at 
that time. So by planning ahead, we were able to avoid having 
to deal with the problem in the Year 2000.
    Ms. Pelosi. Do you think it is too late for others who have 
not gotten a jump on the Year 2000? I think some are just 
starting now, in February.
    Mr. Weisberg. I will ask my Executive Director to talk 
about the computers. I am someone to whom my 8-year-old 
explains, ``Dad, this is how you use the mouse.''
    Mr. Gainer. At the risk of bursting our bubble a little 
bit, we have a much easier problem than a lot of the other 
agencies. We have had the fortune to be able to replace all our 
key systems in the last four years, and we had a very good IRM 
manager on staff who knew instinctively that you do not create 
those kinds of problems. I think we would have to attribute it 
to the fact that we have a smaller problem and we had very good 
people involved in it.
    Ms. Pelosi. Do not underestimate what might be useful 
information for others on this issue because we just heard a 
talk from Andy Grove last week under the auspices of the John 
Quincy Adams Society and our colleague Amo Houghton. This 
became a subject of discussion on everything from microwave 
ovens--that would be the least of it--to very important 
information for the American people.
    I have not heard anybody say with such confidence that they 
were on top of the Year 2000 challenge. We thank you for your 
good work.
    Mr. Porter. Mr. Weisberg, in our judgment you are one of 
the two best agencies that we have the pleasure of dealing with 
and you are doing a wonderful job. We very much appreciate it. 
Thank you for being here today.
    The subcommittee will stand briefly in recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1440 - 1497--The official Committee record contains additional material here.]



                                          Thursday, April 23, 1998.

            FEDERAL MINE SAFETY AND HEALTH REVIEW COMMISSION

                                WITNESS

MARY LU JORDAN, CHAIRMAN
    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the budgets of the Agencies under our 
jurisdiction, with the Federal Mine Safety and Health Review 
Commission, and we are happy to welcome Mary Lu Jordan, the 
Chairman of the Commission. Ms. Jordan, if you would introduce 
the people that you have brought with you, and please then 
proceed with your statement.

                       Introduction of Witnesses

    Ms. Jordan. Good afternoon, and thank you, Mr. Chairman. On 
my left is the General Counsel, Norm Gleichman; on my immediate 
right is our Executive Director, Dick Baker; and to his right 
is our Chief Judge, Paul Merlin.

                           Opening Statement

    It is a pleasure to appear before this committee and to 
discuss with you the Federal Mine Safety and Health Review 
Commission's Fiscal Year 1999 budget request, its 
accomplishments, and ongoing activities.
    The Federal Mine Safety and Health Review Commission is an 
independent, adjudicative agency that provides administrative 
trial and appellate review of legal disputes arising under the 
Federal Mine Safety and Health Act of 1977. Most cases deal 
with civil penalties assessed by the Department of Labor's Mine 
Safety and Health Administration, MSHA, against mine operators 
and address whether the alleged violations occurred, as well as 
the appropriateness of proposed penalties. Other types of cases 
address closure orders, miners' complaints of safety-related 
discrimination, and miners' requests for compensation after 
having been idled by a mine closure order.
    The Commission's Administrative Law Judges decide cases at 
the trial level. The five-member Commission provides 
administrative appellate review. The Commission reviews 
decisions made by its ALJs, rules on petitions for 
discretionary review, and may on its own initiative direct 
cases for review that may be contrary to law or policy or that 
present novel questions of policy. An ALJ's decision that is 
not directed for review becomes a final, non-precedential order 
of the Commission. The Commission's decisions are precedential 
and many involve issues of first impression under the Mine Act. 
Appeals from the Commission's decisions are to the U.S. Court 
of Appeals.
    Currently, the Commission has its full complement of five 
members.
    The budget request for Fiscal Year 1999 is a ``no 
increase'' budget totaling $6,060,000. It contains funding for 
54 FTEs, a reduction of three FTEs below the Fiscal Year 1998 
level. Funding from the FTE reduction will be used mainly to 
offset the added cost associated with federal pay increases.
    The Commission proposes to continue to reduce its inventory 
of undecided cases at both the trial and appellate levels 
during all three years covered by this budget submission. The 
reduction in inventory is being achieved as a result of a 
number of factors which include a reduction in contests of MSHA 
citations and orders; a redistribution of existing Commission 
resources in Fiscal Year 1996 which strengthened the Office of 
General Counsel; and the development of a strategic plan and 
annual performance plans containing goals for increasing 
productivity in case dispositions and appellate review, while 
at the same time reducing personnel as part of the 
Administration's streamlining objective.
    As of March 31, 1998, the Commission has a trial docket of 
5,093 undecided cases, having received 866 cases and decided 
801 cases this fiscal year. At the trial level, 2,000 new cases 
are anticipated for Fiscal Year 1998 and 2,200 are expected in 
Fiscal Year 1999. Dispositions are expected to total 2,900 in 
Fiscal Year 1998. In Fiscal Year 1997 the Commission Judges 
received 1,799 new cases and disposed of 2,776. Five thousand 
one hundred dispositions are anticipated in Fiscal Year 1999. 
This high level of dispositions is predicated on the assumption 
that the Court of Appeals will issue its decision in Secretary 
of Labor v. Keystone Coal Mining Corporation, known as the 
``dust cases''. We anticipate that once the Court of Appeals 
has ruled, most of the remaining dust cases which have been on 
stay since Fiscal Year 1991 will be decided. As a result, the 
Commission anticipates reducing its inventory of undecided 
cases to 1,228 by September 30, 1999.
    At the review level, the Commission has a current docket as 
of March 31, 1998, of 47 cases, having received 15 cases and 
disposed of 21 cases so far this fiscal year. The average age 
of the 47 cases pending is 8.4 months. The Commission 
anticipates ending Fiscal Year 1998 with about 38 undecided 
cases on hand. In Fiscal Year 1999 it anticipates having only 
10 cases undecided. This would be the lowest inventory of 
undecided cases in the history of the Commission, and is 
premised on the disposition of 13 matters, currently on stay 
that are related to the dust cases.
    Fiscal Year 1997 was the initial year of our Government 
Performance and Results Act Strategic Plan, and I am proud of 
our accomplishments.
    At the Commission level, we decided 8 out of 9 cases that 
reached more than 24 months of age during the fiscal year. We 
reduced our briefed but unassigned cases from 12 to 9. We 
reduced the average age of substantive decisions issued by 1.4 
months, and maintained a ten-year cumulative affirmance rate of 
about 80 percent.
    At the trial level, we reduced the number of undecided 
cases that were between 9 and 17 months of age from 37 to 14, a 
reduction of 62 percent; reduced the number of days between 
receipt of a case to its assignment to an ALJ from 82 days to70 
days; 93 percent of the settlement approvals were within 30 days of 
receipt of the settlement motion by the parties; in cases requiring a 
hearing, a decision was issued within 90 days of receipt of the post-
hearing brief in 97 percent of the cases.
    We have set equally ambitious goals for ourselves in Fiscal 
Years 1998 and 1999. We will do our best to achieve those 
goals, notwithstanding our leaner staffing and flat budget.
    Thank you for the opportunity to present this budget 
summary, and I would be pleased to respond to any questions you 
may have.
    [The prepared statement follows:]


[Pages 1502 - 1505--The official Committee record contains additional material here.]



                               dust cases

    Mr. Porter. Thank you, Ms. Jordan. I am going to try to see 
if I understand this correctly, but there are a large number of 
dust cases that have been consolidated, and I understand oral 
arguments were to take place in the Court of Appeals last 
Monday?
    Ms. Jordan. Yes.
    Mr. Porter. Did that happen?
    Ms. Jordan. Yes, it did.
    Mr. Porter. Is it correct that there are 3700 cases that 
will be decided, later this year, by the Court of Appeals?
    Ms. Jordan. The Court of Appeals does not have 3700 cases 
on its docket.
    Mr. Porter. They do not.
    Ms. Jordan. They have a lead case. They have like a one----
    Mr. Porter. One case representing----
    Ms. Jordan. Yes, a representative----
    Mr. Porter. But it presumably will affect the outcome of 
most of the other cases?
    Ms. Jordan. Yes. Exactly how it affects the other cases 
will depend on the nature of the Court's decision.
    Mr. Porter. How many cases are there in total that you have 
awaiting the disposition or the decision in that case?
    Ms. Jordan. About 3700.
    Mr. Porter. That is the 3700.
    Ms. Jordan. At the trial level. We have on the appeal level 
13 cases that are related to the certification of people who 
took dust samples, not citations for violations--they are a 
little bit different--but they are also connected. We suspect, 
and presume, that they are going to be released from stay and 
dealt with after the Court of Appeals decision comes out.
    Mr. Porter. So, if I understand what you said correctly, 
when the Court of Appeals decision is made, that presumably is 
going to clear a lot of your backlog from your docket, of 
course.
    Ms. Jordan. Presumably. There is, a worst-case scenario but 
we do not expect that. It is conceivable that the Court of 
Appeals, in its decision, could reverse every aspect of the 
Commission's case, in which case the Secretary could proceed to 
prosecute each one of the cases that it had cited. That is the 
worst-case scenario. I suspect that that is unlikely. I think 
that there would still be cases carved out, or grouped, or 
consolidated.
    Mr. Porter. What was your initial finding in the case that 
is on appeal?
    Ms. Jordan. Well, I was personally recused when the 
Commission decided the case, but the decision of the Commission 
was to affirm the decision of the Administrative Law Judge who 
vacated the citations. He found that the Secretary had not 
proven that the abnormal white center that was shown on the 
cassettes, was accomplished through tampering. The judge 
determined that the evidence had shown that there were other 
potential ways that the white centers could have been formed 
and, therefore, he vacated those citations.
    Mr. Porter. Is it correct that all 3700 cases are about the 
same basic subject?
    Ms. Jordan. They all involved the abnormal white center 
which was found on the cassette, which the Secretary then 
alleged was the result of tampering. I should clarify that 
there was one lead case that set certain standards for burden 
of proof and certain scientific theories.
    Then there was the Keystone case itself, which focused on 
the actual handling of the cassettes at that mine and how they 
were processed, because there was some question about whether 
the handling, the way it was done at that mine, resulted in the 
abnormal white center. There is a scenario that could occur 
where some of the underlying legal rulings are upheld, but yet 
there is enough question remaining on the evidence associated 
with the Keystone Mine that could be reversed. It would be up 
to the parties to assess whether their handling--and the 
Secretary to assess--whether the handling procedures at the 
other mines are so different that they might prevail in those 
cases. So they are related.
    There are ways that could still lead to litigation, which 
leaves us trying to assume how we should be prepared for the 
court's decision. We want to, even in the worst-case scenario, 
be able to process the cases as quickly as possible.
    Mr. Porter. My recollection is that these incidents that 
gave rise to these cases first occurred when Lynn Martin was 
Secretary of Labor. Is that about the right time frame?
    Ms. Jordan. Yes, I believe that is correct.
    Mr. Porter. Maybe ten years ago, or almost ten years ago?
    Ms. Jordan. Judge Merlin, do you remember when the cases 
went to trial?
    Mr. Merlin. That was the early '90s.
    Mr. Porter. It is eight years ago, at least. It has been 
quite a long time.

                         gpra performance plan

    Ms. Jordan, I want to congratulate you on your GPRA 
performance plan. You have provided both a baseline and a 
specific numerical goal for your activities. For example, you 
indicate that you plan to reduce by 25 percent the number of 
pending cases that have an age of between 9 and 17 months from 
assignment. Your goals are measurable. They deal directly with 
Agency performance, and they set a future goal that we can hold 
you accountable for.
    One of your performance goals for Fiscal Year 1999 is that 
you will reduce the average length of time it takes to reach a 
decision from 17.9 months in Fiscal Year 1997 to 15.4 months in 
Fiscal Year 1999. What is enabling you to accomplish this? Do 
you believe that GPRA has contributed to improving your 
Agency's productivity?
    Ms. Jordan. It has. It has forced us to focus on some 
concrete goals where we can look at and measure ourselves. So 
far in 1998, we have continued to reduce the gap between 
performance and the goals, but the goals are ones that tend to 
be a little bit slippery. Cases in one category, you decide 
them and some other cases move into an older category. But we 
are learning how to watch these measurements. We now have the 
General Counsel provide reports in a format that takes into 
account the GPRA measurements. The same with the Chief 
Administrative Law Judge. We did not have that before. We had 
different ways of looking at how many cases were proceeding, 
but we did not have some of these concrete measurements.
    Mr. Porter. You have one case pending that is older than 24 
months, that prevented you from getting 100 percent of cases 
within that. What kind of case is that? That is not a dust 
case?
    Ms. Jordan. No, it is not a dust case. It is probably a 
case that has looked fairly straightforward, and then as we 
delved into it--you know, some cases are like an onion. Theymay 
not look that complicated on the outside. You start getting into it, 
layers start forming and people have differing views, it becomes 
difficult to issue the decision if there are too many separate views. 
It takes more time to try and see if we can consolidate into more of a 
majority opinion.
    We were in a period of time when there were four 
Commissioners last year, which made it difficult sometimes to 
get cases totally resolved.

                            staffing decline

    Mr. Porter. You are seeking a no-increase budget, and it 
contains funding for 54 FTEs, a reduction of 3 below last 
year's level. Last year you also reduced the FTE level by 2. Is 
this a trend that you anticipate will continue?
    Ms. Jordan. It could. We could see further reductions. For 
instance, this year we are authorized to have 12 Administrative 
Law Judges, but we currently have 10. We have proposed to 
reduce our authorization of Administrative Law Judges in our 
proposed budget to 11 because we still need to see what happens 
with the court's resolution of the dust cases. We think we may 
need that manpower for the dust cases, but if case intake 
continues to decline, it is conceivable we could see additional 
reductions in future budgets. It really depends on what happens 
with the case intake, which is a bit out of our control. It 
depends on what the enforcement agency does and, if they come 
up with an enforcement policy or strategy that tends to 
generate a lot of controversial litigation, then we have to 
deal with that.
    Mr. Porter. Thank you, Ms. Jordan.
    Ms. Northup.

                 redefining significant and substantial

    Ms. Northup. Thank you, Mr. Chairman. Ms. Jordan, I have 
several questions, and I apologize for being late. I am 
interested in the significant/substantial definition. During 
the MSHA hearings, that question was asked of Secretary McAteer 
about his decision to challenge the definition of significant/
substantial which he proposed in February, contrary to the 
reason that was established in the National Gypsum decision and 
was codified by him in 1992, and I understand that he has just 
withdrawn in his bulletin. He did not address whether or not he 
was going to seek to alter the significant/substantial 
definition through litigation. Do you anticipate the Commission 
will continue to maintain its long-term definition of 
significant/substantial?
    Ms. Jordan. We have cases that raise the significant/
substantial issue that come before us. At times, a feature of 
it gets raised that may cause a Commissioner at any point in 
time to consider whether there is a way to change the 
definition or improve it.
    One of the Commissioners has issued an opinion where he has 
expressed a concern that he thinks the current definition is 
perhaps not offering as much clarity as is possible for the 
parties, and that perhaps it is generating too much litigation, 
but that is hard to predict.
    There is one case that is currently pending at the trial 
level that the Secretary had indicated that they were going to 
use as a vehicle for proposing an alternative definition of the 
S&S standard. Now, they have removed their Federal Register 
Notice, but that case, as far as I know, is still in our 
docket. Whether they will move to take a different litigation 
stance in that case remains to be seen, but we tend at the 
Commission to take what comes before us. If the parties present 
a case to us and argue for a different or alternative 
interpretation, we would certainly address that issue.
    Ms. Northup. Well, the fact that it has been long-standing 
and it was codified by MSHA in 1982, then it seems to me to 
change it would be necessary to go through the rulemaking 
process again.
    Ms. Jordan. For the Secretary, the codification is in how 
they assess their penalties and how they assess penalties for 
gravity, and they have codified--the regulation does track the 
language of the Commission's decision, or the Mathies decision, 
as we call it.
    For the Commission to depart from its precedent doesn't 
require a rulemaking. It would require, of course, explanation 
and rationale, as any court would have to do if they are not 
going by stare decisis, not following their precedent.
    Ms. Northup. Could I ask you--I think that you and Mr. 
McAteer did--were co-counsel in a case where you argued against 
the significant/substantial definition in 1989? I'm thinking of 
the Coal Employment Project v. Dole.
    Ms. Jordan. I believe that we may have been on that case 
together. I do not think that case involved the significant/
substantial definition, actually. I think that case involved 
the challenge to the Secretary's policy of using a flat penalty 
for any cases that were not designated S&S, significant/
substantial. I do not think it challenged the underlying 
definition that was used; the standard that was used. But in 
light of the statutory requirement, the case questioned whether 
they could, one, impose a flat penalty instead of taking the 
six statutory criteria into effect and, two, at that time the 
Secretary's policy was for any case that was not designated 
S&S, it did not show up in the operator's history of 
violations. One of the criteria for assessing a penalty is to 
look at the operator's history. So there was sort of a problem 
there. You could have an operator that had numerous violations 
that had not been designated S&S, then getting a violation down 
the road on a standard that was S&S, and when one looked at 
their history to assess the penalty and go by the statute, it 
was warped.
    The Court of Appeals did agree that removing the violation 
from the history was in direct contradiction to the requirement 
of the penalty criteria, but that to impose just a flat penalty 
was okay with the statute.
    Ms. Northup. Well, it certainly raised the question of 
whether you had feelings or a commitment that maybe the 
significant/substantial definition should be changed.
    Ms. Jordan. In my prior practice, I had occasion to argue 
many cases both utilizing the Commission's standard--actually, 
most of them did--utilize the Commission's standard. And in my 
current position, I am well aware that I would be looking at it 
as an impartial adjudicator, and just assessing the parties' 
arguments on the rationale of what would be an appropriate 
standard, whether it should be changed; if so, why; if not, why 
not.
    Ms. Northup. Well, I also want to echo the Chairman's 
comments. It is not often that we are lucky enough to have an 
Agency come before us that sounds to be so efficient. You know, 
most of what we get is ``We need more money'', and things get 
more bogged rather than less bogged down, it seems like. You 
know, that process is very efficient in your office, and I 
really appreciate it.
    Ms. Jordan. Thank you, I appreciate it. I have to really 
thank my colleagues here at the table with me who are very 
efficient and we benefit from their long experience actually in 
the Government and at the Agency.
    Ms. Northup. Thank you, Mr. Chairman.

                            sua sponte cases

    Mr. Porter. Thank you, Ms. Northup. Ms. Jordan, in addition 
to the Commission providing administrative appellate review and 
reviewing decisions issued by Administrative Law Judges, the 
Commission may on its own initiative direct cases for review. 
How often does the Commission direct cases for review?
    Ms. Jordan. That happens rarely.
    Mr. Porter. What kind of case would be a candidate?
    Ms. Jordan. It would have to be something that would just 
be a very novel issue, one that in our reading of the 
Administrative Law Judge's decision he had really missed the 
boat. Usually what happens, we do review the Judge's decision 
and sometimes we see a case that we think might be a candidate 
for directing review, but then we may wait to see if a party 
will petition for review. That frequently happens, and we do 
not have the need to direct it ourselves.
    Mr. Porter. So there are none of those kinds of cases 
around at the moment?
    Ms. Jordan. I will let the General Counsel answer.
    Mr. Gleichman. We do have a couple of cases in that 
category pending.
    Mr. Porter. And what kind of cases would those be? Is there 
any common thread?
    Mr. Gleichman. No, there is not a common thread. One is a 
discrimination case. One is a case involving relationship 
between two special findings, S&S which we've talked about 
already, and unwarrantable failure which is another special 
finding under the Mine Act. I think those may be the only two 
cases pending that the Commission directed for review.

                            workload trends

    Mr. Porter. Thank you. In last year's hearing, Ms. Jordan, 
you anticipated that the 14 new regulations projected to be 
finalized by the Mine Safety and Health Administration during 
Fiscal Years 1997 and 1998 would result in increased case 
filings. Have you found this to be the case?
    Ms. Jordan. I will let the Executive Director respond to 
those numbers.
    Mr. Baker. No, we have not so far, Mr. Chairman. Our case 
load is continuing to be at the level of last year, so there 
has not been the uptake that we anticipated. We have, in the 
last month, seen some movements, and we think that our estimate 
of 2,000 cases will be pretty accurate by the end of the year.

                          year 2000 compliance

    Mr. Porter. Speaking of 2000, Fiscal Year 2000, are you 
going to have a problem?
    Mr. Baker. No, we will not have a problem. We did two small 
studies in 1997 and issues a contract in 1997 to do our Y2K 
work to have our programs corrected. We are basically on target 
with that. We would expect to have those problems corrected by 
the end of Fiscal Year 1998, so we have another year and a half 
to continue to work if anything came up. We feel we are in good 
shape on that issue.
    Mr. Porter. Thank you, Mr. Baker. Ms. Jordan, you and your 
team are doing a fine job, thank you very much. Thank you for 
appearing today.
    Ms. Jordan. Thank you, Mr. Chairman, we appreciate your 
comments.
    Mr. Porter. The subcommittee will stand briefly in recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1512 - 1551--The official Committee record contains additional material here.]



                                          Thursday, April 23, 1998.

               FEDERAL MEDIATION AND CONCILIATION SERVICE

                               WITNESSES

JOHN CALHOUN WELLS, DIRECTOR
C. RICHARD BARNES, DEPUTY DIRECTOR FOR FIELD OPERATIONS
VELLA M. TRAYNHAM, DEPUTY DIRECTOR FOR NATIONAL OFFICE OPERATIONS
FRANCES L. LEONARD, DIRECTOR OF BUDGET AND FINANCE OFFICE
    Mr. Porter. The Subcommittee will come to order. We 
continue our hearings on the Fiscal Year 1999 budget. We will 
begin with the Federal Mediation and Conciliation Service. And 
we are most pleased to welcome our colleague from Kentucky, 
Representative Hal Rogers, for an opening statement.

                        Introduction of Witness

    Mr. Rogers. I thank you, Mr. Chairman. It is always a 
pleasure being before your Subcommittee, especially you as 
Chairman. It has become quite a tradition for me, and it is a 
tradition I am quite fond of. For the fourth time, I would like 
to introduce to you a fellow Kentuckian from Floyd County, in 
my district, a very dear friend, John Calhoun Wells.
    He did his undergraduate work at the University of 
Kentucky. And then after that, he did postgraduate work at 
Rutgers, was a senior research fellow at the John F. Kennedy 
School at Harvard. He has written numerous articles and other 
publications on labor and management.
    He later became Kentucky's first Secretary of Labor under 
the administrations of both Governors John Y. Brown and Martha 
Layne Collins. And while he currently serves as the Director of 
the Federal Mediation and Conciliation Service, this is 
actually his second tour of duty in Washington. He handled 
labor and economic policy under Senator Ford.
    It has been an exciting year for the FMCS. They were the 
lead negotiator for the UPS strike, as we recollect. And 
knowing John, it is of little surprise that he was able to step 
in and negotiate a settlement as effectively in that case as he 
did.
    Mr. Chairman, this is a bittersweet occasion. It is the 
last time I will have the opportunity to introduce him to you 
in this capacity, because John has decided to step down as 
Director of the FMCS and hang his shingle as a private 
consultant. And, judging from his past, I am confident that he 
will encounter nothing but success in his future. But it is 
bittersweet for us because he has been such an effective leader 
of this very important organization, now going on five years. 
And I count it a personal privilege to introduce him, present 
him to you another time.
    Mr. Chairman, let me say thank you also for the effective 
way in which you have funded this organization. At the request 
of myself and John and his staff, this organization has done 
well under his leadership and the Chairman has done well in 
providing adequate funding for the organization that has 
allowed him to modernize an organization that needed some 
introductions into the 20th Century.
    Mr. Chairman, thank you for letting me be here. And I am 
honored and pleased to present to you my friend, John Calhoun 
Wells.

                 Congressman Porter's Opening Statement

    Mr. Porter. Dr. Wells, when you have somebody like Hal 
Rogers on your side urging more resources for your work, you 
are in awfully good shape, and we have been pleased to be very 
supportive.
    I want to welcome you and your wife here today. I have been 
on this Subcommittee since 1981, which is a pretty long time. I 
have listened to hundreds, maybe thousands of witnesses. You 
are a person who knows how to get things done. And we 
appreciate it. Anyone familiar with the Caterpillar strike 
would understand that. We very much appreciate your service to 
our country. And obviously we are very, very sorry to be losing 
you.
    Before we get started, I want to talk just briefly about 
something we touched on last year, and that is leadership. We 
all understand the difficulties that anyone in a leadership 
position faces in trying to bring about change. It is 
particularly difficult when you are trying to change government 
to make it work better for people. You are someone who has done 
that. You are someone who has made a true difference.
    Last year I asked you to do two things if you decided to 
leave FMCS. One is to take an active role in choosing a 
successor. The other is to institutionalize to the greatest 
extent possible the new direction and changes that you have 
made during your tenure. We want the agency to keep moving 
forward after your departure, and you told us then how you are 
intending to do that.
    I would ask in your statement if you can touch on whether 
the White House has asked for your input regarding a successor 
and have you given them the benefit of counsel as to the future 
direction of your agency.
    Please proceed.

                          Introductory Remarks

    Dr. Wells. Thank you very much, Mr. Chairman.
    Before I respond formally, if I might, I want to say 
something to my dear friend and my Congressman from Eastern 
Kentucky, Congressman Rogers. Hal rearranged his schedule. He 
postponed his own hearing today so that he could be here with 
us this morning to introduce me once again.
    I think I can say it best by telling you that our part of 
the world is blessed with great natural resources, magnificent 
repositories of coal, significant deposits of natural gas and 
petroleum. Our mountains are cloaked with wonderful hardwood 
trees. But perhaps the greatest natural resource is the 
leadership that we have in Hal Rogers.
    He is one of our most magnificent native sons. And he is 
not only my dear personal friend, but he has provided enormous 
leadership to the people of Eastern Kentucky, sufficient so 
that the Democrats do not even field an opponent. Hal does not 
even run opposed. He has bipartisan support.
    And he has been my friend. I know he is your dear friend. 
And I just want to thank him once again for his friendship and 
all he has done to help me succeed. Thank you, Hal.
    Mr. Rogers. Thank you. Thank you, Mr. Chairman.
    Dr. Wells. Mr. Chairman, let me first, if I might, 
introduce the members of my staff who are accompanying me 
today. To my far right is Vella Traynham, who is our Deputy 
Director for National Office Operations. To my immediate right 
is Fran Leonard, who is our Budget and Finance Director. To my 
left is Richard Barnes, our Deputy Director for Field 
Operations. We have tried to do things in a team-based 
management system at FMCS.
    You were kind enough to recognize my wife, Charissa, and I 
thank you for that kindness. I am very proud that she came with 
me to be here this morning.
    This is, in fact, my last appearance before your 
Subcommittee as Director of FMCS. About four and a half weeks 
ago, I announced to the President, and then publicly, my 
intention to take leave of the office in a very short period of 
time.
    Actually, one thing I wanted to get done before I left--two 
things--I wanted to help finish the Caterpillar conflict. And 
thank God that has now been resolved. And I will talk about 
that in a moment.
    But, secondly and quite personally, I wanted to appear 
before you one last time and to look you square in the eye and 
tell you thank you, Chairman Porter, for your leadership in 
listening to us, being sensitive to our needs, and within the 
constraints with which you have to deal, to try to be helpful 
to us in our efforts to modernize this agency and bring it 
forward into the 21st Century. And that is something I wanted 
very much to do. And that is one reason I am still here, quite 
frankly.
    My job is largely done in terms of the strategic 
redirection of FMCS. I want to submit my testimony for the 
record and summarize it for you, if I may.

                           Opening Statement

    We have attempted, quite frankly, and I think with some 
measure of success to transform FMCS into a customer-focused, 
performance-based organization that has as its staff 360-degree 
mediators. And that means mediators who are able to provide the 
full range of services which we offer to the American people in 
our nation's business and labor communities. And we have as our 
goal to be at least the equal of the best in the private 
sector. That, sir, has been the vision which has driven the 
changes within this organization.
    We have gone with the conceptual framework that the 
workplaces of America, where products are produced and where 
services are conceptualized and delivered, really is the 
foundation, the building block, if you will, of the American 
economy. And if we at FMCS can improve the social relationship 
between workers and those for whom they work, between their 
unions and employers, then that will translate into enormous 
economic implications and gains.
    It would drive competitive factors, like improved quality, 
productivity, customer satisfaction, more rigorous cost 
efficiencies, which together translates into profits. Profits, 
in turn, lead to jobs and new job opportunities and employment 
security in a growing economy, a strengthened ability for us to 
compete worldwide. That really is the framework, conceptual 
framework, that has driven all that we have done.

                            accomplishments

    Now, what have we done? Well, we have tried to listen to 
the marketplace. And we began with that premise. And we 
conducted, with your support for additional money, the first 
ever national customer service survey, designed by the Sloan 
School of Management at MIT. We held focus groups with our 
customers. We have now internalized the requirement that our 
mediators and our senior staff in the field meet with 
customers.
    From that have emanated changes, for example, for a more 
demanding hiring criteria and more rigorous selection of our 
mediators, which has brought us to the recruitment and, really, 
the promotion of our higher qualified workforce, also, I must 
say, a more diverse workforce.
    In all due respect, most folks who work for FMCS generally 
look like you and me. We have said that theAmerican workforce 
is a little different than that. And so we have been very sensitive to 
issues of gender, of race, of ethnicity, and also of age.
    We have raised the bar appreciably on our performance 
appraisal system. We reward high performance. And there is 
accountability for the lack of performance.
    We have restructured and redefined our field operations, 
trimming it from 9 districts to 5 regions, 18 supervisors to 
15, and redefined the leadership roles of our managers. We made 
a major investment in the education and training of our 
employees.
    You might recall when I first appeared before you, we had 
not a single dollar in our budget for the education and 
training of our staff. And with the generosity of this 
subommittee, we now have three percent of our budget focused on 
training our people.
    We have upgraded our technology. Congressman Rogers made 
note of that. We had only 25 percent of our people who had 
access to computers. Twenty-three of our 79 field offices had 
fax machines; no e-mail; no integration.
    Today, because of the support of this Subcommittee, 
everyone has computers. Everyone is on e-mail. There are fax 
machines in all offices. And our systems are reasonably well-
integrated.
    Based on these changes, this reinvention or reengineering, 
the Vice President was kind enough, through his National 
Performance Review, to recognize and reward us with the Hammer 
Award.
    I want to tell you, these changes have included wide 
involvement of our employees. Forty-five percent of all our 
employees have served on 19 different task forces and 
committees. So we have tried, to the extent possible, to get 
wide support from within. But I guess what I am most proud of 
is we have had the support of the administration, of this 
Congress, both Republican and Democrat alike, and of our 
customers: business and industry, unions, and academic 
institutions with whom we operate.
    So, that is a sense of what we have sought to do. Very 
briefly, you know the basic facts about us. We are an 
independent agency going back to 1947 from Taft-Hartley 
amendments. We have no regulations to enforce. We provide a 
voluntary service.

                           mediation activity

    We have five principal services. The first is dispute 
resolution, which is contract bargaining. Congressman Rogers 
mentioned UPS. You mentioned Caterpillar.
    The Caterpillar strike in many ways for me personally was 
the most significant professional challenge of my life. My 
involvement began in December of '93. And I was at the table 27 
times from that day forward, with over 1,000 phone calls. One 
meeting lasted 20 minutes. One lasted five days. Caterpillar is 
a great corporation and the UAW is a great union. There were 
just significant differences. Thank God it is done and it is 
resolved.
    But we do other things. We, for example, are involved with 
the Waukegan School District and the NEA. We were involved with 
the Wheeling Community Consolidated Schools and their teachers' 
union. So we are involved not just in big, flashy cases, but in 
sites all across these United States.
    We also provide what we call preventive mediation. This is 
the cooperative effort to try to teach people new and better 
ways of working together. Major efforts in that regard were 
with Nabisco and the Bakery and Confectionery Workers Union. 
They have formed a national partnership. We were involved in 
helping construct that.
    You might take interest in the fact that the biggest bakery 
they have in America is in Chicago. Two thousand human beings 
work there. Fourteen hundred, fifty-eight members of the Bakery 
Workers work there. And we have done a significant amount of 
work there as well.
    With GTE and their two unions, the IBEW and the CWA, with 
64,000 members, we have done significant work there. And now 
here is a challenge. We have worked with the Postal Service. 
They have 800,000 American workers on their rolls. They have 
four international unions with about 670,000 unionized 
employees.
    And, at the request of Congressman John McHugh, Chairman of 
the Postal Subcommittee in the House, I have been chairing this 
past year, postal summits between Mr. Runyon, the Postmaster 
General, his direct reports, four international union 
presidents and their staffs, trying to see if we cannot bring a 
better relationship to the Postal Service and its unions. I 
will tell you that is a considerable challenge as well.

             arbitration and alternative dispute resolution

    We provide arbitration services to the labor-management 
community. We made changes in our policies and procedures, the 
first since 1979, based on focus groups with arbitrators who 
perform the services for us and also with our customers, those 
who use our services. We made dramatic changes there.
    With the support of this subcommittee, we instituted a 
modest user fee, about $30 a panel. This recovers all of the 
costs of the Arbitration Department. With the language that 
this Subcommittee provided to us, we are now dedicating 100 
percent of these monies from the user fees to the continued 
education and training of our employees. Our budget asks you 
for no more money to train our people. We recover the cost 
through that modest user fee. And we have already collected 
$420,000 this fiscal year.
    The fourth service is alternative dispute resolution, in 
which we are basically helping governmental agencies 
institutionalize conflict resolution processes, as opposed to 
litigation. We were involved with 45 different government 
agencies last year in providing services; agencies such as HUD, 
HHS, Interior, Agriculture, Education, etc.
    Examples. With EEOC, we are now helping them with their own 
internal discrimination complaints. We are doing likewise with 
the Agriculture Department. I mentioned to you last year that 
we were then involved in the Boundary Waters Canoe Area 
Wilderness dispute. I cannot say we resolved it, but I can say 
we went from 18 differences to 3. And now the findings from our 
work are the basis of legislation in the Senate.

              labor-management cooperation grants program

    Our Labor-Management Cooperation Grants Program, which the 
late Senator Jacob Javits and Congressman Stan Lundine passed 
in 1978 to promote greater cooperation, is alive and well. We 
have not always been as successful in getting as much money as 
I hoped, but I am very pleased that we went from $1,000,000 to 
$1,500,000 with the support of this Subcommittee and OMB.
    Just recently, for example, we hosted in Chicago at the 
Hyatt Hotel the nation's largest labor-management training 
seminar, with 1,900 people in attendance.

                         international program

    Lastly, I want to mention our International Affairs 
Program, not a statutory program, but one we have been involved 
in for over a decade in which we offer training and technical 
assistance to other nations around the world in labor relations 
and conflict resolution processes. This is all done on a cost 
reimbursement basis,largely through the State Department, U.S. 
AID.
    Last year we hosted a World Mediation Summit, at which we 
had 30 nations represented here. And 16 of the 20 world's 
mediation agencies were present. We have had 25 mediators 
involved worldwide, in countries like Bosnia--Herzegovina, 
trying to help mediate conflicts in the reconstruction of their 
own public utility system.
    We are involved in Hungary, Poland, Cyprus, Panama, 
Ecuador, Salvador, and it goes on and on and on. But of 
particular interest to you I think was Taiwan. I made a trip to 
Asia during the past year, the first I ever made, because 
Taiwan has demonstrated an unusual interest, sending a 
delegation of about 35 or 40 of their leaders in government, in 
business and unions to America every year for 3-week training 
seminars.
    And I met with the Prime Minister. He spent 30 minutes with 
me and quizzed me in quite detail and in very fine English, I 
might add, about exploring the possibility of opening an 
analogous organization in Taiwan.
    While I was there, I went to Korea and met with high-level 
officials there. And with the crisis they are now going through 
in their financial markets, there is the probability of far 
more labor difficulties. And they were very anxious to request 
our assistance. And now we are going to enter into a 
cooperative agreement with them as well.
    I will tell you that in the international arena, although 
we do not have the statutory authority, it is a fertile field 
for us. And it is far more than just labor relations or labor-
management relations. It is conflict resolution. And this is an 
area that I would think that we might be involved in even more 
in the future.

               appropriation request and new initiatives

    Our budget request, to bring it to closure here, is for 
$34,620,000 and 290 FTEs. There are two new initiatives, only 
one of which requires funding. They are GPRA initiatives. We 
are requesting $125,000 for capturing best practices in 
conflict resolution processes so we can work with other 
agencies and teach them best practices so they can 
institutionalize the processes within the agencies, rather than 
ask us to come in and mediate their disputes.
    And another GPRA initiative with no budget implications for 
Appropriations is for us to go to the federal centers around 
the nation and provide training and education in partnership 
skills for federal sector labor relations personnel, rather 
than requiring them to come here to Washington.

                               conclusion

    Mr. Chairman, you asked me in terms of my recommendations. 
The White House has, in fact, sought my counsel. I have had two 
conversations with them. I have met personally with Bob Nash, 
the Director of Presidential Personnel. I have, in fact, made a 
recommendation, which I think is under advisement.
    My effort there is simply to assure that there is a 
continuation of the direction in which we have started, which, 
in fact, is the direction I was asked to take when I was 
appointed to this position. And I expect to have continuing 
discussions with them.
    Let me close by saying to you and Congresswoman Lowey and 
this Subcommittee that we have sought to be proactive, not 
reactive, in this agency. We have sought, to be 
entrepreneurial, not status quo. We have sought, within the 
boundaries, within a reasonable framework, really, to run this 
little organization like a business and not a traditional 
government agency. And we are very pleased to be accountable 
and ask to be judged not by what we say, but by what we do.
    I want to say once again to you and to this subcommittee it 
has been a great honor for me personally to work with the 
leadership of this Subcommittee, to work with the staff of this 
Subcommittee, who have, likewise, been sensitive. And having 
worked on the Hill, I have some sense of the value of staff.
    Thank you once again for allowing us to try to be the best 
that we can be and, by so doing, I think develop with this 
Subcommittee a model of what the American people expect in a 
relationship between the Executive Branch and the Congressional 
Branch.
    Thank you, Mr. Chairman. That concludes my formal remarks.
    [The prepared statement follows:]



[Pages 1561 - 1573--The official Committee record contains additional material here.]



                     Remarks by Congressman Porter

    Mr. Porter. Thank you, Dr. Wells. I have to say that you 
have managed your agency well. You have brought it into the 
21st Century. You have internationalized the directions. And, 
more importantly than anything, you have brought people 
together in an understanding of the commonality of their 
interests, and to see that they can both win and resolve 
conflicts, with a record of achievement that I do not think 
anyone will be able to match.
    And I would hope you would not leave government, but if you 
must, make it for not a very long time, please. We need people 
that provide that kind of leadership and inspiration.
    I think I said this last year, Dr. Wells, but the problem 
with our media in this country is that they always focus on the 
failures and the bad news and they never tell the success 
stories and the wonderful things that happen when real 
leadership is provided to make a difference in our country. And 
people go away not understanding that there are people like you 
in government that really are making a difference in people's 
lives. And that is a source of great discouragement to us who 
see that these achievements are occurring and, yet, people do 
not really understand that they are there.
    You have got a whole group of young people behind you that 
came in during the course of your conversation. They should 
know that what is on their television set is not the reality of 
what happens in this country. That is all the bad news. The 
good news you never hear. Here is some good news the people 
ought to hear and understand.
    Dr. Wells. Thank you, sir.
    Well, you know, this may sound hokey. I will tell you I 
still get a catch in my throat when I see the Capitol. I really 
believe that it is a great honor to serve. I take this very 
seriously. I feel blessed that I was asked by our President to 
join the administration and to try to make a contribution along 
with tens of thousands of us.
    Those of you on the Hill, I have a pretty good sense of 
what you have to go through having worked on the Hill. I mean, 
people do not understand. But because of these efforts, 
people's lives are better and the quality of opportunities 
improved. That enriches our nation and the quality of life. It 
seems to me that this is what we are supposed to do.
    So I feel blessed simply to have had a chance to try to 
serve and to try to make a contribution, sir.
    Mr. Porter. Well, those of us on the Subcommittee certainly 
feel inspired by the kind of service you have given, Dr. Wells. 
I just wish more people knew about it and understood it because 
they would be inspired as well.
    Dr. Wells. Thank you, sir.

                          fmcs customer survey

    Mr. Porter. In your statement, you talked about a new 
emphasis on education and outreach to your customers, including 
the national customer survey.
    Dr. Wells. Yes, sir.
    Mr. Porter. Can you describe this more fully and tell us 
the value of this activity to the Service?
    Dr. Wells. Yes, I can, in fact. In 1993, we had 898 
outreach instances by our staff. In 1997, we had 5,619. We have 
institutionalized this in the performance appraisal of our 
mediators to require that they go out and talk to customers.
    The whole purpose here Mr. Chairman, is try to learn what 
the needs are of our nation's business and industries and our 
nation's workers and their unions, and to determine how well we 
are performing and ask how can we do better.
    I call it listening to the marketplace. But also it is an 
opportunity to educate them because the truth of the matter is 
these services are voluntary. And as people learn about them, 
they are making greater use.
    Most of our customers know about our traditional dispute 
mediation, our contract bargaining. Most do not know about our 
education and training, which we call preventive mediation, to 
strengthen and improve the relationship. And that has been a 
growth area for us. Under my tenure, that has gone from 10 
percent of our business to 30 percent of our business.
    And so listening to the customer is really a method by 
which to educate them about the services that this government 
provides, but we also listen to them about how we can do a 
better job.

                 evaluation and performance measurement

    Mr. Porter. There are a lot of people that would say, 
``Well, we should not be spending money to seek more 
interventions.'' I think they are exactly wrong, and I know you 
think they are exactly wrong.
    To the extent that we can do that and bring people closer 
together, you are going to head off a lot of strife that would 
otherwise occur. I think the outreach and education are very, 
very important.
    How does this information help you evaluate the 
effectiveness or productivity of your services? In other words, 
is it incorporated into your strategic planning in your GPRA 
activities?
    Dr. Wells. It most assuredly is. It gives us a baseline, if 
you will, of performance and customer satisfaction. And for 
strategic planning purposes, we are able then to judge what we 
are doing well, what we are not doing so well, and where we 
need to emphasize or make improvements in the future. The data 
is plugged directly back into our planning process for 
continuous improvement.
    Mr. Porter. How do you evaluate a mediator's performance? 
Obviously some conflicts are much more difficult to resolve 
than others.
    Dr. Wells. Yes.
    Mr. Porter. How do you set a standard? And how do you make 
an evaluation?
    Dr. Wells. Mediators are evaluated by their direct 
supervisors, what we call our Directors of Mediation Services, 
which is a change that we have instituted. Now, supervisors are 
required to go out in the field with mediators and observe 
their performance in at least one dispute case and one 
preventive mediation case a year. And that is an indirect way 
of saying we have that measurement.
    We have done a better job of measuring satisfaction with 
the agency than we have with mediators. For example, we do not 
send a questionnaire at the conclusion of our services in 
dispute mediation asking. ``How did we do? How can we do 
better?'' We do that, however, after our preventive mediation 
services.
    Mr. Porter. Thank you, Dr. Wells.
    Ms. Lowey.

                    Statement by Congresswoman Lowey

    Mrs. Lowey. Thank you, Mr. Chairman. I want to join you in 
your very complimentary remarks to our guest this morning.
    It is very clear to me--and I was glad that there are so 
many young people here to witness your performance--that your 
articulate presentation and your personal charm are your recipe 
for success. And it would seem to me that having people sitting 
around a table with you conducting the mediation would be sure 
to succeed.
    Dr. Wells. Thank you, ma'am.

                        caterpillar-uaw dispute

    Mrs. Lowey. I was very interested in your role, of course, 
in the Caterpillar dispute. And I wonder what special 
qualities, what special activities enabled you to play that key 
role in settling the dispute or is it just your articulate 
presentation and your personal charm?
    I ask that very seriously because we fund a whole range of 
programs. And the challenge to this Committee and the challenge 
to me--and I have been asking this question every year--is: How 
do you really establish excellence?
    You can see great programs. You can see agencies that have 
outstanding mission statements. You cannot always find someone 
with your expertise to head that program. So the challenge to 
government to me is: How can we in putting together programs 
and funding these programs increase the odds of promoting 
excellence?
    So I just wondered: What is it? You are leaving this agency 
now. What are the special qualities? What were the factors that 
actually enabled you to take such an important role?
    Dr. Wells. Congresswoman Lowey, Caterpillar was an unusual 
circumstance. The truth of the matter is what finally worked 
there was doggedness and determination because I was at the 
table over 27 times over 5 years. I wish I could suggest to you 
that some stroke of genius enabled that to happen. It did not.
    What did happen, though, after an initial effort last year, 
I did go individually and met with Don Fites who is Chairman of 
the Board and CEO of Caterpillar, and then with Steve Yokich, 
who is the President of the UAW, and secured from both of them 
their personal commitment that they were desirous of an 
agreement.
    And then I worked very closely with their representatives: 
Dick Shoemaker, who is a UAW Vice President for Ag Implement; 
and Wayne Zimmerman, who is Vice President of Human Services at 
Caterpillar. And we just made a determination together that we 
were going to get it done, no matter what.
    Now, having said that, it still took about 15 months to get 
it done. But I think that this commitment from top leadership, 
and then a willingness by the participants, enabled us to work 
through an enormously difficult, exceedingly complex dispute 
with lots of legal ramifications.

                   hiring and training fmcs mediators

    Now, in terms of your question, your bigger question, about 
excellence, I think it is important that you be well-prepared 
for service. That is one reason we have changed our hiring 
criteria, not that our colleagues in the past were not 
prepared, but the demands in the workplaces of America are more 
sophisticated. And we needed to be sure that we had people who 
were better prepared, people who couldhelp in a tough dispute, 
but also people who could educate and train the parties, who could 
really proselytize, if you will, say, you know, ``It is okay to 
cooperate. Actually, it is good to work together. That is how you build 
a better product and have profits. And that leads to jobs.'' So we have 
raised the bar appreciably.
    We have spent more time in educating our own people, 
Congresswoman. When I took office, our new mediators had one 
week of orientation. Now they have three weeks over the course 
of a year. And we focus one week on dispute, one on preventive 
mediation, and the other on alternative dispute resolution.
    Anyway, we are more intensive in the up-front training. We 
now have continuing education and training. We did not have a 
dollar bill, honestly, to educate and train our people. This 
Subcommittee, in its wisdom, was kind enough to support my 
efforts to institutionalize continuous learning for our people, 
both in the national office and in the field.
    Also, we made a policy decision to downsize in Washington. 
We have dropped our national office staff by 27 percent. As 
people have retired or chosen to go elsewhere, we have been 
very, very frugal in replacing them. But we have then hired in 
the field. So we have been able to increase our mediators in 
our service by about 8 percent.
    We set a very high standard, too. We were very clear about 
what we wanted to do. We had a plan to do it. We had 
accountability. We have more outstanding performance among our 
mediators than we ever did before because we had given them the 
tools, the equipment, and the motivation. Some people have not 
made it, and some have elected to no longer stay with us.
    So it has not always been easy. Change has been tough on 
all of us. But I think if you expect excellence, you prepare 
people for excellence, you set a high standard and try to meet 
that standard yourself, then people will follow.
    Mrs. Lowey. We understand in this Committee the importance 
of your work and that it has a direct impact on the economy. If 
you can prevent a strike or a lockout----
    Dr. Wells. Yes.
    Mrs. Lowey [continuing]. Clearly this has a direct impact 
on the economy.
    You talk about training your mediators. And I know an 
important part of your function is to train labor and 
management representatives----
    Dr. Wells. Yes.

                          preventive mediation

    Mrs. Lowey [continuing]. In their own dispute resolution 
skills. How successful have you been in training labor and 
management representatives in these skills so that your 
services really are not necessary, not that we want to put you 
out of business?
    Dr. Wells. Yes.
    Mrs. Lowey. But obviously we want to avoid reaching that 
point.
    Dr. Wells. Sure.
    Mrs. Lowey. Have you been successful in that regard?
    Dr. Wells. Well, I think we have because during my tenure 
there, we have gone from 10 percent of our mediation work being 
in the realm of what we call preventive mediation,--you think 
of preventive medicine--education and training, to 30 percent. 
And that is a fairly significant improvement. I should not say 
improvement. Interest, a greater interest.
    But I am going to ask Richard Barnes, our Deputy Director 
for the Field, if I could, because he works hands-on and I do 
not want him to have come to this meeting and not even have a 
chance to respond to a question. He could respond better than I 
did, if I may.
    Mr. Barnes. The answer to the question, Congresswoman 
Lowey, is we have had tremendous success. It is an ongoing 
process. We see changes in labor and management groupings. A 
company changes its top leadership. The unions change their top 
leadership.
    So to perpetuate the change in organizations, we make 
ourselves available routinely every three to four to five 
years. We will continue the process of education.
    I think one of the things that we have done that has really 
helped the labor-management community is to train the trainer, 
where we will work with their staff to train both the corporate 
and the union leadership.
    We have had tremendous success with that. Within the first 
six months of this year, our demand was up 20 percent over this 
time last year. The cases that we have actually closed in 
training of people is up 20 percent at this point. That demand 
continues to grow each year as we see our work transition to 
more training.

             mediating employment discrimination complaints

    Mrs. Lowey. And, lastly, I was very interested to see in 
your testimony that you are helping to reduce backlogs of 
employment discrimination cases for the EEOC or even developing 
curricula for school-based conflict resolution programs.
    Dr. Wells. Yes.
    Mrs. Lowey. Perhaps you can share with us some information 
on these services.
    Dr. Wells. These are alternative dispute resolution 
services, Congresswoman. Basically, it is the application of 
mediation skills and techniques to issues that otherwise would 
go to litigation.
    It is a tremendous growth area. One of my colleagues will 
have the data on the growth which is unbelievable. The first 
year I was there, it was at 14 percent growth. Then '95, it was 
29. '96, it went down. It was down eight percent because, 
frankly, there was a government shutdown here. '97, it was up 
122 percent. And so far this year, it is up 188 percent. People 
are finding that it is better to resolve these EEO complaints, 
one example, by mediation, as opposed to going to court.
    We are performing these services for four or five different 
governmental agencies, including the EEOC itself. For the 
Agriculture Department, we are doing a good bit of work. We are 
now in a negotiation with the Postal Service to do likewise.
    And this is a tremendous growth area for us and really what 
this simply says is, ``Look, if you have got a problem, if you 
have a conflict, why have a war? Try to sit down and work it 
out,'' whether it is a workplace complaint, whether it is an 
international issue, or whether it is a discrimination 
complaint in a workplace.
     Mrs. Lowey. That is very interesting because I remember 
some time ago reviewing some of the work of the EEOC----
    Dr. Wells. Yes.
    Mrs. Lowey [continuing]. And talking to some of the 
principals involved. It was my understanding that what they 
were doing in most situations was just passing it on to the 
judicialsystem. So that a ruling by the EEOC was not 
necessarily a ruling that was carefully thought through. Has that 
changed, in other words?
    Dr. Wells. Richard?
    Mr. Barnes. As an example, with the Department of 
Agriculture--and one of the programs we have picked up was 
assisting them with their EEO cases--at the time we met with 
them, they had a 19 percent success rate internally with 
mediation.
    I am really not sure, Congresswoman, of the numbers at this 
point. I certainly can provide them for you. But I am clear in 
my mind that we are over a 50 percent success rate today, and I 
think we are more into the 55 percent success rate with that 
mediation.
    Mrs. Lowey. That you have instituted since you have gotten 
involved?
    Mr. Barnes. That is correct, using our skills and using our 
mediators and the alternative dispute resolution design that we 
have developed for EEO dispute mediation. I am almost positive 
that we are above 55 percent, but we can provide you with that 
number.
    Mrs. Lowey. Well, I thank you very much. And, again, we 
certainly appreciate your service. I must tell you that I still 
look at that Capitol dome and with that same feeling of awe and 
feel it a great privilege to serve. I think when we stop 
feeling that way, we should not be serving in government.
    So we are grateful again for your appearance here before 
us, and we wish you good luck. I am sorry that I missed our 
esteemed colleague, Congressman Rogers, who obviously had 
wonderful things to say.
    Dr. Wells. He was very generous.
    Mr. Porter. Thank you very much.
    Dr. Wells. Thank you.
    Mr. Porter. Thank you, Ms. Lowey.
    Dr. Wells, on the reimbursable contracts with the EEOC and 
USDA and others that involve large numbers of complaints, how 
do these contracts impact on your mediators' ability to perform 
their other mediation and training responsibilities?
    Dr. Wells. Well, it is art more than science. Clearly we 
have difficulty because the growth in our business has been 
considerable, especially in these contractor services. We do 
the best we can within our budget constraints and within the 
FTEs we have.
    Our people are really busy, as you could see with the 
improvement of productivity. It has been significant. We have 
to make judgment calls. We had one mediator who had four 
different sessions in one day, three disputes, and a training 
seminar.
    So I guess what I am saying, we are stretched. And I will 
say whoever succeeds me probably is not going to be able to 
come before you and show the kind of productivity improvements 
and increases in the future which we have experienced. I think 
we have taken most of the fat out of the system. So we have 
done about as much I think as we can reasonably be expected to 
do given the constraints we have on FTEs.

                     mediator employment statistics

    Mr. Porter. How many of your mediators are women and how 
many are men in percentage terms?
    Dr. Wells. That is a good question.
    Mr. Porter. Just out of curiosity.
    Dr. Wells. While they are looking, let me tell you I am 
very proud of this figure. While they are looking for the data, 
the last hired class we had last year was 26. That was the 
largest single class. Of those 26, 13 were white males. The 
rest were women and people of color.
    Of the 70 new hires--we do have that--who have come on 
largely since I have been there, 37 were males, white males, 5 
were African American, 3 were Asian American, 6 were Hispanic, 
13 were female. The total, sir, in terms of male to female is 
50 to 20 of the new hires. But of those 70, only 37 were white 
males. I can assure you in the past it would have been an 
appreciably higher figure.

                    evaluating mediator performance

    Mr. Porter. You said on my last question before we went to 
Ms. Lowey that your mediators are evaluated by their 
supervisors in the field. How, then, do you deal with excellent 
performance and how do you deal with poor performance?
    Dr. Wells. Well, as I indicated earlier, we have higher 
expectations. We have changed the performance appraisal system. 
We are rewarding our people who are performing with excellence. 
Last year 51 of our approximately 200 mediators were counted to 
be outstanding, and this was not grade inflation. And we 
provided a $2,500 bonus which, by private sector standards is 
not much, but by government standards is considerable. We 
really gave them recognition for a job well-done.
    I will also tell you, though, that seven mediators who were 
not able to fulfill the performance standards are no longer 
with us. And that sends a signal that we are pretty serious 
about this business.
    Mr. Porter. What percentage of your current mediator 
workforce has been hired during your tenure?
    Dr. Wells. Thirty-seven percent have been hired in the last 
four and a half years under our revised and more rigorous 
hiring criteria. If I could just go on, I might suggest also 
that these new mediators have tended to be of higher education, 
broader knowledge and skills, and technologically sound. There 
are a higher percentage of females and also a greater diversity 
in the workforce than we have hired in the past as well, sir.
    Mr. Porter. What kind of educational background would serve 
you best to become a mediator?
    Dr. Wells. Boy, is that not a good question.
    Mr. Porter. Is there any----
    Dr. Wells. Yes. That is a great question. I think one needs 
to be prepared. Clearly we like to see someone with strong 
background in conflict resolution and collective bargaining.
    In the past, you had to have seven years as a chief 
spokesperson in collective bargaining or we did not hire you. 
Quite frankly, what happened is women did not qualify and 
generally people of color did not qualify because they were not 
chief spokesmen with seven years of experience. So we made that 
more flexible and looked for comparable experience as well.
    I think you need a basic level of education. You do not 
need a baccalaureate degree, but I certainly think that is very 
helpful to have. So we have given increased attention to that, 
but we are still hiring people who do not if they have 
demonstrated competence in other ways as well.
    I think flexibility is so important because you have to be 
agile in this business. You cannot be dogmatic. You have to be 
willing to listen, and you have to be willing to reallystretch 
a little bit.
    Something I say, for example, when I am at the table--and I 
only get involved in the toughest cases that really are visible 
because our staff does a good job--I simply say, you know, ``If 
you learn to walk in the other person's moccasins, you know 
what it feels like.'' And if you can look within yourself and, 
say, if you really are sincere about achieving the goals that 
you have outlined for these negotiations, then you need to help 
your colleague across the table achieve his or her basic goals, 
too, so that both sides can win.
    So I guess the truth of the matter is I do not know if 
there is a precise prescription, but I look for people who have 
demonstrated competence and excellence, who have had some 
minimal level of achievement, both academically and also in the 
real world, folks who are willing to stretch and want to be 
peacemakers.

                          THE PEACE INSTITUTE

    Mr. Porter. You know, the concept of both sides winning 
is--and we have talked about international matters before--not 
understood in a large part of this world, I find. And if 
America can change the culture of the world to understand that 
both sides can win--and often this is exactly what happens--it 
can go a long way to resolving disputes that go back centuries, 
where people dwell on the past and believe that if they gain 
something, the other side loses and vice versa.
    There is so much of that that you see out there, whether it 
is Armenia and Azerbaijan, over Nagorno-Karabach or whether it 
is in the Middle East, whether it is in Cyprus. There is so 
much looking to the past and not trusting the other side 
because if they get something, you lose something.
    Somehow we have got to change people's culture to 
understand that working together, both sides can win. And then 
we could resolve a lot of these ancient disputes and get people 
into a mode of accepting one another in working together and 
having a future that really is good for both sides.
    Dr. Wells. Absolutely.
    Mr. Porter. That is why I wondered: Did you talk to the 
Peace Institute and see if some of the practicalities that you 
bring to your work can in some way rub off on their effort in 
training mediators and conflict resolution people?
    Dr. Wells. I have, in fact, met with Dr. Solomon, the 
President of the Peace Institute, some months ago. We have a 
working group of some of their staff and our staff exploring 
complementary efforts.
    We joined them in two programs--in September at the World 
Summit here in Washington and last November, in Greece, where 
we trained diplomats from the Balkans.
    We are actually meeting this week again with the Peace 
Institute. We have done a lot of talking, but we also have had 
some accomplishments.
    I think we had to talk through things to see where we could 
come together. My sense is they have the substantive knowledge 
in the international arena, and they have very fine theoretical 
models. We can marry our very practical hands-on conflict 
resolution skills with them and I think provide an important 
service.
    We are ready to do that, and they have indicated that they, 
too, are ready. So I think it is time for us to go forward in 
more concrete and tangible ways. And we are prepared to do 
that.
    Mr. Porter. Well, they are going to be here this afternoon. 
So we are going to push them in your direction.
    Dr. Wells. Okay.

                          MEDIATION STATISTICS

    Mr. Porter. The number of collective bargaining 
negotiations with active mediation increased in 1996 and 1997 
for the first time in a decade. Why is the number increasing? I 
think I know, but perhaps you can tell us that specifically.
    Dr. Wells. While I begin to answer that question, we have a 
table that I would like to share with you that indicate the 
change.
    [Table attached.]


[Page 1583--The official Committee record contains additional material here.]



    Dr. Wells. I think it has increased, sir, partly because of 
our customer outreach and the fact that we are making people 
more aware of our services. Second, we have raised the bar and 
we have higher expectations of ourselves. Third, I think it is 
because we are being asked to do more, quite frankly.
    If you will look on the far left column there on dispute 
mediation cases, you can see in '94 we were down 6 percent. 
Well, the truth is for a decade, we have been down every year 
until the turnaround happened in '96. And now it is beginning 
to go up.
    Dr. Wells. This 7 percent may not sound like much in 1997, 
but it is a fairly appreciable increase when you look at a 
decade of decline. And we are up 13 percent to date this year.
    Right next to it is our work in preventive mediation. 
Congresswoman Lowey, you had asked the question there. That has 
been a tremendous growth area for us.
    My first full year was 1994. One of the things we did to 
change things was to look at our rewards system. Our 
performance appraisal system for our mediators counted a 
dispute twice as highly as it did a preventive mediation when, 
in fact, the preparation and the execution of a preventive 
mediation, training and education, is really more time-
consuming than just going to the table, not more demanding but 
more time-consuming.
    So we made a policy change that preventive mediation and 
ADR would count equally for performance appraisal purposes as 
dispute. And that gave added incentive to our mediators and to 
embrace these new processes in a more vigorous way.
    And the truth of the matter is the new mediators we are 
hiring are more comfortable and are excited about involving 
themselves in preventive mediation and ADR. And so that has 
contributed to an increase as well, sir.

                            YEAR 2000 ISSUES

    Mr. Porter. I have to ask you the mundane question we are 
asking all of the agencies under our jurisdiction, and that is: 
Are you going to have a year 2000 problem with your internal 
systems? Ms. Leonard says no.
    Dr. Wells. We are taking the measures to ensure that we do 
not have a year 2000 problem.
    Mr. Porter. Good. It is something we are very worried about 
with agencies that deal with the public with benefit checks and 
the like. And so I am hopeful that we can head off any possible 
problem in all the agencies under our jurisdiction.
    We have taken the matter very seriously. And I know youwere 
represented here when we had the consolidated management hearing 
earlier in the week.
    Dr. Wells. Yes.
    Mr. Porter. Ms. Lowey, do you have additional questions?
    Mrs. Lowey. No. Thank you.

                    INSTITUTIONALIZING NEW DIRECTION

    Mr. Porter. Let me finish by saying, Dr. Wells, that you 
have given us four and a half years of real change in the 
culture and direction of the agency that you have headed. And 
you have made government work better for people, which is what 
we are all trying to do. We are going to miss you very much.
    As a last question, we want to know not only what you have 
done currently but what you have done that will make tomorrow 
and next year better. So can I ask you: What measures have you 
taken to ensure that our investment in your agency and your 
leadership continues to pay dividends down the road for us so 
that we can see the same outstanding results in the future that 
we have seen under your leadership?
    Dr. Wells. Well, I think number one is that the next person 
who is selected as the Director of the Federal Mediation 
Service continues on the path that we have gone. In fact, this 
was the path, the direction I was charged with when I accepted 
this responsibility of reinvention, reengineering, or change 
and preparing the agency for the 21st Century.
    So I have every reason to believe that the administration 
will do that. I am talking with them, counseling with them. So 
the next director must continue this direction. So that is key 
and fundamental, and that is the administration's 
responsibility.
    A second way to assure, I think, Mr. Chairman, is for 
careful and diligent and rigorous oversight by the Congress. I 
think checks and balances are important. And I have always 
sought to be judged by what we have done. So I think that your 
Committee with the power of appropriations has extraordinary 
influence should it choose to exercise that influence. And so 
that is a second means.
    A third means--and this is something, frankly, that I did 
not get done and should have and I hope that my successor 
will--is to establish a customer council for the Federal 
Mediation Service in which we would have high-level executives 
from our customers, both firms and unions. It is provided for 
in our statutory enabling legislation going back to 1947. A 
customer council could provide I think oversight and direction. 
And I think that is something that ought to be investigated and 
considered as well.
    And last, but not least, really, the demands of our 
customer. I think we have raised the bar with them and what 
they now expect from us. And I think they need to demand more 
from us because, after all, we are in for public service. And 
they have every right to expect us to respond to their needs 
with efficiency and competence and high quality. And I would 
suggest that as well.
    One last point I did not make earlier, if I could, with 
you, Mr. Chairman. You asked us to be more vigorous and 
creative in outreach in the international arena last year. I 
went aboard myself. I had not done that before, both in Europe 
and in Asia.
    I was immensely impressed. I was shocked, actually, to hear 
the labor leadership and the business leadership and the 
governmental leadership of first Ireland, then United Kingdom, 
and then in Brussels, Belgium talk about the need for what they 
call social partnership between government and unions and 
firms.
    Ireland has the highest economic growth rate of any nation 
in Europe now and the lowest unemployment rate. And they 
attribute a great deal of that to social partnership.
    I will tell you I was astounded when I met John Brennan, 
the Deputy Secretary of the top trade union in the U.K. I 
forget the name of it. But when he talked to me, he said: Look, 
we are real good at fighting over here. We know how to do that 
in England. Now we need to learn how to work together. And 
social partnership is our future.
    So I thought that was a message. We are trying to do the 
same, in cooperation as well. A problem we have is we cannot 
get money. We cannot use appropriated funds for our 
international work. And so we have to enter into contract with 
the State Department and U.S. AID or the Peace Institute or 
whomever.
    A number of foreign governments have said: We will pay for 
you to come over here and train and educate our people, but we 
do not have the authorization. And OMB has said they would 
support this.
    So if your Committee would be willing to consider the 
possibility of enabling language that would allow this, we 
could do a far better job of responding because I will tell 
you--and I can take no credit; this was before my time--this 
agency of FMCS trained the South African organization which is 
equivalent to FMCS and is magnificent. They are involved not 
only in labor, but all kinds of conflict resolution.
    We did likewise in the former Soviet Union. We have done it 
in Russia and El Salvador. And so it seems to me that we have 
an important role to play.
    We do not try to tell these foreign nations to do it our 
way, but what I say is: Look, here is what has worked for us. 
And you see what, if anything, we do is relevant to you, 
especially with emerging nations and emerging economies. It 
seems that we would have an important role to play in helping 
them develop an infrastructure of conflict resolution. And they 
are seeking to do it, and they are calling us. We are not able 
to respond as well as we might.
    So this is a means by which you could aid us if you think 
we should move forward in that direction, sir.
    Mr. Porter. Well, I think that would be a wonderful 
additional legacy that you might leave. And while we do not 
have jurisdiction to do that, we can certainly put a provision 
like that in our bill if the authorizing committee of 
jurisdiction will allow us to do it. And we would be delighted 
I think to give you that additional authority and provide 
additional resources to accomplish that. I think it would be a 
very, very important part of the mission that already you have 
done a great deal to advance, even without that authority.
    Dr. Wells, let me say you have provided tremendous 
leadership. You have made a difference for people, which is 
what it is all about. You have raised the standards within 
government. That is important. People can look at the work you 
have done in your agency as a model and try to emulate it in 
theirs. That will certainly reverberate all throughout our 
government.
    And we thank you for your outstanding service to our 
country. Thank you so much.
    Dr. Wells. Thank you, Mr. Porter. And I thankCongresswoman 
Lowey and this Committee.
    The unsung heroes are our men and women, our mediators, all 
across America who are working to resolve conflicts and to 
really bring more peaceful resolutions to differences in the 
American workplace. And so all that we have done has been 
enabled by their public service. And I want to commend them to 
you for the good work that they do.
    I thank this Committee for its leadership and for listening 
to us and helping us do the job that we were hired to do. Thank 
you, Mr. Chairman and Congresswoman.
    Mr. Porter. Thank you, Dr. Wells.
    The subcommittee will stand briefly in recess.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1588 - 1755--The official Committee record contains additional material here.]



                                         Wednesday, April 22, 1997.

                     NATIONAL EDUCATION GOALS PANEL

                                WITNESS

KEN NELSON, EXECUTIVE DIRECTOR, NATIONAL EDUCATIONAL GOALS PANEL
    Mr. Porter. The subcommittee will come to order. We 
continue our hearing on the budget for fiscal year 1999 and are 
pleased to welcome Ken Nelson, Executive Director of the 
National Education Goals Panel.
    Mr. Nelson, if you would please proceed with your opening 
statement and then we will have some questions.
    Mr. Nelson. Thank you, Mr. Chairman and members. I will be 
very brief. You have received a lot of our materials as we put 
them out during the year.
    I like this Einstein quote that says we cannot begin to 
solve the complex problems we face today with the same level of 
thinking we had when we created them; because I believe that 
the bipartisan National Education Goals Panel, created by the 
Bush administration, with the Nation's Governors in 1989 and 
1990, created a new level of thinking which we have tried to 
live out and deliver. And that is to provide a results-driven 
public accountability and reporting mechanism on the 
effectiveness of education in the States and the country. I 
wanted you to each have the 1997 report because it illustrates 
how we attempt to do that.
    First of all, we illustrate the respective goals, the eight 
goals, and they, as you perhaps recall, were presented to the 
country in a measurable manner, with the specific objectives 
around them, and then the panel itself put specific indicators 
around them so we could report on progress over time.
    The Nation's report card is listed on pages 30 through 33 
of the 1997 report, and if I can call your attention to that, 
here is how we try to report on progress. Again, pages 30 
through 33. We have 8 goals listed, with 26 indicators around 
the goals, those indicators by which we can get data reporting 
on progress over time. This shows the baseline of data 
indicated by the box at the top, and that is the data we 
gathered as close as possible to when the goals were first 
established in 1990. Then the update is the latest data that 
was gathered, and then the progress, showing the arrow upward 
or regression downward or status quo.
    If I could indicate on indicator No. 3, Goal 1, the ready-
to-learn goal, it indicates an encouraging trend of more 
families reading to their children. Through two data points, 
1993 and 1996, we show a 6 percent gain there. And then across 
the page on indicator 8, under Goal 3, math achievement was 
encouraging for the country in that it is up in grades 4, 8 and 
12. Not all signs are positive, of course.
    These are graphically illustrated. Then on Page 37, where 
we try to illustrate where we must be to get to 100 percent. 
Now all of the goals are absolute. We are not sure we are 
asking that really of the country, but we thought we better 
remain consistent and state it in that manner. So on Page 37, 
we illustrate graphically how far we have come with those data 
points, and then on page 43, again, it shows the math 
achievement, and, again, if we are going to get all of our 
children to that performance level, we have a long way to go.
    I would like to also call your attention to State report 
cards which start on page 77 with, of course, Alabama, first in 
the alphabetical order. You can see that for the States we have 
33 indicators for the 8 goals, a few more than for the national 
because we have some more data. This year, or last year, 1997, 
for the first time, we illustrated not just how Alabama is 
doing against itself, its own baseline, but how it compares to 
the U.S. baseline and to the range of State scores and to the 
median scores. It is interesting that the evolution of the 
Goals Panel, when it was first started, Governors at that time 
were a bit hesitant to have States compared to each other, but 
now they really want it more and more, more State officials and 
I think national officials as well, are asking how well are we 
doing? What are our benchmarks? Those benchmarks are other 
States, and therefore the States want this kind of data.
    Congress has asked us to do more than just report on 
progress toward these goals. They have asked us to put this 
into a very understandable and usable report by parents, the 
general public, as it states in the law, so we produce 
thissummary document as well. We published many more of these. It has 
the Nation's report card in it and it also has our theme of math and 
science--21st century, prompted by the TIMSS report of last year. We 
always want our publications to pass the barbershop test so the person 
waiting to have their hair cut in the barbershop can pick this up and 
make sense of it. So we have focus groups every year to give us 
feedback on how well do these read.
    You will be interested in knowing we also have put all of 
this information on our Web site and we have this brochure just 
being launched, just being distributed now, but our Web site is 
used significantly because States want comparisons. And so, 
frankly, the Web site provides more flexibility than the 
printed document.
    If you, from a respective State, Mr. Chairman--say 
Illinois--you want today to find out how neighboring States--
say Michigan or Wisconsin--are doing compared to these 
indicators here, our Web site allows you to do that and print 
that out. That is more flexible than the printed document.
    Mr. Hoyer. Do we have a copy of your Web site brochure?
    Mr. Nelson. I will get it to you. Absolutely. I should have 
brought more. We did have 100,000 hits on this this last month, 
so it is increasing exponentially as the word gets out, but I 
will make certain each of the members get that.
    Mr. Hoyer. Thank you. Excuse me.
    Mr. Nelson. Thank you.
    Then, in addition, the documents, the mandate from Congress 
said we should work with States and communities to escalate 
progress toward goal achievement, not just a report, but to 
facilitate progress; so in that vein, we have published these 
documents. One is on Ready Schools. The panel is concerned that 
we not just make children ready for schools, ready to learn, 
but that we make schools ready for the children. And this has 
10 keys in it in terms of how we can best do this, designed and 
developed again with people in the schools, be it principals, 
parents, teachers, and sent out at large to all schools in the 
country and all parent groups.
    Also, the Congress specifically asked us to provide this 
document on assessments of early childhood, and how to best do 
that, and that was just delivered this past year.
    We are also now working on some new publications that will 
be of interest to the panel. Number one, very shortly we will 
be releasing a report that does a very strong comparison, State 
by State, on all the NAEP-level data for the States, and that 
will be quite interesting and quite dramatic. It will allow 
States to look at even subgroup populations in their States to 
find out how they can improve strategies for moving and 
responding to the subgroups. So we try to make our information 
actionable by State policymakers.
    The other report we are working on which will be released 
later this year is how States and communities are reporting 
assessment results to parents and families. It is a very 
dramatic issue right now in all States. All States are moving 
toward higher academic standards, and they want to promote the 
standards with the parents and the larger public. How they best 
do that is what they are struggling with; and then how they 
best help parents understand what the assessment results are 
going to be.
    You might be fully aware that some States are raising the 
bar quite significantly--Massachusetts comes to mind, Colorado 
comes to mind--for graduation requirements. And when students 
don't achieve those new standards, sometimes parents are upset 
about that. Policymakers, Governors, State legislators, are 
anticipating that and trying to communicate best to parents 
what to expect and what these assessment results mean. And so 
we are working with multiple States and communities to put out 
a publication on that and we will probably release it when we 
release our 1998 report.
    This year, Mr. Chairman, for the first time, we are going 
to do a downlink, we are going to telecast it throughout the 
country to all State-level policymakers, whom we consider our 
focused customer audience, in terms of how they can best use 
this document, how they can best use the State assessment 
document.
    This year our panel is chaired by Cecil Underwood, Governor 
of West Virginia. As you know, it is bipartisan. Governor Hunt 
of North Carolina was last year's chair. This year, Governor 
Underwood created a new Task Force on the Future of the Goals, 
cochaired by Governor Hunt and Governor Engler of Michigan, 
because next year the reauthorization legislation is up for the 
Goals Panel, and the Goals Panel wants to come up to the Hill 
properly prepared to comment on that reauthorization.
    Finally, Mr. Chairman and members, I will conclude by 
saying that we are constantly trying to be customer-responsive. 
We have defined our customer base primarily as State 
policymakers; that is, Governors, State legislators, chief 
State school officers, State boards, and business education 
coalitions, and then parents and the public; and we respond to 
them with the best-quality products and services that we can 
render, and we do it through the four strategic performance 
objectives listed in our budget.
    Finally, back to the Einstein quote. We believe, the panel 
believes, it is providing a new level of thinking as we provide 
these resources to communities and States as they grapple with 
the complex problems that we are facing.
    Thank you very much, Mr. Chair and members.
    [The prepared statement follows:]


[Pages 1761 - 1768--The official Committee record contains additional material here.]



    Mr. Porter. Mr. Nelson, thank you for your statement. Has 
the media shown a great interest in any of this?
    Mr. Nelson. Well, to some degree, Mr. Chairman, they have. 
Let me start with when we released our annual report. C-SPAN 
has always been present. In fact, Governor Romer of Colorado 
cites the fact that when he bumped into Bob Dole once, Bob Dole 
said to him, ``I saw you on television, and it was on C-SPAN,'' 
and Bob Dole was working on his bicycle machine or whatever and 
watching that at the same time, and so Romer was very impressed 
with that.
    Consequently, we have made sure the media gets the full 
attention on the release of our report, and they have been very 
helpful. We have a media contract, so C-SPAN and CNN have been 
at the last three of our meetings and have gone live and then 
rebroadcast across the country. We follow up with print media 
in every way we can as well, but it is a question we are always 
asking ourself. We would like more media, of course.
    Mr. Porter. It seems to me that these statistics and 
indications of progress or lack of progress are very helpful to 
State policymakers, but the American people ought to know about 
them as well, and the broadest dissemination of this 
information to motivate us--if you look, for example, at goal 
three on Page 31, under mathematics achievement, our record 
there as a country as a whole is pitiful. And while the 
indicators are up, the results of the TIMSS test recently for 
grades 8 and 12 show that relative to other countries, we are 
doing very, very badly, and we have a long, long way to go.
    So it seems to me that somehow these kinds of things ought 
to motivate the American public, parents particularly, to see 
if they can get a little greater achievement out of their 
children in school, and one of the primary uses of this ought 
to be to influence people broadly if that can be done.
    We consider your agency a well-run agency.
    Mr. Nelson. Thank you.
    Mr. Porter. I don't have a lot of long questions for you. 
In fact, the questions I have for you I think can be answered 
for the record, and I would just like to thank you for the good 
work that you are doing.
    Mr. Hoyer.
    Mr. Hoyer. Thank you. I was supportive and am supportive of 
the Goals and I am supportive of the assessment of Goals 
because they give us some opportunity to judge how we are 
doing.
    The Chairman, of course, has made an observation that I 
agree with, that we ought to be doing better. Let me ask you 
something, just so you can explain to me how this works. On 
page 44--and this is not unique, it is the same kind of 
language someplace else, in a number of other places--when you 
say on the top of page 44, table 4, ``Mathematics disparities 
and percentage points between whites and minority students to 
meet the goals in performance standards in mathematics,'' when 
you do the percentages there, explain to me what that means. 
Because you talk in terms between white and minority students. 
What does the percentage mean?
    Mr. Nelson. The percentage would be those who performed at 
the performance level of achievement that was established by 
NAGB. NAGB set some achievement levels called proficient and 
advanced. We report on that, so those percentage marks indicate 
that percentage passed at that level and the----
    Mr. Hoyer. But how does that relate to white and minority 
students? Maybe it is on a previous page, but it is confusing. 
How does that relate to white students? Did 40 percent of white 
students or 50 percent of white students meet the standards? 
Who met the goals and performance standards in mathematics? How 
do I judge that against what majority students have done? It 
confused me a little bit and maybe I am not reading it right. 
Let me see in the explanation over here.
    Mr. Nelson. The box at the side does allude to it, but I 
don't think that explains it fully. This might be one I would 
have to--I didn't bring my statistician with me today.
    Mr. Hoyer. Now this may be the gap, not the percentage of 
students who met it.
    Mr. Nelson. I think you might be on to it there, 
Congressman.
    Mr. Hoyer. There was an 11 percent gap between the white 
students meeting the standard and the American Indian student?
    Mr. Nelson. Yes.
    Mr. Hoyer. Let me suggest that it is a difficult graph. If 
this is the gap as opposed to the percentage of students that 
met the Goal, then it is nice to know. If they are all failing, 
but the African Americans are failing at 11 percent worse than 
whites or Hispanics or whatever, that is not particularly 
gratifying.
    Mr. Nelson. This is one I better get back to you on. I'm 
sorry I don't have that at my fingertips. It is the first time 
I have been confronted with that question.
    Mr. Hoyer. I did not mean it as a stumper. I read it three 
times and thought I must be dumb because I do not understand 
what this is telling us.
    Mr. Nelson. It says to me we haven't said it clearly 
enough. This is good feedback, actually, that we haven't said 
it clearly enough, so we will work on that and we will also get 
back to you.
    Mr. Hoyer. It seems to me it is really important. If I am 
an African-American parent or I am a Hispanic parent and I want 
to judge how my young people are doing or how my son or 
daughter is doing for when they enter into the workplace, I 
want to know how did the majority of students do, how did 
minorities do, how did African Americans do versus Hispanics or 
Asian Americans. Not so I can look at the other people, but so 
I can look at my son or daughter and say to the system, to the 
John Porters, Steny Hoyers, et cetera, that we can do better. I 
think that is what these Goals are for.
    It would be helpful if you can clarify that. As I look at 
these graphs, I understand what they are saying, but I think 
they are a little esoteric. That is a constructive criticism, 
because I am very much in favor of what you do and I am glad to 
hear the Chairman's observation and the staff observation that 
you are doing a good managerial job.
    Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Mr. Hoyer.
    Mrs. Northup.
    Ms. Northup. I just sort of wondered how much you all are 
involved, if at all, in cause and effect or prescriptions for 
change. For example, do you notice any trends that you 
diagnose? I see one in particular, and that is both at my State 
level and at the national level, the percentage of teachers 
that have a degree in their main teaching assignment declined. 
And clearly, the reason that goal was there is because you 
think it is important that teachers have a degree in the area 
they teach. Do you make any statement as to why that is true?
    Mr. Nelson. Mr. Chairman and Congresswoman Northup, yes, we 
analyze, as best as we can. In fact, that very indicator 
prompted us to establish a Task Force on Professional 
Development. And we have a report going out from the panel now 
to all Governors and State legislators in the country, 
recommendations on how to enhance professional development, 
with a lot of good State examples cited in terms of how to do 
that, and it raises the question about whether people are 
teaching out of field. It is practiced because of necessity at 
the local level, a shortage of teachers in that professional 
field, whatever generates it.
    Ms. Northup. Is it that, or is it teachers that have more 
seniority bid on teaching slots outside of their primary 
certification?
    Mr. Nelson. Well, frankly, we have not gone in to analyze 
it that deeply. You are probably on to one of the facets right 
there, but we have not gone into it.
    Ms. Northup. Well, I think that is really important. If the 
main cause is not that we don't have teachers who have certain 
degrees in certain areas but that we allow people to bid on 
jobs outside of their primary certification, if we don't state 
that, that becomes a problem, and then it seems like all we are 
doing is scorekeeping here.
    Mr. Nelson. Right. That is a good reminder. I will get back 
to you on that to see what we can do, because, as I said, we 
are already working on that area but not specifically on that 
issue.
    Ms. Northup. One more question.
    Mr. Nelson. Yes.
    Ms. Northup. Are the statistics significant enough that you 
can break it down any closer than whole States?
    Mr. Nelson. We struggle with that all the time. We are not 
able to do that because our data cannot be disaggregated. This 
is State-level data. We would love to do that, because I 
believe the data gets more powerful the closer you get to the 
student. Some people have asked us to look at that.
    As a matter of fact, when we look at the future of the 
goals, one facet we will be looking at is how can more of this 
link with the States and local use of data; so that although a 
lot of the State data--we always report comparable data, and 
yet every State reports noncomparable data, and they rely on a 
lot of that to change and improve their system. It is not that 
they are in conflict; they should be complementary, but we 
right now are not able to go below State-level data.
    Ms. Northup. Since you do have separate fields, though, in 
your programming, clearly for breakdown by race, can you 
breakdown the States by race?
    Mr. Nelson. Yes; we have done that to the subgrouping and I 
will get you examples of that.
    Ms. Northup. I would be interested in that because our 
minority community is raising a lot of questions about how 
their children are doing on tests and feeling that they are not 
doing well, and not receiving the benefits that they need. And 
I would be interested in seeing, based on the State data, 
whether or not that holds out. I mean, the fact is they are 
having trouble getting the information from the States to get 
it broken down that way, so if you could do that for me, I 
would appreciate it.
    Mr. Nelson. We have the report that is forthcoming which 
does that, by subgroups, all minority groups, and I think male 
and female, on all of the NAEP State-level data we have.
    Ms. Northup. Okay, good. Thank you, Mr. Chairman.
    Mr. Porter. Thank you, Ms. Northup.
    Off the record.
    [Discussion off the record.]
    Mr. Porter. Again, thank you for the job you are doing. I 
do have a number of questions for you to answer for the record.
    The subcommittee will stand in recess until 10:00 a.m. 
tomorrow.
    [The following questions were submitted to be answered for 
the record:]


[Pages 1773 - 1827--The official Committee record contains additional material here.]



                                           Tuesday, April 28, 1998.

                        NATIONAL MEDIATION BOARD

                               WITNESSES

ERNEST DuBESTER, CHAIRMAN, NATIONAL MEDIATION BOARD
STEPHEN E. CRABLE, CHIEF OF STAFF
JUNE D.W. KING, CHIEF FINANCIAL OFFICER
MAGGIE JACOBSEN, BOARD MEMBER AND FORMER CHAIRPERSON

    Mr. Porter. The subcommittee will come to order. We 
continue our hearings on the fiscal year 1999 budget with the 
National Mediation Board, and we are pleased to welcome Ernest 
DuBester, Chairman. Mr. DuBester, if you will introduce the 
people you have brought with you, then proceed with your 
statement.

                       Introduction of Witnesses

    Mr. DuBester. Thank you, Mr. Chairman,. Good morning. 
Accompanying me today at the far end of the table is Maggie 
Jacobsen, Member of the Board, and former Chairwoman. To my 
left is Stephen Crable, Chief of Staff of the agency. And to my 
right is June King, our Chief Financial Officer.
    I have submitted a statement in addition to the budget 
justification. I would ask that it be incorporated into the 
record.
    Mr. Porter. Yes.

                           Statement Summary

    Mr. DuBester. I will make a couple of brief observations. 
Mr. Chairman, as I know you are aware, over the last five years 
the National Mediation Board has been reexamining its mission 
to improve customer service, agency efficiency and cost-
effectiveness at a time of diminishing resources.
    Last year we reported on the successful reorganization of 
the NMB which has resulted in greatly enhanced agency services 
at a reduced cost to the public. Today I am pleased to report 
that the NMB continues to move forward with its initiative to 
reorganize and to improve the quality of its services. The 
agency's reorganization, as we previously reported, included 
relocation of the mediators to the Washington, D.C. office, 
expansion of the services offered by the agency, and 
reorganization of the agency's management structure at the most 
senior staff levels. It has allowed the NMB to use its mediator 
corps and support staff in a much more efficient and cost-
effective way.
    During the last fiscal year, as a result of the fact that 
our reorganization led to the loss of a little more than half 
of our mediators to retirement or relocation to other agencies 
or other jobs. We spent a lot of time and resources in 
recruiting, interviewing, hiring, and training new mediators. 
Without the reorganization of the Board's processes and 
structures, the NMB's ability to effectively continue its 
statutory functions would have been difficult and problematic. 
I would report to you that some of our mediator positions are 
still unfilled and there are some other retirements that are 
possible in the near future. In view of these realities, I 
think it is likely that staffing issues will continue to be a 
challenge well into fiscal Year 2000.
    At the same time, I just want to share with you quickly 
that the NMB has continued to upgrade its technological 
capacity with the latest in hardware and software which allows 
for effective communication among the staff. The Board is 
continuing to address the agency's technological challenges, 
quite frankly looking ahead to the next five years. We have 
moved into cyberspace. We are providing our staff with 
effective access to the Internet and have established a home 
page on the Internet which is user friendly and which is based 
upon heavy support that we received and input we received from 
the labor and management parties that we serve as well as other 
government agencies and the public. Obviously our Web site 
focuses primarily on the Board's principal functions of 
mediation, representation, arbitration, and presidential 
emergency boards.
    All of these developments, Mr. Chairman, and steps have 
continued to allow the agency to do more with less. Greater 
utilization of computer technology and the restructuring of our 
office systems has been critical to the ability of the agency 
to satisfy its statutory responsibilities, and this is 
particularly true again given that our work force was reduced 
by nearly 10 percent in fiscal year 1996 and further 
temporarily reduced by eight voluntary retirements or transfers 
during the last fiscal year.
    By the same token, I am happy to report that 
notwithstanding the fact that we have been somewhat short 
staffed over the last year and while at the same time we made 
every effort to reduce costs to the public, it has not 
resulted, in my judgment, in a diminishment of the services 
that we have been providing.
    As we reported last year, we launched new dispute 
prevention initiatives which have continued with great success 
and I think great customer satisfaction last year. These 
include training and education, particularly in the areas of 
grievance mediation, interest-based bargaining and labor 
management committee facilitation. Our overall goal in these 
endeavors is to reduce the time it takes to resolve disputes, 
to improve the quality of bargaining and other dispute 
resolution processes and thereby help the parties to bring 
about a positive change in the collective bargaining culture in 
both the railroad and airline industries.
    I would say to you that the Board continues to view the 
objective of mediation as assistance to the parties in 
achieving agreement and we see the revitalized role of the 
mediator as an active participant in the process and really key 
to that assistance. Consistent with this view of mediation and 
the role of the mediator, all of our professional staff have or 
are receiving practitioner-oriented training.
    The railroad and airline industries, the labor-management 
parties that make up those industries, are also continuing to 
participate in the staff training and development. I would say 
to you that we have had, just by illustration--this is not all-
inclusive--a number of training initiatives in theseareas with 
carriers such as American Airlines, Northwest Airlines, America West 
Airlines, railroads such as Conrail, Metro North Railroad and the Grand 
Trunk Railroad, all of which have brought about, I think, a positive 
change in the ability of those parties to come about with more 
effective dispute resolution and problem-solving approaches to 
collective bargaining obligations.
    Like always, we have a busy year. We have collective 
bargaining negotiations that continue in both industries. Some, 
like Northwest Airlines for example, Northwest Airlines happens 
to have the largest number of collective bargaining agreements 
in the airline industry, 12 agreements, have been open for over 
a year right now. With the pilots, for example, they came to 
the table with 2,000 open issues. They have been in mediation 
since August.
    Part of our challenge, given our statutory mission, is, on 
the one hand, to facilitate and improve effective collective 
bargaining while at the same time striving to minimize or avoid 
disruptions to commerce. As you well know, given your tenure on 
this committee, mediation under our law is mandatory and 
working the processes towards those statutory objectives is 
always a challenging one.
    We have U.S. Airways before us. Last year we reported 
negotiations that were pending with Continental Airlines and 
its pilots, and I am pleased to report that we have reached 
agreements and helped them to reach agreements which are now 
pending ratification. We have ongoing negotiations with Amtrak 
and all of its unions. We were successful last year in reaching 
one agreement, and since then we have reached two more and we 
continue to hold promise for quick resolution of those ongoing 
negotiations.
    As you may be aware, I believe you are, last year's Amtrak 
reauthorization bill enacted a statutory mandate regarding 
employee protection issues. Under the process that the Congress 
implemented through that law, there was a period for 
facilitated mediation and it held out the prospect perhaps of 
self-help or a strike by June 1 of this year.
    I would report to that you on one hand we have not reached 
agreement on these difficult issues but in working with the 
parties, the parties, as a matter of process, have agreed that 
absent an agreement, they will let the matter go to binding 
interest arbitration and that is another dispute resolution 
process that we always look to as a possible solution. 
Obviously the good news about that is that we know there is not 
the possibility of a strike come June 1st.
    These are the various matters, among others, that are 
looming before us, and the budget request that we have 
submitted, we believe, is necessary to help us sustain our 
statutory mission. And at the same time, I would commit to you 
that we will continue to do the best we can to improve the 
quality of our services but try to make do with less than we 
have in the past.
    [The prepared statement follows:]


[Pages 1832 - 1841--The official Committee record contains additional material here.]



                          performance measures

    Mr. Porter. The strategic plan included with the budget 
justification lists standards for customer service but does not 
set targets. For example, page 26 of the justification 
indicates that the percentage of mediation applications to 
which the NMB responded within three days declined from 96 
percent in 1995 and 1996 to 88 percent in 1997. The standard is 
a response within three days, but the plan does not include 
targets for 1998 and 1999. These targets should be reported 
based on the 1998 appropriation and the 1999 request. You 
simply report the historical data on pages 26 to 32. Why have 
you not selected targets for each of your performance measures?
    Mr. DuBester. Mr. Chairman, the question that you raise may 
have to do with a little confusion as to the documents that we 
have. The pages that you refer to have to do with our customer 
service plan. In our strategic plan and our annual GPRA 
obligations, we do set specific targets. One of them is a 
general obligation that we have incorporated our customer 
service plan in the performance measures contained therein as 
specific targets, and in fact I am looking at the annual GPRA 
report that we have which I am happy to provide to the 
committee, if we have not already done so, and it makes clear 
that we have specific targets identified and they do, in these 
areas, tend to track the published standards that you have 
cited that are in our customer service plan.
    Mr. Porter. Staff tells me that this should be in the 
justification and not where apparently it is. Can we put this 
in the record then? We will put that in the record.
    [The information follows:]

    The measure you refer to on page 26 of the justification is 
an NMB Customer Service Plan (CSP) measure. The CSP measures 
should be distinguished from the performance objectives and 
targets set out in the performance plans. In this connection, 
the NMB initiated a customer service planning process, which 
followed a series of railroad and airline transport industry 
focus group sessions involving management, labor and neutral 
parties. The first CSP covered the FY 1995 and the current CSP 
covers the FY 1998. The CSP did not initially contemplate 
setting future or multi-year goals or targets for the various 
CSP measures, as in GPRA, but was focused on monitoring and 
evaluating our experience with the CSP measures for a given 
year. CSP results are recorded and a CSP Report is issued 
annually to the parties and made available to the public.
    In keeping with the GPRA goal of aligning separate 
performance related systems, we included the CSP measures as a 
means of reference for both our strategic plan and annual 
performance plans. In performance plans subsequent to FY 1999, 
the Board intends to incorporate customer service standards 
into the performance plan and include specific targets.

    Mr. DuBester. I regret that oversight and I apologize to 
the committee.
    Mr. Porter. In the example I mentioned above, why did the 
percentage of cases to which NMB responded within three days 
drop from 96 percent to 88 percent?
    Mr. DuBester. One reason for that, Mr. Chairman, may be 
that in addition to the fact that we set stringent standards 
for our agency, that often our ability to meet our standards 
are dictated by factors out of our control. What I mean by that 
specifically are requests that we get from the parties 
themselves to hold back for certain reasons. It could be for a 
variety of reasons. One may be that the parties are close to 
reaching an agreement in their judgment and they may want to, 
before getting into mediation which might change the dynamic, 
they ask us to hold off for a few days to see how the process 
develops. I know in this last fiscal year that British Airways 
and one of its unions, the International Association of 
Machinists, in that vein had specifically asked us to hold off 
for a period of about 30 days, I think, for the reason I just 
cited.
    When we get situations like that where the parties have 
asked us to accommodate what is going on with them, we try to 
do that because we are interested, obviously, in more effective 
resolution. What we do not do is we don't make special 
notations or special allowances in our standards. We consider 
that a situation where we have not succeeded, even though in 
reality I would say to you, Mr. Chairman, that that probably is 
not exactly the situation.
    Mr. Porter. I was going to say it seems to me that that 
should not start the running of the three-day period normally. 
Why don't you answer that question more fully for me for the 
record? I would like to know what the 96 to 88 percent really 
represents. I think it will help both of us understand a little 
bit better.
    [The information follows:]

    Upon receipt of an application for mediation assistance, 
the NMB issues an initial written response which generally 
indicates the case number and mediator assigned to the matter 
as well as other preliminary information. Our customer service 
goal is to respond to applications within three days. This 
``change'' from the previous year's rate of 96% is not 
significant from a practical point of view. The percentage 
change was driven by a delay in the handling of four cases 
which was done at the request of the parties. Under the then 
current customer service standards, these ``delays'' were 
chargeable to the agency. Beginning in FY 1998, the customer 
service standards were changed to give the Chief of Staff the 
authority to exclude these types of aberrations from counting 
against the agency.

                           mediation caseload

    Mr. Porter. On page 17 of the justification, it indicates a 
growing backlog of mediation cases from 168 at the end of 1997 
to 258 at the end of 1999. Why is the backlog growing? Is this 
acceptable to you and is this measure included in your 
strategic plan?
    Mr. DuBester. Again, Mr. Chairman, the number of cases that 
are pending has to do with a lot of factors, one of which may 
be, for example in a particular fiscal year, what dates the 
number of collective bargaining agreements became open to 
negotiation. That is not necessarily going to be uniform during 
any particular year.
    Number two, it has to do a lot with the nature of the 
collective bargaining situations that are before us. What I 
mean by that is the complexity, whether they are first 
agreements or renewal agreements, whether they are particularly 
complex negotiations with major carriers that may take a little 
longer to bring to an effective resolution.
    The third reason I would mention to you as well, which I 
don't think has resulted in a diminishment of our statutory 
mission and the obligations that we have in providing mediatory 
assistance, is that for the better part of the last year we 
have been working with less. We have been short staffed. I 
think that may have a slight bearing on the numbers, but again 
I don't think it has in any way undermined the statutory 
mission or our obligation to perform. If it is a backlog that 
is caused in any way by the inability of our staff to provide 
quality service, it always provides a concern to us. But we are 
working hard, as I said before, to continue to monitor and 
assess our needs. As I mentioned to you, and I think as our 
budget statement indicates, we are currently five or six bodies 
below our FTE level. So we contemplate hiring staff in the near 
future and that includes mediators. That will be of great 
assistance not only to performing our statutory obligations, 
but I think will also be a great relief to our existing 
mediators.
    Mr. Porter. Is the measure included in the strategic plan? 
That is the backlog?
    Mr. DuBester. Yes--do you mean in terms of measuring the 
number? I do not believe it is.
    Mr. Porter. Should it be?
    Mr. Crable. That is a difficult question. I think ideally 
it should be. One of the difficulties in setting standards, 
particularly on a backlog, is in many cases we have no control 
over that or it may put us in conflict with one of the 
principles of trying to avoid disruptions in interstate 
commerce.
    For example, now the Northwest pilots have been in 
mediation for approximately 9 months. They came in with 400 
issues on the table in mediation and while we might have liked 
that case to move along quicker, to move it alongquicker 
probably would have resulted in an increased likelihood of a 
disruption.
    Mr. Porter. Why don't you give us a discussion of this 
question for the record because obviously it is a fairly 
complex one and has a lot of different facets that you probably 
want to give some additional thought to.
    Mr. Crable. Great.
    [The information follows:]

    The projected backlog is growing for several reasons. 
First, the number of cases handled by the Board in the 
mediation (including facilitation and dispute prevention) 
dramatically increased between FY 1996 and FY 1997. In FY 1996, 
the Board received 62 new mediation cases. During FY 1997, the 
Board received 88 new mediation cases, a 41% increase in 
mediation cases. Additionally, the Board docketed 28 cases 
involving facilitation, preventive mediation or training, an 
increase of 26 cases over FY 1996 which was the first year the 
Board formally began offering these new services. Year after 
year, the Board's case load in these areas increased by more 
than 80 percent. This increase was attributable to the cyclical 
nature of bargaining as well as the increased range and quality 
of services being offered by the Board which has resulted in 
greater customer satisfaction. The agency anticipates that new 
cases will continue to increase during FY 1998 (projected 130) 
and 1999 (projected 140). An increase in cases of this 
magnitude will necessarily increase the ``backlog'' by a 
significant amount unless staffing or productivity increases by 
the same percentage as new case intake.
    Second, during FY 1997, the number of mediators employed by 
the agency fell from 16 to 8, before increasing again to 13. 
This set of circumstances naturally led to an increase in the 
number of unresolved cases. However, as a result of highly 
increased mediator productivity (as measured by case closures), 
the increase in the number of unresolved cases was 
substantially less than it would have been if productivity was 
flat. As illustrative, during FY 1996, 16 mediators closed 64 
cases. In FY 1997, 12 mediators closed 82 cases, a 28% increase 
in the number of cases closed by 25% fewer mediators.
    To deal with the projected increase in the number of cases, 
the Board is striving to increase its mediator complement, as 
described below, by four mediators. The agency believes that 
this projected increase in staff levels will help reduce the 
number of unresolved cases which increased during the agency's 
re-staffing and will cover the projected increased demand for 
its services related to the enhanced quality and skill of the 
Board's mediators.

                        representation caseload

    Mr. Porter. Page 20 of the justification indicates a growth 
in the backlog of representation cases. Why is this backlog 
growing? Is this acceptable and is this measure included in 
your strategic plan?
    Mr. DuBester. In the representation area, Mr. Chairman, you 
will see that our customer service standards have been met, I 
think, in quite high percentages. We are pleased with the 
performance in that regard. Again, the number of cases that are 
pending per se is a matter that is largely out of our control. 
It is initiated by the parties, and based on years of 
experience we can project what we anticipate; but you never 
know during the course of a year.
    Mr. Porter. Give me the same kind of discussion on that one 
for the record.
    Mr. DuBester. I would be happy to provide that.
    [The information follows:]

    There were five more representation cases pending at the 
start of FY 1998 than there were at the start of FY 1997. This 
relatively small growth in pending cases is cyclical and is 
well within acceptable limits. We will likely revise downward 
our pending case estimate for the beginning of FY 1999 because 
53 cases have been closed during the first six months of FY 
1998, compared with 83 cases closed during all of FY 1997. The 
expeditious resolution of representation matters effectively 
minimizes the potential for labor-management strains over 
delayed representation determinations. For that reason, the 
NMB's strategic plan focuses on the expeditious resolution of 
these disputes rather than particular case inventory levels. In 
addition, the prompt resolution of representation cases also 
has the greatest prospect of effectively managing and 
minimizing the inventory of unresolved disputes over time.

                             budget request

    Mr. Porter. The request represents a reduction of $200,000 
below the fiscal year 1998 appropriation. But the fiscal year 
1998 figure included a $500,000 one-time appropriation for 
backlog reduction. So the fiscal year 1999 request actually 
represents a $300,000 increase over fiscal year 1998. How is 
this increase being allocated?
    Mr. DuBester. It is our intention, Mr. Chairman, to 
allocate two-thirds of that number to arbitration services in a 
continuing effort to reduce the number of railroad grievances 
that are pending. And the additional $100,000 we plan to 
dedicate for the use of mediatory assistance and training 
initiatives.

                          arbitration backlog

    Mr. Porter. If the $500,000 was for backlog reduction, that 
says to us that at least to some degree, backlogs can be 
reduced by adding resources and it is not simply serendipitous 
given the situation in the industry at any one time. So include 
that, please, in your answer to the previous two questions.
    Mr. DuBester. I will, Mr. Chairman.
    [The information follows:]

    There is a direct relation between availability of funding 
and the number or days allocated to the arbitrators. After 
seven months into the fiscal year, the Board is projecting a 
reduction in the number of pending cases by the end of FY 1998 
from 10,420 to 9,544 cases. However, this number may not fully 
reflect the ultimate reduction accomplished by the additional 
funding, since the reduction in backlog attributable to the 
additional funding will not be known until the end of FY 1998.
    Viewed in a different light, the backlog of pending cases 
might be seen as even more substantially reduced. Until a case 
is actually heard by an arbitrator, it may be withdrawn, or 
settled by the parties. As of May 1, 1998, there were 706 cases 
heard and not decided. As information, the NMB implemented a 
new policy in 1995 which requires an arbitrator to submit a 
proposed decision to the parties within six months from the 
date of the hearing. If the arbitrator fails to comply, he/she 
is restricted from hearing any additional cases until such time 
as all of the arbitrator's overdue awards are submitted to the 
parties. After three years, the impact of this policy has 
proven to be extremely effective, not only with respect to 
expediting the rendering of decisions, but also in getting more 
cases heard during the year.
    In light of the additional funding received for FY 1998, 
the Board is urging the parties to increase the use of 
precedent-setting boards which could resolve all similar claims 
involving the same carrier and organization. In addition, a 
strong effort is being made to encourage and assist the parties 
in the use of grievance mediation in lieu of arbitration, which 
could result in a dramatic reduction in the number of incoming 
cases which the Board has no statutory authority to control. 
The Board is encouraging the use of these approaches by 
offering training and technical support to interested parties.

    Mr. Porter. How is the $500,000 one-time appropriation 
allocated and have the backlogs been reduced as projected?
    Mr. DuBester. The allocation of the money has gone to a 
number of purposes. One, to pay a fuller complement of days to 
the neutrals who resolve these cases.
    Number two, to provide for the travel involved in providing 
hearings.
    Third, to increase our ability to provide training and 
assistance for some of the new dispute initiatives that I 
referred to, such as grievance mediation.
    I believe, as I indicated in my statement and as we have 
also discussed in our fuller budget justification, we believe 
that a lot of the developments, particularly in terms of the 
new initiatives like grievance mediation and the impact that 
they have on changing the bargaining culture within 
particularly the railroad industry, that we are going to see a 
positive effect next fiscal year. But in terms of the 
arbitration proceedings themselves and the length they take to 
schedule and resolve, which often exceed the life span of two 
fiscal years, I don't believe we will see the immediate impact 
of that until the latter part of this calendar year or, in 
other words, early next fiscal year.

                            tracking system

    Mr. Porter. What is the status of the grievance mediation 
tracking system and the pilot program?
    Mr. DuBester. Well, as I have indicated, the grievance 
mediation initiative is flourishing. Not only have we engaged 
in a number of grievance mediation training initiatives or 
evaluations with parties in both the airline and railroad 
industries, but we continue to get a lot of positive feedback 
from the parties that have gone through the training. We 
continue to get a large number of inquiries and additional 
requests for further training, so I believe that that holds out 
a very positive prospect for the future.

                     dispute prevention initiatives

    Mr. Porter. What has been the result of NMB's interest-
based bargaining training initiative? Have all professional 
staff received the training?
    Mr. DuBester. All of our professional staff have received 
training. We have a number of our mediators who we are 
utilizing to a greater extent to provide training to the 
parties right now, and we are always, obviously, looking to 
expand the number of people that can provide the training.
    Again, interest-based bargaining is not necessarily a 
substitute, Mr. Chairman, for traditional bargaining which has 
existed, as you know, for decades. It is just another tool that 
we are trying to make, of course, our staff very familiar with, 
but also trying to familiarize the parties who have the 
bargaining obligations. So that would be a dispute initiative, 
if you will, that is very similar to grievance mediation and 
with, I think, similar feedback from the parties and similar 
efforts in terms of training our staff.
    Mr. Porter. Last year, Mr. DuBester, Mr. Hipp testified 
that he was constrained from discussing the impact of NMB's 
dispute prevention initiatives because the initiatives were so 
new they involved active cases. Presumably, those cases are no 
longer active. How many people have been trained through this 
initiative and what information do you have regarding its 
success in preventing disputes?
    Mr. DuBester. Well, again, Mr. Chairman, I would be happy 
to provide a more detailed response in writing, but I think I 
would just echo what I have said in my previous responses, 
which is that we have had a number of what I believe to be 
successful initiatives, both in terms of grievance mediation, 
as well as in terms of interest-based bargaining.
    One illustration I would give to you, for example, is on 
the Metro North Railroad, involving one of its labor 
organizations. We recently provided them with grievance 
mediation training, and recently got a report back that they 
had gone into that training with the idea of presenting perhaps 
200 different cases for arbitration. As a result of their 
experience, they had reduced that to 7. So that is just one 
illustration, for example, of the kind of results you can get 
and the way that we can improve the quality of our service at 
reduced costs to the public.

                             chicago office

    Mr. Porter. Last year the NMB testified that the projected 
cost of maintaining the Chicago office was $180,000 for fiscal 
year 1997 and $140,000 for fiscal year 1998. What was the 
actual cost for fiscal year 1997 and what are your current 
projections for fiscal year 1998 and fiscal year 1999?
    Mr. DuBester. Well, we have recently moved our offices 
through a direct contract arrangement with the Railroad 
Retirement Board, and I know that our costs with that agreement 
are down to $51,000, which you can understand is another 
dramatic reduction in the money we had previously been 
spending.
    I note, Mr. Chairman, as you are also aware, of the 
reduction in the number of bodies that we have had actually 
staffing our office in Chicago. In the last year we made a 
further reduction so that we are not even using two full bodies 
there now. We are using one full-time staffer and another part-
time staffer. So in terms of the physical space, we have 
reduced our cost by $125,000 and on top of that, we have cut 
back by half a body, if you will.
    Mr. Porter. Mr. DuBester, we have additional questions that 
you can answer for the record, if you will, please. We thank 
you very much for your appearance here and your statement here 
this morning.
    Mr. DuBester. Thank you, Mr. Chairman.
    Mr. Porter. The subcommittee will stand in recess until 
3:00 p.m.
    [Recess.]
    [The following questions were submitted to be answered for 
the record:]


[Pages 1849 - 1934--The official Committee record contains additional material here.]



                                           Tuesday, April 28, 1998.

                      ARMED FORCES RETIREMENT HOME

                               WITNESSES

DAVID F. LACY, CHIEF EXECUTIVE OFFICER/CHAIRMAN OF THE BOARD, ARMED 
    FORCES RETIREMENT HOME
MG DONALD C. HILBERT, USA, RET, DIRECTOR, U.S. SOLDIERS' AND AIRMEN'S 
    HOME
F. MICHAEL FOX, DIRECTOR, U.S. NAVAL HOME
    Mrs. Northup. Good afternoon. We will reconvene the 
committee. We have the Armed Forces Retirement Home this 
afternoon. Mr. David Lacy, CEO and chairman of the board, is 
here and, Mr. Lacy, I will give you an opportunity to introduce 
the other members that are here with you today and to use your 
time and make your presentation.
    Mr. Lacy. Thank you. Madam Chairman, I am pleased to appear 
today to testify on behalf of the Armed Forces Retirement Home. 
You have my prepared statement which I ask be entered into the 
record.

                       Introduction of Witnesses

    I am accompanied today by the directors of the two 
facilities. On my right is Major General Don Hilbert, who is 
the director of the U.S. Soldiers' and Airmen's Home here in 
Washington, and to my left is Michael Fox, who is the director 
of the U.S. Naval Home in Gulfport.

                            Opening Remarks

    I come before you today for my first time as chairman of 
the Armed Forces Retirement Home Board, having succeeded Dr. 
Dennis Jahnigen, who is our founding chair. In my first visit 
with you, I urgently and earnestly ask that you consider 
favorably our capital funds request. The Armed Forces 
Retirement Home is set on a path of downsizing due to the 
decreasing trust fund which supports us.
    We are also, over three fiscal years, incrementally 
increasing the monthly fees of our residents. That started with 
this last fall. In order to preserve the quality of life for 
that smaller population, to condense our facilities into more 
efficiently operating structures requiring smaller staff, and 
to retain that target population, certain capital improvements 
are required to improve the living conditions of the residents. 
The Sheridan dormitory renovations begun this year at the 
Soldiers' and Airmen's Home are designed to provide for a 
steadily aging population by providing better accommodations 
than the existing gang latrines at the ends of the Sheridan 
dormitory floors. We are also in the design phase of the 
additional 110 bed long-term care facility at the U.S. Naval 
Home for those residents who age in place and gradually require 
24-hour nursing care. These capital projects are vital for the 
quality of life of our distinguished veterans, and we seek your 
continued support to complete those capital improvements.
    Last year you were kind enough to assist us with 
incremental funding authority, which we again seek to enable us 
to enter into contracts with those projects which may follow 
into a subsequent year.
    Our operation and maintenance budget request before you is 
about $55 million and it equates to a reduction from the 
previous year by over $400,000. The homes and our oversight 
boards have sought out efficiencies and economies of operation 
by outsourcing, through internal analysis, and with sharing 
agreements.
    We continue to seek additional venues of funding by methods 
such as our newly created AFRH foundation and by disposition of 
excess land at the Soldiers' and Airmen's Home. We also 
continue to urge the Department of Defense to implement the 
congressionally authorized increase in active duty pay 
assessment from 50 cents to $1. But the difficult truth is that 
our funding stream, tied to the active duty force size, is 
decreasing steadily and we must adjust and accommodate that. We 
must also realize some additional avenues of income so that our 
trust fund will not become insolvent, as it is currently 
projected to do sometime between 2004 and 2006.
    Madam Chair, I ask that you allow us to respond to your 
questions regarding our budget request and that you will 
consider favorably our budget request, including the capital 
expenditures from our trust fund.
    [The prepared statement follows:]


[Pages 1937 - 1946--The official Committee record contains additional material here.]



                            capital funding

    Mrs. Northup. Thank you. Mr. Lacy, I noticed that you are 
requesting a slight decrease for operations. However, you are 
requesting two appropriations for capital activities: 15.7 
million for general capital activities and 9 million 
specifically for the Sheridan building and health care 
facilities. These two requests equal an 87 percent increase 
over the fiscal year 1998 appropriation for capital. If we were 
unable to provide for both of the capital requests, which of 
the two is your higher priority?
    Mr. Lacy. The higher priority would be the $15.7 million 
for 1999. The balance is really an advance request for the year 
2000. That advance appropriation would allow us to complete 
work begun in 1999. This is a multiple-year capital project 
which started with our request last year, and will go through 
the year 2000. There is quite a bit of phasing involved in this 
project.

                            fy 1998 capital

    Mrs. Northup. Of the capital funding that we provided in 
fiscal year 1998, what portion of that has already been 
obligated?
    Mr. Lacy. All but 2.3 million of that is obligated.
    Mrs. Northup. Do you anticipate that you will obligate all 
of the fiscal year 1998 capital funding by the end of the 
fiscal year?
    Mr. Lacy. Yes, we do.
    Mrs. Northup. Okay. Specifically, what modificationshave 
been and will be undertaken with fiscal year 1998 capital funding? Have 
there been any deviations from the allocations that were projected in 
last year's testimony?
    Mr. Lacy. No; there have been no deviations. We started the 
Sheridan project and also started design of the long-term care 
facility at the Naval Home.

                            Financial Audits

    Mrs. Northup. Last year we learned that the Armed Forces 
Retirement Home conducted an audit of its 1994 financial 
statements that resulted in a disclaimer of opinion. Dr. 
Jahnigen also testified that the Home would not audit its 
financial statements for 1995 or 1996. Why specifically were 
those audits not performed?
    Mr. Lacy. Okay. The AFRH audits are required on a two-year 
basis. We did plan to audit 1997, and we approached the U.S. 
Naval Audit Service (NAS) to provide that audit for us on a 
nonreimbursable basis. They agreed, provided DOD approved. That 
request was turned down by DOD. Without this approval, and the 
amount NAS requested was about $450,000 to perform the audit. 
That was not in our budget, so we have had to step back and 
reassess how we will get our audit done. We are currently 
seeking private proposals to do our audit, and we will probably 
do that audit for fiscal year 1998.
    Mrs. Northup. I am a little confused. If I could just ask 
you a couple of clarifying questions. Was the bid that you were 
getting for 1997 a two-year audit for 1996 and 1997?
    Mr. Lacy. No; I believe it is a one-year audit, but our 
audits are done on a biannual basis. So it was going to be an 
audit of one year.
    Mrs. Northup. In other words, only every other year is an 
audit usually done, a one-year audit?
    Mr. Lacy. Yes.
    Mrs. Northup. So the audit for 1994 included a disclaimer 
of opinion.
    Mr. Lacy. Yes. At that time the audits were being done 
separately for each home. Now we are seeking to do a combined 
audit for both homes. The auditor's opinion of the Soldiers' 
and Airmen's Home financial position reported that since there 
were errors in reconstructing property records, and 
documentation did not really exist to review and validate they 
were unable to satisfy themselves as to the value of the 
capital assets and all accounts payable. Because they were not 
able to apply alternative auditing procedures, the scope of 
their work was not sufficient for them to express an opinion on 
those. We did report our corrective actions to that auditor, 
and all the recommendations that were made have been accepted 
and closed out by the auditor.
    Mrs. Northup. And does that mean--I guess I am going to ask 
you, does that mean that at this point he is willing to certify 
the audit?
    Mr. Lacy. I am not sure what the protocol is on that 
whether they will go back and certify the audit. We have taken 
into account the recommendations that they made to us so that 
we would not run into this problem in the future. Those 
corrective actions have been taken.
    [Clerk's note.--Later clarified as follows: ``AFRH provided 
information which satisfied the auditors, but they will not go 
back and certify the audit.'']
    Mrs. Northup. When were the corrective actions taken?
    Mr. Lacy. I would need to find that out from the staff.
    It was over a period of time, but they were finished up 
within the last two months.
    Mrs. Northup. Was some of it done under Dr. Jahnigen or 
when was it, when you came on board?
    Mr. Lacy. I came on board in the fall of last year.
    Mrs. Northup. Is that when the corrective actions began?
    Mr. Lacy. They began soon after the audit.
    Mrs. Northup. I guess I was under the impression that the 
1997 audit had been at least started, if not completed. At this 
point you don't even anticipate a 1997 audit. Instead you are 
going to do a 1998 audit?
    Mr. Lacy. Yes. We could not afford to do a 1997 audit at 
that quoted amount. We did ask the U.S. Naval Audit Service to 
do a 1997 audit for us, and they did show interest in doing 
that. However, it took quite a while to process our request for 
approval to do it on a nonreimbursable basis. That request was 
ultimately turned down, so we lost a considerable amount of 
time while that was being evaluated.
    Mrs. Northup. Have they ever done one for you in the past?
    Mr. Lacy. Yes, they have. They have done two. Those were 
basically on a nonreimbursable basis.
    Mrs. Northup. When were those done?
    Mr. Lacy. 1992 and 1994.
    Mrs. Northup. What were the reasons given for them? Was it 
because of the condition of the books in 1994 that they did not 
want to----
    Mr. Lacy. They were quite happy to continue doing the work. 
The Defense Department felt that they could not afford to 
provide that service on a nonreimbursable basis to the home. We 
had not anticipated that it would cost anything like that, 
since we had received their services on a nonreimbursable basis 
before.
    [Clerk's note.--Later clarified as follows: travel was 
reimbursed.]
    Mrs. Northup. So let me ask you, in your budget request for 
1999, does it include an audit of your 1998 books?
    Mr. Lacy. The budget request for 1999. You are asking----
    Mrs. Northup. My concern is that your operating expenses 
actually don't go up at all. And so if there is no money in 
this year's budget to conduct the audit on last year's books, 
why would there be money next year to be able to afford an 
audit on this year's books?
    Mr. Lacy. We are seeking to get, we believe we can get an 
audit for less than the $400,000 or in excess of $400,000 that 
was quoted to us by the Naval Audit Service.
    [Clerk's note.--Later changed to $450,000.]
    Mrs. Northup. Any basis for that? I guess I am going to 
pursue this just a little bit. If you have done your very best 
to get your best bid for the 1997 audit and it was not 
affordable, what is the opportunity or what would convince you 
that out of the 1999 appropriation there would be money 
sufficient to cover the 1998 books?
    Mr. Lacy. Well, we really anticipated that we would receive 
the 1997 audit on a nonreimbursable basis, because we had been 
able to do so in the past. We had not sought any alternatives 
to that, because we had expected to be able to receive it on a 
nonreimbursable basis. Now, if I may ask for the staff's help, 
they are seeking proposals now and may have some sense of what 
the cost range may be for auditing 1998.
    Mrs. Northup. I would be happy to hear.
    Mr. Bellamy. At this point we don't have any real firm 
figures, but in talking with some of the accounting firms, they 
all say that that price that we have been given from the Naval 
Audit Service, based on the size of our budget, is extremely 
high. So we feel that if we could find an audit service from 
the commercial companies, we would probably get that a whole 
lot cheaper. We believe that with the budget that we have, we 
can eventually find the money to do that. Based on our 
downsizing, and based on the savings that we can generate from 
what we are doing in termsof downsizing, that we can pay for an 
audit.
    [Clerk's note.--Later changed to ``We will try to find the 
money to pay for an audit.'']
    Mrs. Northup. I guess I can't speak for the Committee, but 
I can speak personally, that considering the fact that the last 
financial statement had a disclaimer of opinion on it makes the 
Committee--at least it gives rise to concerns about the overall 
certified accounting procedures and the protections, quite 
honestly, of taxpayer money and your money, your trust fund 
monies. And it would seem to me that everybody would be very 
eager to have a financial statement that would be able to be 
certified and that you would be very aggressive about getting 
bids to do last year's audit. That seems to be being pushed 
aside fairly quickly, which at least raises concerns in my 
mind.
    It also raises concerns that your appropriation is going to 
go down this year by about $400,000. Even if you got it cheaper 
than the $400,000, it is mysterious that you could not have 
afforded an audit of last year and that you are going to be 
able to afford one this year. I don't know whether you want to 
comment on that.
    Mr. Lacy. Well, we were quite surprised, frankly, when they 
did come back to us and tell us they would not be able to do it 
on a nonreimbursable basis. We had fully expected approval, and 
basically felt we were on schedule with this process. We have 
not had to go to the public sector firms in the past, so this 
is a new process for our staff. They are undertaking this, and 
they are seeking proposals right now. They feel certain that we 
can accommodate this in the budget request that we have made. 
We will also be appealing to the Department of Defense to ask 
again if we can get this done on a nonreimbursable basis, as 
they have done in the past. We have not fully given up on that 
possibility as yet.
    Mrs. Northup. Do you feel like it is too late to 
aggressively seek bids for the 1997 audit and to do that so 
that you have a clean audit?
    Mr. Bellamy. The Treasury requires that our audits be done 
by the first of March to be submitted to them in our trial 
balance. Since we have passed that date, we felt that it would 
not be a very prudent thing to spend the money on a fiscal year 
1997 audit. That is the reason why we are looking ahead to 
1998, versus doing 1997.

                       Active duty Pay Assessment

    Mrs. Northup. The 1995 legislation gave DOD the authority 
to increase the monthly active duty pay deduction from 50 cents 
to $1. I know they have not done that, but I wondered if they 
have ever used that authority.
    Mr. Lacy. Well, we have made two requests of the Department 
of Defense to implement the assessment increase from 50 cents 
to $1. We were turned down the first time. We made a request 
again earlier this year, and that is being considered at this 
point in time by the Department of Defense. We have not yet 
heard a response back.
    Mrs. Northup. How much of a difference would that make in 
your overall revenue?
    Mr. Lacy. It is about $7.4 million per year. That, of 
course, is dependent on the size of the----
    Mrs. Northup. In other words, the 50 cents' increase would 
itself bring in about 7 million additional dollars?
    Mr. Lacy. Yes.

                      Nonreimbursable DOD Support

    Mrs. Northup. Since 1991, DOD has had the authority to make 
nonreimbursable payments to the Armed Forces Retirement Home to 
support its activities. Has the DOD ever exercised this 
authority?
    Mr. Lacy. I would say on a limited basis. A lot of these 
relationships have been negotiated by each of the homes, often 
with local bases. They have provided some investment services 
to us on a nonreimbursable basis. They have provided audit 
services to us. Walter Reed provides a number of services to 
the Soldiers' and Airmen's Home. We have made a list of areas 
where we believe DOD could provide additional services to us 
that would either provide cost avoidance or cost savings to us. 
That has been submitted to DOD, and we have not yet heard back 
on that. They are, hopefully, actively considering those 
requests.
    Mrs. Northup. So basically all services and all help, 
financial help that the DOD has given, has primarily been in 
services. They do not make payments, nonreimbursable payments?
    Mr. Lacy. No; they do not make nonreimbursable payments.

                       Status of AFRH Trust Fund

    Mrs. Northup. And what is the status of the trust funds? 
You said they were solvent just to the year between 2004 and 
2006?
    Mr. Lacy. Yes; obviously assumptions make a difference 
about where that point of insolvency would occur, but right now 
we are expecting that without additional sources of revenue, we 
would reach insolvency of the trust fund in that period of 
time.
    Mrs. Northup. Okay.
    Mr. Lacy. We continue to actively seek revenue sources.

                            Vehicle Leasing

    Mrs. Northup. On page 8 of the budget justification it 
indicates that there is an increase of $223,000 for vehicle 
leasing. Can you give me some idea what the reason for this 
increase is?
    Mr. Lacy. Yes. The homes had done a study that indicated 
that we would save money over the long term, leasing rather 
than purchasing vehicles. That is the reason for that change, 
and we would be happy to provide more detail for the record.
    [The information follows:]

    Mrs. Northup. On page 8 of the budget justification it 
indicates that there is an increase of $233,000 for vehicle 
leasing. Can you give me some idea what the reason for this 
increase is?
    Mr. Lacy. The U.S. Soldiers' and Airmen's Home conducted a 
Lease versus Purchasing of Vehicles study which concluded that 
leasing, as an alternative to purchasing, prevents obsolescence 
and is more cost effective for planning. We can better forcast 
an annual budget line item for vehicle leasing. In addition to 
saving on purchasing replacement vehicles, USSAH reduced it's 
automotive repair shop budget for an annual savings of about 
$100,000.

                          facility admissions

    Mrs. Northup. Okay. What are the waiting lists at both of 
the homes?
    Mr. Lacy. If I may, I would defer to each director.
    General Hilbert. We just started a waiting list. We are on 
a downsizing requirement by the Armed Forces Retirement Home, 
and we started a waiting list about 2\1/2\ months ago. As of 
today, there are 69 individuals on our waiting list for the 
home.
    Mr. Fox. Eighty-three currently at the Naval Home.
    Mrs. Northup. Okay. Is that pretty steady, did you say, 
from last year?
    General Hilbert. When the Soldiers' and Airmen's Home had a 
capacity of about 1,500 we did not have a waiting list. As we 
decreased to 1,300 we started a waiting list. We also started 
our waiting list because of the renovation of the Sheridan 
Dormitory and because we have had to move people. Second we are 
trying to get down to a size we are required to live under if 
we don't get additional funding. This is something new for the 
Soldiers' and Airmen's Home to have a waiting list. The only 
surprising thing is that it has grown as fast as it has. I did 
not anticipate it would grow as quickly as it has.
    Mr. Fox. We are actually reducing our waiting list. It has 
been a little higher in the past than it is currently.

                        previous capital funding

    Mrs. Northup. Last year the Armed Forces Retirement Home 
testified that it would expend 8.3 million in previously 
unobligated capital balances. I wondered if that funding has 
been obligated and, if so, for what purposes.
    Mr. Lacy. All but 2.9 million has been obligated so far. If 
we may, we will provide the detail of that for the record.
    [The information follows:]

    Mrs. Northup. Last year the Armed Forces Retirement Home 
testified that it would expend $8.3 million in previously 
unobligated capital balances. I wondered if that funding has 
been obligated and, if so, for what purposes.
    Mr. Lacy. All but $2.9 million has been obligated, and the 
balance is under formal commitment. $3.3 million was obligated 
with the award of the Sheridan Dormitory design/build 
renovation; $1.7 million was obligated for repair of essential 
buildings; $400,000 was obligated for an emergency call system; 
$600,000 is under formal commitment to the Corps of Engineers 
as required contingency reserve for the contracted renovation 
of the heating plant; $400,000 is under formal commitment 
against contract solicitation for utility tunnel repair; 
$80,000 is under formal commitment against contract 
solicitation for asbestos abatement; the USSAH Central Heating 
Plant; and $1.75 million is under formal commitment as required 
contingency reserve for the Sheridan renovation contract.

                             strategic plan

    Mrs. Northup. That would be great. Has the Armed Forces 
Retirement Home completed the strategic plan required for GPRA, 
the Government Performance and Results Act?
    Mr. Lacy. Yes, we have and we will be happy to submit that.
    Mrs. Northup. Would you please give us a copy for the 
record?
    Mr. Lacy. Yes, ma'am.
    [The information follows:]


[Pages 1953 - 1966--The official Committee record contains additional material here.]



    Mrs. Northup. Thank you very much. That completes my 
questions. Thank you very much for being here today. The 
committee is recessed until tomorrow.
    [The following questions were submitted to be answered for 
the record:]

    Mr. Porter. Last year Dr. Jahnigen testified that the Armed 
Forces Retirement Home was in the process of integrating its 
financial management systems. Has this initiative been 
completed? [if not, when will it be complete?]
    Mr. Lacy. This has been an ongoing initiative for numerous 
years. Although we have not merged our financial management 
systems, we have made progress in preparation for the 
transition from separate financial management systems to an 
integrated financial management system. We completed the 
development of a uniform chart of accounts and a management 
structure. Considering the progress accomplished, the actual 
integration of the financial management systems can now take 
place in fiscal year 1999. Although the financial systems are 
not integrated, we have consolidated the financial reporting to 
the Office of Management and Budget and the Department of 
Treasury.
    Mr. Porter. How much would the 1997 audit cost?
    Mr. Lacy. The Naval Audit Service stated that an audit 
would require a reimbursable amount of $450,000. Our plan was 
to have the Naval Audit Service conduct the FY 97 audit of our 
financial statements. The $450,000 was more than we could 
afford for FY 97. I have again requested the Department of 
Defense to provide audit service on a non-reimbursable basis, 
except the payment of travel and per diem. The cost of travel 
and per diem is about $30,000. We are also considering other 
audit sources.
    Mr. Porter. Does the FY 98 budget include funding for an 
audit of the FY 97 books?
    Mr. Lacy. The FY 98 budget includes funds to reimburse the 
Naval Audit Service for its travel and per diem cost estimated 
to be approximately $30,000. However, there are no funds in the 
FY 98 budget to cover a $450,000 audit. DoD's disapproval of 
our request was received on September 20, 1998, after our FY 99 
budget was developed and submitted.
    Mr. Porter. Will you allocate funding in FY 98 to complete 
an audit of the FY 97 statements?
    Mr. Lacy. Currently our FY 98 budget does not include 
funding above the $30,000 for an FY 97 audit. As I indicated 
before, we are requesting that OSD reconsider the decision not 
to provide audit services on a non-reimbursable basis. If that 
request is not favorably considered, we will take management 
action to try to generate funds for reprogramming. For example, 
we can try to further accelerate reductions in employment and 
delay hiring actions, in order to generate sufficient funding 
to cover the cost of an audit; however, this will likely have 
some adverse effect on the quality of services provided at the 
Homes.


[Pages 1968 - 2008--The official Committee record contains additional material here.]










                           W I T N E S S E S

                              ----------                              
                                                                   Page
Apfel, K.S.......................................................  1047
Barnes, C.R......................................................  1553
Bell, Linda......................................................   977
Bristo, Marca....................................................   827
Caldera, Louis...................................................  1309
Coonrod, R.T.....................................................   391
Crable, S.E......................................................  1829
Darden, Harding, Jr..............................................   515
Dickman, M.J.....................................................     1
Dubester, Ernest.................................................  1829
Endres, Tom......................................................  1309
Feinstein, Fred..................................................   515
Fox, F.M.........................................................  1935
Frankel, Diane...................................................   977
Gainer, W.J......................................................  1413
Gould, W.B., IV..................................................   515
Hilbert, MG D.C..................................................  1935
Jacobsen, Maggie.................................................  1829
Jordan, M.L......................................................  1499
Kever, J.F.......................................................     1
King, J.D.W......................................................  1829
Lacy, D.F........................................................  1935
Leonard, F.L.....................................................  1553
London, Diana....................................................  1309
Nelson, Ken......................................................  1757
Ross, M.N........................................................   919
Simon, J.H.......................................................   769
Solomon, Dr. R.H.................................................   181
Speakman, V.M., Jr...............................................     1
Traynham, V.M....................................................  1553
Weisberg, S.E....................................................  1413
Wells, J.C.......................................................  1553
Wilensky, G.R....................................................   919
Willard, R.S.....................................................   769
Williams, D.C....................................................  1047
Wofford, Harris..................................................  1309
Wolff, Alfred....................................................   515








                               I N D E X

                              ----------                              

                       Railroad Retirement Board

                                                                   Page
Agency Downsizing................................................    51
Appropriations, Fiscal Year 1999 Proposed........................   105
Appropriations, President's Proposed FY99........................     5
Audit:
    Financial Statement Results..................................    76
    Preliminary Plan.............................................    51
    Priorities...................................................    15
Benefit Payment Accuracy.........................................    77
    Statement of Mr. Kever Concerning............................    77
Biographies:
    Martin J. Dickman............................................    18
    Jerome Francis Kever.........................................    11
    V.M. Speakman, Jr............................................    12
Charts, Update of Fiscal Year 98..................................61-75
Claims Processing:
    Redesign.....................................................    79
    Statement of Mr. Kever Concerning............................    79
Customer Waiting Times...........................................    31
Debt Collection Improvement Act..................................   103
    Compliance With..............................................    78
Electronic Funds Transfer........................................   103
Field Service:
    Lease of Vehicles............................................    84
    RRB Offices.................................................60, 102
Financial Statement Audit Results................................   136
    Statement of Mr. Jerome F. Kever Concerning..................    77
Funding:
    Information Technology.......................................3, 103
    Request for Additional, FY99..................................2, 77
Goals:
    Full Cycle Times.............................................    31
    Special Management Improvement Plan..........................    31
Government Performance and Results Act...........................    50
    RRB Performance Objectives...................................    19
Inspector General, Office of.....................................   106
    Investigative Activities.....................................    59
    Medicare Activity............................................    60
    Office of Audit..............................................    14
    Office of Investigations.....................................    16
Investments, Return on...........................................    50
Justification of FY99 Budget Estimates:
    Railroad Retirement Board....................................   108
    Inspector General............................................  1982
Material Weaknesses:
    Detailed Response Concerning.................................    78
Medicare:
    Administration...............................................    53
    Mr. Speakman's Response to Transfer of Authority to HCFA.....54, 56
Occupational Disability Standards, Modified......................   105
Outsourcing:
    Data Processing Operations...................................    84
    Mr. Kever's Comments on Computer Operations..................    84
Performance:
    At Proposed Funding Level....................................    20
    Reports of Actual and Planned Data............................20-30
Railroad Retirement Board:
    Background...................................................     5
    Performance:
        Objectives Under GPRA....................................   112
        At Proposed Funding Level................................   114
        Reports of Actual and Planned Data.......................   116
Recommendations for the Future...................................    31
    By Former Chairman...........................................    49
    Comments of Mr. Jerome F. Kever..............................    33
    Comments of Mr. V.M. Speakman................................    37
Reconciliation of Tax Data......................................49, 102
    Statement by Mr. Kever Concerning Reconciliation of Tax Data.    49
Recurring Reports Required by Congress and Federal Agencies......84-100
Reinvention Task Force Recommendations...........................    79
    Status Summary...............................................    80
Remarks:
    Mr. Speakman.................................................     3
    Mr. Porter...................................................    19
Statement:
    Opening:
        Mr. Jerome F. Kever......................................     1
        Inspector General........................................    13
    Written:
        Jerome F. Kever and V.M. Speakman........................     5
        Martin J. Dickman, Inspector General.....................    14
Tax Data:
    Reconciliation of............................................    49
    Statement of Mr. Kever Concerning Reconciliation of..........    49
    Vision for the Future........................................     6
Witnesses:
    Introduction of..............................................     1
    List of......................................................     1
Year 2000 Conversion.............................................     9

                    United States Institute of Peace

Africa................................................194, 309-311, 361
Agency for International Development (AID)................189, 203, 211
Albania........................................................211, 229
Algeria..........................................................   243
Angola.........................................................193, 340
Appendices......................................................371-390
Appropriation Request............................................   258
Armenia..........................................................   203
Arms control.....................................................   334
Asia...........................................................230, 311
Balkans....................................183, 185, 190, 192, 194, 211
Biographies:
    Richard H. Solomon...........................................   197
    Harriet Hentges..............................................   198
    Charles E. Nelson............................................   199
    Board of Directors..........................................371-373
    Officers and Senior Staff...................................374-375
Board of Directors...............................................   272
Bosnia...185-187, 190-193, 228-229, 234-238, 242-245, 259-260, 279-294, 
                                                          325, 335, 358
Bosnia Initiative........183-184, 188, 193, 209, 218, 234-238, 274, 278
Bulgaria.......................................................203, 335
Burundi....................................185, 193, 232, 271, 310, 335
Cambodia..............................185, 193, 203, 210, 225, 227, 229
Central Africa...................................185-186, 187, 195, 196
Central Asia.....................................................   194
China...........................................................230-232
Cold War........................................183, 188, 190, 200, 217
Conflict resolution...................................206-207, 217, 235
Congo.....................................................233, 271, 310
Cost sharing for training........................................   229
Croatia..........................................................   193
Cross-cultural negotiation...........................316, 331, 333, 340
Cyprus.........................................................203, 216
Dayton Peace Accords.................................188, 190, 245, 358
Earmarking AID funds.............................................   216
East and Southeast Asia...................................187, 194, 196
East China Sea...................................................   312
East Timor................................................242, 243, 335
Eastern Europe............................................203, 340, 358
Education and training program.............................201, 295-307
El Salvador....................................................193, 341
Ethiopia.........................................................   204
Ethnic violence in Central Africa................................   185
Europe...........................................................   313
Federal Mediation and Conciliation Service.....206, 209, 215, 216, 217, 
                                                                    219
Full-time equivalents (FTEs)...............................363, 365-366
Funding, additional............................................182, 259
Georgia...................................................242, 243, 335
Grant Program..............................................201, 328-336
Greater Horn of Africa Initiative.........................203, 211, 229
Great Lakes region (Africa)................185, 195, 270, 321, 335, 362
Greece...........................................................   193
Haiti............................................................   193
Hungary..........................................................   193
Inter-American Defense College............................203, 206, 208
International Conflict Resolution and Skills Training (ICREST).....203, 
                                                                    331
International criminal tribunal.................................233-234
International security in the new millennium.....................   188
Islamic world....................................................   325
Israel....................................................203, 241, 341
Jennings Randolph Fellowship Program.......................201, 337-342
Jordan.........................................................341, 203
Kashmir..........................................................   241
Kenya............................................................   203
Korean Peninsula.................................................   311
Kosovo..........................................185, 215, 225, 243, 335
Kuwait...........................................................   203
Latin America....................................................   314
Lebanon.........................................................203,341
Liberia..........................................................   361
Library Program.................................................343-348
Long-term vision for the Institute...............................   195
Major contributions--U.S. peacekeeping efforts...................   240
Management and administration...................................363-370
Mexico...........................................................   341
Middle East.....................................241, 242, 244, 315, 341
National Peace Eassy Contest...................................194, 305
National Oceanic and Atmospheric Administration..................   208
Need for the Institute...........................................   238
Nicaragua........................................................   193
Nigeria........................................................310, 335
Non-governmental organizations (NGOs)..........184, 185, 191, 192, 193, 
                                                 200-206, 236, 239, 361
North American Treaty Organization (NATO).................332, 340, 358
North Korea......................................................   240
Office of Cummunications...................................201, 355-362
Opening statement of Richard H. Solomon.........................181-187
Operating budgets................................................   263
Organization chart..............................................273-275
Organization of African Unity (OAU)..............................   204
Organization of American States (OAS).....................203, 211, 215
Organization on Security and Cooperation in Europe (OSCE).....203, 206, 
                                                          209, 233, 245
Oslo Accords.....................................................   242
PeaceWatch.......................................................   357
Permanent headquarters facility................................186, 273
Personnel summary................................................   276
Post-Cold War challenges...................................182, 266-271
Practitioner training......184-185, 192, 193-194, 200-212, 213, 221-230
Preventive diplomacy...........................................190, 204
Publications program............................................349-354
Reimbursable training............................................   215
Religion, Ethics, and Human Rights..............................323-326
Research and Studies program...............................202, 308-317
Response time for training requests..............................   225
Romania..........................................................   163
Rule of law................................................274, 318-322
Russia.........................................................335, 340
Rwanda.................185, 193, 228, 232, 233, 241, 270, 310, 321, 361
Srajevo...................................................184, 192, 225
Serbia...........................................................   358
Slovakia.........................................................   203
Somalia...................................................204, 241, 361
South Africa........................................................203
South Asia.......................................................   332
Southeastern Europe..................................215, 228, 335, 358
South Ossetia.............................................242, 243, 335
Sri Lanka.................................................242, 243, 335
Staffing Levels.................................................273-276
Sudan..........................................................241, 310
Syria............................................................   241
Tanzania.........................................................   211
Track II diplomacy........................................243, 316, 332
Training by teleconferencing.....................................   220
Training practitioners in conflict management skills......192, 193-194, 
                                                       200-212, 221-230
Transcaucus......................................................   242
Transitional justice.............................................   319
Tunisia..........................................................   211
Turkey.........................................................204, 211
Ukraine..........................................................   340
Unanticipated requests-cost of funding..........................223-224
United Nations............................................204, 209, 226
United States Information Agency (USIA)..............203, 209, 209, 245
United States Institute of Peace Act............................376-390
United States Peacekeeping Institute (PKI).....192, 193, 203, 204, 206, 
                                                               208, 229
Virtual Diplomacy...............................333, 348, 356, 360, 361
Voice of America...............................................357, 360
War crimes...........................................190, 233, 320, 358
Witnesses for April 23, 1998 hearing............................197-199
Written statement of Richard H. Solomon.........................188-196
Yugoslavia......................................203, 233, 325, 335, 358
Zaire......................................185, 195, 204, 232, 271, 310

                  Corporation for Public Broadcasting

Appropriations Request and Justification.........................   466
Bill Moyer's ``On Addiction'' Program............................   439
Bill Moyer's ``On Addiction'' Program memorandum to CPB, insert..   441
Biography of Witness, Robert T. Coonrod, President and CEO.......   404
Board of Directors, CPB's........................................   450
Borrowing Authority..............................................   454
Common Sense for the Future, insert..............................   409
Cost of Conversion...............................................   434
Cost of Equipment................................................   427
Culturally Diverse Programming...................................   431
Digital Authorization Language...................................   446
Digital Conversion Funding Options...............................   406
Digital Conversion Timeline......................................   424
Digital Funding Distribution.....................................   429
Digital Transition Fund..........................................   460
Efficiencies and CPB's Request...................................   448
FCC Digital Conversion Timetable.................................   428
Federal Contribution to Digital Conversion, Total................   448
Federal Revenue of Public Broadcasting, Total....................   455
Federal Role in Digital Conversion...............................   426
Federal Role in Digital Conversion...............................   432
Future of Public Broadcasting....................................   406
FY99 Request.....................................................   433
Health Related Programming.......................................   437
Households that receive Multiple Signals.........................   449
Independent Producers............................................   432
Minority Consortia...............................................   462
Multicultural Program Funding, insert............................   393
National Latino Communication Center.............................   453
Need for Federal Assistance......................................   430
Opening Statement of Witness.....................................   391
Program Producers in the Digital Age.............................   464
Programming Costs................................................   450
Programming for Teens............................................   436
Promise of Digital Public Broadcasting...........................   424
Public Broadcasting Revenue......................................   446
Public Radio.....................................................   452
Ready To Learn...................................................   458
Relocation of Towers.............................................   427
Request and Justification........................................   466
Stations and the Move to Digital Transmission....................   455
Testimony, prepared, of Robert T. Coonrod, President and CEO.....   397
Witness opening statement........................................   391
Witness, Robert T. Coonrod, President and CEO, Biography.........   404

                     National Labor Relations Board

Administrative Law Judge Procedures............................526, 738
Administrative Reforms...........................................   525
Advisory Panels...........................................529, 738, 745
Appeals..............................................538, 555, 684, 742
Appropriation History............................................   755
Appropriations Language..........................................   750
Authorizing Language.............................................   750
Backlogs..............................519, 524, 532, 591, 620, 633, 704
Best Practices...................................................   743
Bias, Perceptions Of.............................................   639
Biographies:
    Fred Feinstein...............................................   573
    William B. Gould IV..........................................   530
Bodenstein Case..................................................   627
Budget Authority...............................................751, 752
California Proposition 226.................576, 578, 580, 582, 587, 626
Case Activity Tracking System.............................592, 653, 660
Case Backlogs.........................519, 524, 532, 591, 620, 633, 704
Case Complexity................................................630, 632
Case Processing, Median Time........................................762
Casehandling Time................................................   735
Caseload, Measures To Lower......................................   642
Cases, Generation Of...........................................636, 640
Cases, Types Of NLRB................................................765
Chairman, Opening Statement....................................515, 522
Cohen, Laurence.....................................................587
Compliance Program Review......................................538, 552
Congress, Meetings With Members..................................   588
Congressional Directives.........................................   757
Cooperation Between General Counsel And Board....................   707
Disposition Patterns............................................759-761
Dispositions Per FTE.............................................   655
Distribution Of Resources........................................   638
Election Circumstances Beyond NLRB Control.......................   676
Election Agreements, Goal For Voluntary..........................   678
Federal Procurement Policy.......................................   689
Field Case Backlog...............................................   620
Field Offices:
    Caseload.....................................................   691
    Closing Of............................................538, 560, 648
    Complaints Processed.........................................   684
    Multiple Offices in Metropolitan Area........................   650
    Number And Location........................................644, 684
Frivilous Cases..................................................   585
Full-Time Equivalents (FTE):
    Additional Requested.........................................   658
    Detail Of....................................................   753
    Dispositions Per.............................................   655
    History......................................................   756
Funding Reductions, Impact Of....................................   629
General Counsel:
    Opening Statement..........................................517, 531
    Report on Operational Initiatives............................   535
    Vacancy....................................................590, 640
Generation of Cases..............................................   636
Government Performance and Results Act (GPRA).......516, 523, 531, 572, 
                                                     662, 736, 744, 746
Impact Analysis......................................537, 543, 624, 740
Improving Service To The Public..................................   518
Independence of Board............................................   584
Information Officer Program......................................   734
Information Technology..........................570, 632, 736, 744, 747
Injunctions...............................................538, 550, 639
Justification For Budget Request...............................516, 523
Justification of Estimates.......................................   729
Labor-Management Relations, Internal.............................   566
Litigation, Effect Of............................................   638
Litigation, Increase In..........................................   631
Meritorious Cases..............................................659, 679
National Labor Relations Act.....................................   642
Opening Statements:
    Fred Feinstein.............................................517, 531
    William B. Gould IV........................................515, 522
Operation Initiative, General Counsel Report on..................   535
Organization...................................................732, 749
Other Services...................................................   680
Partnership, Labor-Management....................................   566
Pending Board Cases, Median Age..................................   678
Pending Cases, Buildup Of........................................   524
Performance Measures...........................................518, 664
Performance Plan.................................................   654
Performance Plans For Regional Directors.........................   597
Political Appointees, Terms and Compensation.....................   763
Postal Service Agreement.........................................   556
President's Request..............................................   520
Press Release on California Proposition 226....................576, 580
Productivity, Staff..............................................   656
Representation Cases Reinvention Program..................537, 546, 741
Regional Directors........................................594, 597, 694
Regional Offices, Changing Decisions Of..........................   703
Regions, Productivity Of.........................................   597
Rent, Communications And Utilities...............................   681
Rental Payments To GSA...........................................   680
Repeat Violators Of Labor Law....................................   683
Representation Case Procedures...................................   766
Resident Agents..................................................   562
Salting Cases....................................................   585
Section 10(j) Injunctions.................................538, 550, 639
Section 503 Of Appropriations Bill.............................579, 583
Settlement Judges..............................................625, 661
Settlements, Voluntary.........................................523, 735
Special Categories For Companies.................................   682
Speed Teams....................................................528, 738
Staff Productivity...............................................   656
Statutory Responsibility And Role................................   522
Stokes, Congressman Louis:
    Chairman's Tribute...........................................   574
    Ranking Minority's Tribute...................................   574
Super Panels...................................................528, 739
Supervision, Streamlining Of...................................538, 561
Transfer of Cases................................................   623
Travel Costs...................................................538, 561
Triage Approach to Representation Appeals........................   740
Trials, Cancellation Of..........................................   635
Unfair Labor Practices, Procedures for...........................   767
Web Site.............................................570, 577, 734, 745
Witnesses, Introduction Of.......................................   515
Workload and Output Data.........................................   758
Year 2000......................................................533, 635

        National Commission on Libraries and Information Science

Action Plan....................................................771, 777
Biography: Jean Hurley Simon, Chairperson........................   780
Biography, Robert S. Willard.....................................   781
Government Printing Office.....................................771, 777
Internet and Libraries..........................................770,774
Institute of Museum and Library Services.......................772, 782
Justification for Federal Funding................................   792
Justification of Budget Estimates, Fiscal Year 1999..............   790
Libraries, Federal Support for.................................778, 782
Library Services and Technology Act............................772, 778
Opening Statement: Jean Hurley Simon, Chairperson..............769, 773
Organization chart...............................................   824
Partnerships with Other Organizations..........................770, 776
Program Areas of the Commission..................................   793
Statistics, Library............................................770, 776

                     National Council on Disability

Accessibility for People Who Are Blind...........................   856
Achieving Independence...........................................   827
Activities for FY 1997...........................................   901
Biographies:
    Marca Bristo.................................................   842
    Ethel D. Briggs..............................................   843
    Andrew J. Imparato...........................................   844
Budget Increase..................................................   859
Civil Rights Monitoring..........................................   828
Closing Statement................................................   830
Current FY 1998 and Planned Activities...........................   836
Employment Task Force............................................   828
Equipment........................................................   840
Executive Order..................................................   850
Fiscal Year 1999 Congressional Budget Request....................   871
Interaction with Other Organizations.............................   860
International....................................................   830
Introduction of Witnesses........................................   827
Major Accomplishments During FY 1996.............................   834
Major Accomplishments During FY 1997.............................   834
Minority and Rural Concerns......................................   830
Mission of the National Council on Disability....................   847
NCD Publications.................................................   845
Opening Statement................................................   827
Other Services...................................................   838
Personnel........................................................   840
Planned Activities and Budget Request for FY 1999................   837
President's Committee on Employment of People with Disabilities..   858
Rehabilitation...................................................   856
Reauthorization of the Rehabilitation Act........................   860
Removing Barriers to Work........................................   828
Strategic Planning...............................................   860
Supplies, Materials and Publications.............................   840
Task Force on Employment.........................................   858
Technology.......................................................   829
Testimony........................................................   832
Travel...........................................................   840
Year 2000........................................................   860
Youth Leadership.................................................   829

                  Medicare Payment Advisory Commission

Access to Care of Medicare Beneficiaries.........................   948
Accomplishments and Research Agenda.................................923
Activities and Accomplishments......................................967
Administration and Management.......................................970
Amounts Available for Obligation.................................   962
Appropriations:
    FY 1999 Request..............................................   956
    Language.....................................................   957
    Reqeust....................................................920, 926
    History Table................................................   963
Appropriations Language.............................................957
Appropriations Request..............................................920
Appropriations Request..............................................926
Appropriations History Table........................................963
Authorizing Legislation.............................................958
Biographical Sketch of Gail R. Wilensky, Ph.D.......................930
Biographical Sketch of Murray N. Ross, Ph.D.........................931
Biographical Sketches:
    Gail R. Wilensky, Ph.D.......................................   930
    Murray N. Ross, Ph.D.........................................   931
Budget:
    Authority....................................................   929
    Authority by Object Class....................................   960
    Justificaiton Introduction...................................   955
    Category Changes.............................................   932
    Justification of Proposal....................................   970
    MedPAC's.....................................................   946
Budget Authority by Object Class.................................   960
Budget Justification Introduction................................   955
Budget Category Changes..........................................   932
Commission:
    Meetings Thus Far in FY 1998.................................   969
    Medicare.....................................................   948
    Members......................................................   972
Commission Meetings Thus Far in Fiscal Year 1998.................   969
Commission Members...............................................   972
Conclusion.......................................................   945
Congressional Directives in House and Senate Appropriations 
  Committee Reports..............................................   965
Data Development, Analysis, and Research.........................   971
End-Stage Renal Disease Patients.................................   949
Establishment and Mandate........................................   921
Estimates for Consulting Services................................   975
Estimates for Related Services...................................   976
Fiscal Year 1999 Appropriation Request...........................   956
Fraud:
    Medicare.....................................................   952
    Waste and Abuse..............................................   950
Future Work......................................................   924
Health Care:
    Beneficiary Access to........................................   948
    Home.........................................................   937
    Managed......................................................   940
    Long-Term....................................................   938
Home Health Care.................................................   937
Introduction of Witnesses........................................   919
Justification of Budget Proposal.................................   970
Long-Term Care...................................................   938
Managed Care.....................................................   940
Medicare:
    Beneficiary Access to Care...................................   948
    Commission...................................................   948
    End-Stage Renal Disease Patients.............................   949
    Fraud........................................................   952
    Home Health Care.............................................   937
    Long-Term Care...............................................   938
    Managed Care.................................................   940
    Premium Contributions........................................   935
    Provider Attitudes...........................................   951
    Reimbursement Policies.......................................   933
    Risk Adjustment..............................................   943
    Waste, Fraud, and Abuse......................................   950
Medicare Commission..............................................   948
Medicare Fraud...................................................   952
Medicare Payment Advisory Commission:
    Budget.......................................................   946
    Budget Authority.............................................   929
    Establishment and Mandate....................................   921
    Fiscal Year 1999 Appropriation Request.......................   956
    Future Work..................................................   924
    Meetings Thus Far in FY 1998.................................   969
    Members......................................................   948
    Member Affiliation...........................................   928
    Personnel Summary............................................   961
Medicare Payment Advisory Commission Budget Authority............   929
Medicare Payment Advisory Commission Member Affiliation..........   928
Medicare Reimbursement Policies..................................   933
MedPAC's Commission Members......................................   948
MedPAC's Budget..................................................   946
Merger Issues....................................................   932
Narrative Justification General Statement........................   966
Opening Statement................................................   919
Personnel Summary................................................   961
Premium Contributions............................................   935
Provider Attitudes...............................................   951
Risk Adjustment..................................................   943
Staffing:
    History......................................................   964
    Personnel Summary............................................   961
    Questions....................................................   946
Staffing Questions...............................................   946
Staffing History.................................................   964
Summary of Changes...............................................   959
Waste, Fraud, and Abuse..........................................   950

                Institute of Museum and Library Services

Administrative Expenses..........................................   987
    Personnel....................................................  1016
Audit............................................................   991
    SemiAnnual Report to Congress, Office of the Inspector 
      General....................................................   992
Budget Submission, FY99..........................................  1020
Future of Libraries..............................................   987
Government Performance and Results Act...........................  1012
    Accountability and Evaluation................................  1014
    Balance of Evaluation and Support for Services...............   987
Grants:
    Impact of Federal Library Funding............................  1016
    National Leadership Grants...............................1012, 1017
    State Grants, Amounts Awarded................................  1014
    Technology Needs.............................................  1018
No-Year Funds:
    Carry Over Authority.........................................   989
    Disposition..................................................  1013
Statement, Director Frankel......................................   977
Strategic Plan, FY1997-FY2002....................................  1038
Systems Integration..............................................   990
Technology Needs.................................................  1018

                     Social Security Administration

800-Number Service...........................................1083, 1137
Adequacy of Budget Request.......................................  1087
Biographies:
    Kenneth S. Apfel, Commissioner...............................  1074
    David C. Williams, Inspector General.........................  1075
Commissioner's Budget for SSA....................................  1086
Comparison of Performance Commitments to Actual Performance......  1115
Continuing Disability Review Cost-Benefit Ratio..................  1103
Continuing Disability Reviews....................................  1126
Current Status of Women Under Social Security....................  1081
Disability Case Processing.......................................  1076
Disability Fraud Initiatives.....................................  1080
Disability Redesign:
    Initiative...................................................  1141
    Overall Cycle Time...........................................  1123
Disincentives to Work............................................  1147
Electronic Payments..............................................  1121
Expenses Related to Union Activities.............................  1103
FLSA Overtime....................................................  1145
Full-Time Equivalent (FTE) Projections...........................  1085
Funding from Legislative Proposals...............................  1088
History Tables...................................................  1128
Inspector General and CPRA Indicators............................  1078
Intergenerational Equity.........................................  1098
Investing Social Security in Stocks..............................  1089
Legislative proposals............................................  1101
Long Range Goals for Disability Claims and Hearings..............  1113
Long-Term Solvency of Social Security............................  1093
National Debate on Social Security...............................  1095
National Debate Over the Future of Social Security...............  1099
Need for Administrative Budget...................................  1098
Office of Program and Integrity Reviews..........................  1101
Official Time Expenses...........................................  1084
Old-Age and Survivors (OASI) Claims Processing...................  1113
One Hundred Megahertz Processors.................................  1102
Opening Statement................................................  1048
OPIR:
    Activities...................................................  1125
    Budget.......................................................  1124
    FTE..........................................................  1126
    Review.......................................................  1125
    Workforce....................................................  1126
Processing Times.................................................  1124
Proposals to Modify Social Security..............................  1081
Reclassification.................................................  1146
Reconsideration Reversal Rate....................................  1117
Refining Performance Indicators..................................  1077
Review of Disabled Children's Benefits...........................  1091
Security of On-Line PEBES........................................  1151
Social Security:
    Future of....................................................  1099
    National Debate on...........................................  1095
    Proposals to Modify..........................................  1081
    Using the Budget Surplus to Protect..........................  1092
Social Security Rates of Return..................................  1096
Social Security Reform:
    Senator Moynihan's Proposal..................................  1082
    Women and....................................................  1080
SSA Downsizing...................................................  1145
SSA Morale.......................................................  1146
SSA's Five-Year Budget...........................................  1085
SSI:
    Advance Appropriation........................................  1148
    High Risk....................................................  1153
Taxpayer-to-Retiree Ratio........................................  1099
Technology Refreshment...........................................  1102
Ticket to Work...................................................  1148
Understanding Social Security Solvency...........................  1152
Using the Budget Surplus to Protect Social Security..............  1092
Vision and Priorities............................................  1150
Women:
    Current Status Under Social Security.........................  1081
    Social Security Reform.......................................  1080
Workers Compensation Expenses....................................  1119
Year 2000:
    Computer Problem.............................................  1151
    Conversion...................................................  1149

                    Corporation For National Service

Budget Estimate..................................................  1359
Collaboration with Education Department..........................  1333
High Bridge VISTAs...............................................  1337
Leveraging Federal Resources.....................................  1335
Literacy and America Reads.......................................  1332
Questions for the Record.........................................  1342
Selection and Training of VISTAs.................................  1339
Seniors are Growing in Number....................................  1331
Status of Auditability...........................................  1332
VISTA Sustainability.............................................  1331
VISTA's Success..................................................  1334
Written Statement of Harris Wofford..............................  1312

            Occupational Safety and Health Review Commission

ALJ:
    Case Dispositions............................................  1438
    Productivity.................................................  1428
Biography:
    Chairman.....................................................  1425
    Executive Director...........................................  1426
Budget Request...................................................  1428
Case Tracking....................................................  1438
Commissioners....................................................  1427
E-Z Trial........................................................  1428
Financial Audits.................................................  1427
Financial Management System......................................  1438
Introduction of Witnesses........................................  1413
News Story.......................................................  1429
Opening Statement............................................1413, 1417
Questions of Representative Stokes...............................  1440
WEB Site.........................................................  1438
Year 2000 Compliance.........................................1438, 1439

            Federal Mine Safety and Health Review Commission

Appealed Cases...................................................  1512
Budget Justification.............................................  1520
Case Backlog Comparison..........................................  1513
Dust Cases.......................................................  1506
GPRA Performance Plan............................................  1507
Opening Statement................................................  1499
Significant and Substantial......................................  1508
Staffing:
    Decline..................................................1508, 1512
    Distribution.................................................  1515
Sue Sponte Cases.................................................  1510
Year 2000 Compliance.............................................  1511
Workload:
    Estimate vs Actual...........................................  1516
    Revised Estimates............................................  1514
    Trends.......................................................  1515

               Federal Mediation and Conciliation Service

Alternative Dispute Resolution...................................  1558
Appropriation Request............................................  1559
Arbitration......................................................  1557
Concluding Remarks...............................................  1559
Customer Survey..............................................1574, 1588
Dispute Mediation............................................1576, 1602
Evaluation and Performance Measurements......................1575, 1580
Government Performance and Results Act.................1563, 1571, 1602
International Activities.....................................1558, 1589
Labor-Management Cooperation Grants Program......................  1558
Mediation Activity...............................................  1557
Mediators....................................................1577, 1580
Opening Statements...........................................1554, 1561
Peace Institute..................................................  1581
Preventive Mediation.............................................  1578
Program Descriptions.............................................  1564
Schoolyard Mediation.............................................  1600
Staffing and Funding.............................................  1596
Witnesses........................................................  1553
Workforce Diversity..............................................  1598
Workload.........................................................  1583
Year 2000........................................................  1584

                     National Education Goals Panel

Opening Remarks by Ken Nelson....................................  1757
Questions Submitted and Answered for the Record..................  1773
Congressional Budget Request for FY1999..........................  1789

                        National Mediation Board

Annual Performance Plan..........................................  1891
Arbitration Services:
    Annual Performance Plan......................................  1928
    Arbitration Cases............................................  1856
    Backlog of Claims............................................  1845
    Chicago Office...............................................  1847
    Customer Service Measure.....................................  1889
Biography Sketches:
    Ernest W. DuBester...........................................  1839
    Stephen E. Crable............................................  1840
    June D.W. King...............................................  1841
Budget Request...................................................  1845
Customer Service Plan Measures...................................  1884
CSX and Norfolk Southern.........................................  1854
Dispute Prevention Initiatives...................................  1846
Funding Carry-over...............................................  1851
Government Performance and Results Act:
    Goals and Performance Indicators.............................  1855
Interest-Based Bargaining........................................  1850
Introduction of Witnesses........................................  1829
Mediation:
    Annual Performance Plan......................................  1897
    Caseload.....................................................  1843
    Customer Service Measures....................................  1884
    Tracking System..............................................  1846
NMB Budget, Fiscal Year 1999.....................................  1857
NMB Strategic Plan General Goals.................................  1896
Opening Statement of Ernest W. DuBester..........................  1833
Performance Measures:
    Cases........................................................  1853
    Customer Service Plan........................................  1842
Representation:
    Annual Performance Plan......................................  1916
    Caseload.....................................................  1845
    Customer Service Measure.....................................  1887
Staffing:
    Shortages....................................................  1849
    Vacancies....................................................  1852
Statement Summary................................................  1829

                      Armed Forces Retirement Home

AFRH Budget Justification:
    AFRH Board...................................................  1980
    Appropriations History.......................................  1977
    Authorization Legislation....................................  1971
    Budget Authority by Activity.................................  1973
    Capital Outlay...............................................  1974
    Executive Summary............................................  1969
    Organization Chart...........................................  1968
    Resident Data................................................  1979
    Staffing History.............................................  1978
    Summary of O&M Changes.......................................  1975
    Total Obligations by Object Class............................  1976
    Trust Fund...................................................  1970
Biographies:
    Frederick M. Fox, Jr., Director, U.S. Naval Home.............  1946
    Donald C. Hilbert, Director, U.S. Soldiers' and Airmen's Home  1945
    David F. Lacy, Chairman, AFRHB...............................  1944
Capital Budget:
    Capital Funding..............................................  1947
    Capital Program..............................................  1937
    FY 1998 Capital..............................................  1947
    Previous Capital Funding.....................................  1952
Facility Admissions:
    Waiting Lists................................................  1951
Financial Audits.................................................  1947
Future of AFRH...................................................  1942
Non-reimbursable DoD Support.....................................  1950
Opening Remarks..................................................  1935
Prepared Statement...............................................  1937
Residents........................................................  1938
    Care for the Residents.......................................  1940
    Data.........................................................  1979
    Planned Downsizing...........................................  1938
    Quality of Life..............................................  1939
Strategic Plan...................................................  1952
    Executive Summary............................................  1954
    Goals........................................................  1959
    Mission......................................................  1954
    Vision.......................................................  1954
Trust Fund.......................................................  1970
    Active Duty Pay Assessment...................................  1950
    Search for Alternative Funding...............................  1940
    Status.......................................................  1951
Vehicle Leasing..................................................  1951
Witnesses........................................................  1935