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



 
                 DEPARTMENTS OF COMMERCE, JUSTICE, AND
                   STATE, THE JUDICIARY, 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 COMMERCE, JUSTICE, AND STATE, THE 
                    JUDICIARY, AND RELATED AGENCIES

                    HAROLD ROGERS, Kentucky, Chairman

JIM KOLBE, Arizona                 ALAN B. MOLLOHAN, West Virginia
CHARLES H. TAYLOR, North Carolina  DAVID E. SKAGGS, Colorado
RALPH REGULA, Ohio                 JULIAN C. DIXON, California
MICHAEL P. FORBES, New York        
TOM LATHAM, Iowa                   

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.

Jim Kulikowski, Therese McAuliffe, Jennifer Miller, Mike Ringler, and Cordia Strom,
                           Subcommittee Staff
                                ________

                                 PART 8

                              THE JUDICIARY
                                                                   Page
 The Supreme Court of the United States...........................    1
 Architect of the Capitol.........................................   39
 The Federal Judiciary and the Administrative Office..............   61

                            RELATED AGENCIES

 Legal Services Corporation.......................................  199
 Small Business Administration....................................  257
 Securities and Exchange Commission...............................  293
 Federal Communications Commission................................  343
 Equal Employment Opportunity Commission..........................  443

                              

                                ________

         Printed for the use of the Committee on Appropriations
                                ________

                     U.S. GOVERNMENT PRINTING OFFICE
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                       COMMITTEE ON APPROPRIATIONS                      

                   BOB LIVINGSTON, Louisiana, Chairman                  

JOSEPH M. McDADE, Pennsylvania         DAVID R. OBEY, Wisconsin            
C. W. BILL YOUNG, Florida              SIDNEY R. YATES, Illinois           
RALPH REGULA, Ohio                     LOUIS STOKES, Ohio                  
JERRY LEWIS, California                JOHN P. MURTHA, Pennsylvania        
JOHN EDWARD PORTER, Illinois           NORMAN D. DICKS, Washington         
HAROLD ROGERS, Kentucky                MARTIN OLAV SABO, Minnesota         
JOE SKEEN, New Mexico                  JULIAN C. DIXON, California         
FRANK R. WOLF, Virginia                VIC FAZIO, California               
TOM DeLAY, Texas                       W. G. (BILL) HEFNER, North Carolina 
JIM KOLBE, Arizona                     STENY H. HOYER, Maryland            
RON PACKARD, California                ALAN B. MOLLOHAN, West Virginia     
SONNY CALLAHAN, Alabama                MARCY KAPTUR, Ohio                  
JAMES T. WALSH, New York               DAVID E. SKAGGS, Colorado           
CHARLES H. TAYLOR, North Carolina      NANCY PELOSI, California            
DAVID L. HOBSON, Ohio                  PETER J. VISCLOSKY, Indiana         
ERNEST J. ISTOOK, Jr., Oklahoma        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 COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED 
                    AGENCIES APPROPRIATIONS FOR 1999

                              ----------                              

                                         Wednesday, March 11, 1998.

                             SUPREME COURT

                               WITNESSES

HON. ANTHONY M. KENNEDY, ASSOCIATE JUSTICE
HON. DAVID H. SOUTER, ASSOCIATE JUSTICE
JAMES C. DUFF, ADMINISTRATIVE ASSISTANT TO THE CHIEF JUSTICE
DALE B. BOSLEY, MARSHAL
BILL SUTER, CLERK
FRANK WAGNER, REPORTER OF DECISIONS
TONY DONNELLY, DIRECTOR OF BUDGET AND PERSONNEL

                            Opening Remarks

    Mr. Rogers. This morning we will hear the testimony 
regarding the fiscal year 1999 budget request of the Supreme 
Court. We welcome before the subcommittee Justices Anthony 
Kennedy and David Souter. This is their fifth appearance 
together before us, and they have become quite a team--
including a softshoe dance from time to time.
    This is a unique opportunity for the Congress to interact 
with the Supreme Court, the highest court of a separate and 
independent branch of our government, working within the system 
of checks and balances envisioned by our founding fathers.
    One of the constitutional bases of our government is that 
no money can be spent from the Treasury except as a result of 
an appropriation enacted into law, as set forth in Article 1, 
Section 9. That requirement is what leads to your appearance 
here, and we are, of course, pleased to welcome you here. Our 
hearts are open to you, if not our wallets.
    We know that this hearing always sparks some media 
interest, and we suspect that it has more to do with your being 
here than our being here, so welcome.
    After hearing from the Justices, we will hear from the 
Architect of the Capitol, who has responsibility for the care 
of the Supreme Court Building and grounds.
    Justice Kennedy, we will make your prepared testimony a 
part of the record. We would be pleased to hear any summary 
that you would care to make, and then we would be pleased to 
hear from Justice Souter.

                      Statement of Justice Kennedy

    Justice Kennedy. Thank you, Mr. Chairman. Justice Souter 
and I are pleased to be with you, once again.
    I know that the budget of the Supreme Court is small by 
comparison even with that of the whole third branch. The budget 
for the courts as a whole this year I think is something over 
$4 billion, and we are less than one percent of that.
    I was thinking last night, though, Mr. Chairman, that this 
is a valuable exercise for us. It gives us a good chance to 
examine our own court operation, small as it is. It has been 
many years since I have had to meet a payroll or a monthly 
overhead commitment, and it is important for us to see what 
governmental agencies and what private law firms have to do in 
order to have a modern and efficient operation.
    We are assisted in the preparation of our budget, of 
course, by our staff. Most of the principal officers of the 
court are here with us today--Bill Suter, the Clerk of the 
Court; Dale Bosley, the Marshal; our Reporter of Decisions, 
Frank Wagner; our Budget and Personnel Officer, Tony Donnelly; 
and our Public Information Officer, Toni House; and Jim Duff, 
your fellow Kentuckian the Administrative Officer/
Administrative Assistant to the Chief Justice.
    Our budget request is for just under $37 million, which is 
a 13 percent increase, and most of that increase is due to the 
buildings and grounds portion, which the Architect will 
present. He, and not we, are the experts on the raw data that 
make up that request.
    As we have advised you, and as you well know, Mr. Chairman 
and members of the committee, the court facility is going to 
need some major renovations in the next few years. The Justices 
think the building is just fine the way it is. We like it. And 
as you know, we have spent a considerable amount to clean the 
exterior over the last few years. We think the building 
represents stability and fidelity and inspiration to the 
public, and we think it is very important to stay in that 
building.
    Now, the things we do not see are wires and the plumbing 
systems and electric systems and foundations. The Architect 
felt that we need to refurbish those systems, and so that is 
what that increase is going to be and he will tell you about 
it.
    Our budget request of just over $31 million for Salaries 
and Expenses is a six percent increase. At page 1.3, we detail 
the adjustments to base. Those are the things that you are very 
familiar with. Much of the increase is for pay and benefits. My 
understanding is that this is--part of this will always be 
constant if there are COLAs.
    On the other hand, the federal employees retirement system 
and the conversion to that is an increase that may not occur, 
to this extent in any event, in later years. Law books increase 
in cost at more than the rate of inflation. They are up again 
this year by 10 percent.
    On page 1.4, we detail the request, or list the request, 
for four additional positions. We actually identified a 
potential need for up to six, but we think we can defer two 
certainly for a year. The first three are all technically 
related. They all have to do with the computer and technical 
systems.
    Our people tell us that they replace the hardware once 
every three years. One-third of the hardware is replaced every 
year, and I could not understand that until I started talking 
to people who say that they send their son or their daughter to 
college with a computer as a freshman and it is outmoded by the 
time they are a junior. So that is happening to us, and we need 
these people to keep us up to date on these systems.
    We actually, over the years, have converted many of our 
positions in the Clerk's office and in other offices of the 
court to this computerized Clerk's function. So the staff has 
been strong and innovative in upgrading the talents and the 
skills of our own people.
    The fourth request is somewhat technology related as well. 
It is for an additional person in our Reporter of Decisions 
Office. He or she will be the Assistant Reporter of Decisions. 
I brought my prop here, the United States Reports. These are 
the lineal successor, of course, of Dallas and Cranch and 
Wheaton. The U.S. Reports set a very high standard in the world 
of the law for their excellence and their accuracy. It is the 
way we keep in touch with our own past.
    The time lag between the preparation of this bound volume, 
or I should say between the issuance of our decision and the 
preparation of the bound volume, was just a few years ago, over 
four years. This was simply unacceptable. Our reporter, Frank 
Wagner, has cut that gap in half. He tells us that by the end 
of the '98 term it will be less than 12 months, which is 
certainly commercially acceptable.
    The problem now, though, Mr. Chairman, is that as soon as 
we release our opinion, it really should be in fully edited 
form. In past decades, the reporter has been able to wait for 
counsel or attorneys or law professors to write, suggesting 
certain small changes, and also to take his own time to ensure 
that the statutory references and citations are precisely 
correct, that being one of the most difficult parts of his 
work.
    But now, since it is released immediately and becomes 
really part of the public domain worldwide, the post-edit 
function becomes largely irrelevant and, in some cases, rather 
mischievous. So this additional position is to enable him to 
complete almost all of the editing before the opinion is 
written.
    The other increases are for telecommunications improvements 
and removal of some wiring systems. The Architect of the 
Capitol is in charge of placing the conduit for the wire, but 
we are in charge of putting the wire in and out.
    Mr. Chairman, over the years, the Congress of the United 
States has been generous in providing facilities and resources 
and support for the Judiciary. As you well know, when people 
from foreign countries, or even from other states, come to 
Washington, they visit the Administrative Office of Courts and 
our Court, and the Federal Judicial Center. What they see is 
one of the most impressive judicial systems in the world.
    We had lunch, the nine of us, last week with the Chief 
Justice of Norway. He had come here specifically to discuss 
court structure and court management with the Administrative 
Office of the Courts, and he told us how valuable that was and 
how enviable the system is that we have. And that is because 
the Congress, Mr. Chairman, and the Executive have recognized 
their constitutional responsibility to maintain the courts, and 
for that we thank you.
    [The information follows:]


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



    Mr. Rogers. Thank you very much. Justice Souter.
    Justice Souter. Mr. Chairman, thank you, but I will be even 
more brief than Justice Kennedy.

                        utility systems upgrade

    Mr. Rogers. Well, you managed that.
    Well, thank you very much for your statements.
    Last year, we talked about plans for replacing the utility 
systems in the building, a project that last year was estimated 
to cost $22 million, compared with estimates a year earlier of 
$7 million.
    Justice Kennedy, last year you indicated that you thought 
it would be worthwhile to do the schematic study that we did in 
fact fund in fiscal year 1998, and then decide whether it made 
sense to proceed forward with the entire plan. This year's 
Architect's budget includes $2 million to proceed with the 
design of the project, even though the schematic study has not 
been completed.
    Do you think that we should proceed to design the 
replacement of the court's utility infrastructure, before the 
schematic study is done and decisions are made about whether 
and how to go forward with the project?
    Justice Kennedy. That is a technical question that I will 
leave to the Architect. As I indicated at the outset, we think 
that--I know that we, and I am sure that the public, and I 
think that the Congress has committed to keeping us in that 
building. When you tell me--when the Architect tells me, 
rather, that it is going to take $2 million to study 
improvements of a building that cost $9 million to build, it is 
a little difficult to fathom.
    But so much of this has to do with wiring and telephone 
communications, plus basic plumbing and electrical systems, 
plus security, that I hope that you will give the Architect the 
funding that he needs. We deferred it last year, and I think we 
had better proceed with the study as he proposes it.
    Mr. Rogers. Are you fully prepared for the dislocation and 
the disruption of a four-year remodeling? I hope so. It is 
going to be a mess.
    Justice Kennedy. We are thinking about that. We----
    Justice Souter. The answer is no.
    Justice Kennedy. I may work at home more days of the week 
than I do.

                             resource needs

    Mr. Rogers. Of course, the primary purpose of your being 
here today at this hearing is to consider your budget for 
fiscal '99, and to be sure that you have sufficient resources 
to carry out the weighty responsibilities that you carry. You 
currently have an operation that includes 331 employees.
    What is your overall assessment of the resources that are 
available to you? Are we adequately taking care of your needs?
    Justice Kennedy. Our needs are adequately taken care of. As 
I indicated, we identified two positions that we might have 
added in the library and in the printing staff, but we think we 
can wait at least a year for those. Our people have been good 
about reassigning functions and redesigning the functions of 
the court. We are adequately staffed.
    Of course, we are a much simpler operation than even a 
court of appeals. All nine of us sit on every case. We have no 
vacancies. The courts of appeal sit in panels, they sit in 
different cities, they have mandatory jurisdiction, and a trial 
court is far more complex even than that. So we are a fairly 
simple operation, which is why I think it is valuable for us to 
focus on it as a discrete budget matter.
    Mr. Chairman, we are current in our work. We have the staff 
and the facilities that we think that we need to perform that 
work.
    Mr. Rogers. You are requesting an increase of $200,000 for 
the removal of old voice and data wire. Why would not that be a 
part of the major system's refurbishment that will be starting 
in fiscal 2001 that is the $22 million renovation?
    Justice Kennedy. I have got two answers to that. One is it 
has to be done anyway, and the other is that it has to be done 
immediately, because we cannot put new wires in. The conduits 
are only so big, and apparently they kept just adding new wires 
without pulling the old ones out. And if you go in and just 
pull them all out, then you stop the system. So the Architect 
has told us that this is not redundant and that it is necessary 
now.
    Mr. Rogers. Now, here is truly something that Chief Justice 
John Marshall would have had no way of anticipating. It is 
called a year 2000 computer problem. Yours is one of the few 
budgets that we have seen that does not include a budget 
request to anticipate the year 2000 computer glitch. How will 
the problem affect the Supreme Court, and are you anticipating 
any needs in that area?
    Justice Kennedy. Number one, it does affect us, because we 
have dates and docketing, as well as payroll, just as any other 
agency does. Number two, apparently, it is a problem with our 
computers. And, number three, within the existing budgets, 
including the senior program analyst that we have requested as 
a workload increase, the staff says that they have this problem 
contemplated within the existing budget and within the 
personnel increase. They are looking at it.
    I have not met anybody yet who tells me that it is not 
going to be a problem. They say that within existing budget we 
can identify the problem and solve it.
    Mr. Rogers. Mr. Dixon.

                             jury selection

    Mr. Dixon. Thank you very much, Mr. Chairman, and I, too, 
would like to welcome you gentlemen here. And I have really no 
questions as it relates to the budget.
    But, Justice Kennedy, you talked about electronic 
distribution. Are you currently using some form of electronic 
distribution?
    Justice Kennedy. Yes. We, number one, have access to our 
docket, to our order list, to our attorneys admissions lists, 
and immediately when the opinion is out, it is on an electronic 
system so that it can be picked up that way.
    Mr. Dixon. And the additional person would be to make sure 
that the opinions are in the proper form before they are 
released?
    Justice Kennedy. That is the Assistant Reporter of 
Decisions, yes. The opinion goes out over the wires to I 
suppose tens of thousands of lawyers hours after it is issued, 
and that is why the instant release has become so much more 
important. It has taken on such a greater significance these 
days. And we want to be able to complete the editing function 
before it goes out.
    Mr. Dixon. I have not attended the last two hearings of the 
Supreme Court, but I have read with interest the dialogue that 
has gone on between the Chairman and members about the trial 
courts. And I note that recently a commission here in 
Washington, D.C. has made some recommendations about 
restructuring of the jury selection process.
    In fact, there is an editorial in today's Washington Post 
about restructuring of jury selection. I do not know if either 
one of you gentlemen have an opinion or think that we need to 
study the jury selection processes. Do you have an opinion? 
And, if so, would you state it?
    Justice Kennedy. I do not have a well thought out specific 
plan. I do know that it is an area that deserves attention from 
the courts and from the Congress. I think the public sometimes 
thinks that the jury system is being manipulated when we have 
jury consultants, so that the person sitting next to the 
counsel table says what kind of a juror to find.
    In England, as you know, it is basically the first 12 
people in the box are selected, unless there is a clear 
conflict such as a financial interest or a relationship between 
a juror and one of the parties or the counsel, and I think this 
works very well. I think preemptory challenges are very costly, 
not only from the standpoint of delay in getting the jury 
selection, but from the standpoint of the perception of 
fairness of the community.
    Justice Souter I know agrees with me, and I think every 
member of our court agrees, that the jury system is of immense 
importance in this country.
    Congressman, we would not have a system in which courts and 
judges have the authority and the influence and the 
significance that they do were it not for the leveling and the 
democratizing influence of the jury. And we are absolutely 
committed to the jury system in this country. It is the 
opportunity for the citizen to participate in government in a 
very direct way. Other than voting, this is the most direct 
participatory role a juror can have, and it is of immense 
importance.
    I think we ought to give more attention to how we select 
the jurors. I think preemptory challenges are somewhat----
    Mr. Dixon. You are not suggesting that we do away with 
preemptory challenges?
    Justice Kennedy. I think they can be severely limited.
    Mr. Dixon. In general, I would agree with your statement. 
But just from my general observation, it seems that a lot of 
people escape jury duty. And, therefore, you do not have a good 
class to draw from. Many professional people escape jury duty 
because for one reason or another they cannot afford it or they 
are providing a service.
    When you look at jury pools, you find that in some areas or 
communities the same people are being called all the time. They 
are usually Federal Government employees, because the Federal 
Government understands the importance of jury service and pays 
the people.
    If you are in the private sector working for the tire 
company, perhaps your employer will not pay you for your jury 
service. So, in theory, this jury system seems to be working 
very well or has in the past, but it seems to me that there is 
a disproportionate burden falling on some people in our society 
to serve on juries versus others who very easily escape.
    I am not criticizing them for that. I am just saying that 
when we talk about the jury system, it sounds like democracy at 
work, but we find more and more that there is a limited class 
of people that are participating in the jury system.
    Justice Kennedy. You may remember, you were in the 
legislature in California, I think in the early '70s it was, 
when California abolished all exemptions.
    Mr. Dixon. Yes.
    Justice Kennedy. And the Code was just rife with 
exemptions. And the result was I was a United States Circuit 
Judge, I sat on a jury. To my supreme disappointment, the case 
was dismissed before it ever went to the jury. [Laughter.]
    The governor, Governor Brown, sat on the jury, and I 
thought this was salutary. But this is largely a function of 
state court judgments, but I agree with you that it is very 
difficult to have a fair jury if the jury pool itself is not 
representative of the community.

                      televising court proceedings

    Mr. Dixon. Justice Souter, I certainly want to give you an 
opportunity to restate your position about a bill that is 
currently before our Judiciary Committee that would give 
discretion to judges in the federal system to allow cameras in 
the courtroom. I understand you are opposed to that.
    The Chairman has tried to make a comparison between the 
House of Representatives or Congress and the Judiciary, and 
some might say it seems kind of stuffy that the court system 
feels that they should not be open to the camera, and you also 
make some very valid points.
    I think one is the context in which statements are being 
made and that justice may be taken out of context. You think, 
as I recall your testimony, that it is an inhibiting factor in 
dialogue between the attorneys appearing before you and the 
justices.
    But on one hand you want to use electronic distribution, 
modern technology, and, of course, having cameras in 
legislative bodies and in some courts is now the accepted 
practice. I guess my question to you, would you still be 
opposed to giving the discretion to judges if the Supreme Court 
were exempted from that particular----
    Justice Souter. I still would be. The different courts have 
different reasons, I think, for fearing the effect of live 
cameras, or still cameras for that matter, in the courtroom. 
But they all have an interest, and I saw the interest back in 
New Hampshire as an appellate judge in New Hampshire, and I do 
not think we need any extended argument today to point out the 
effect that these cameras can have on a live trial.
    And so, yes, I am very protective about the process of the 
Supreme Court, and I do not want that compromised. But I am 
equally protective about the processes of the other appellate 
courts in this country and the trial courts, and I do not want 
them compromised either.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. Let me stay on that subject a bit further here. 
Let me ask you this, Justice Souter. Would you allow making 
available video recordings of court arguments to proceed, or 
would that still be within your objection?
    Justice Souter. I do not see that it would make very much 
difference whether the broadcast comes literally simultaneously 
with the argument, or whether it comes three hours later, or 
for that matter three weeks later. I think the process is going 
to be compromised, and it is too valuable to spoil it.
    Mr. Rogers. Correct me on this. The audio recordings of 
oral arguments before the court are released at a later time, 
are they not?
    Justice Souter. Yes. They have traditionally been released 
at the end of the term, and we have talked about even getting 
them out earlier once the case has been decided. I do not think 
they are actually being released that early yet, but they are 
basically available at the end of the term.
    Mr. Rogers. You have no problem with the audio recordings?
    Justice Souter. No. You know, it is a pragmatic difference. 
It is not a difference in some kind of theoretical principle. 
That does not seem to invite the abuse that I think a video 
recording with relatively early release of the video recording 
would do.
    Mr. Rogers. Would you have a problem with live radio 
broadcasts of the oral arguments?
    Justice Souter. I think I would, simply for this reason. 
That, oddly enough, has never been one of the proposals, but I 
think my concern with that would be that the immediate release 
of a radio recording would lend itself simply to the kind of 
editing down to the sound bite, to the two-second clip, that 
the audio recording does. And I think it would have the same 
kind of inhibiting effect that immediate video release would 
have.
    Mr. Rogers. So you do not think that in releasing the audio 
recordings of the oral arguments at the end of the term would 
cause a lawyer to add any rhetorical flourishes that he would 
not otherwise make in order to gain some notoriety?
    Justice Souter. I really do not. Actually, it is not so 
much adding the rhetorical flourishes that concerns me, 
although that is in my mind, as the reticence sometimes on the 
part of the court in place of being very candid in its 
questioning, and that would be true in any event.
    But a release months later of simply an audio recording 
just does not present the opportunity for the kind of 
grandstanding, which goes with the performance itself. It is 
six months old news then. Not many people are going to play it, 
and I think for that reason not many people are going to be 
tempted to abuse the process so that it can be played.
    Mr. Rogers. Mr. Dixon referred to the fact that the U.S. 
House, and now the Senate, have added live television coverage 
of our proceedings. And I do not think anyone would say that 
there is any grandstanding that goes on in the Congress.
    Justice Souter. I would certainly hope not. I would be 
shocked if there were.
    Mr. Dixon. If the Chairman would yield, it would seem to 
me, Justice--and maybe you can respond to this--that my 
personal view of C-SPAN activities of the House is thatmembers 
of Congress, because they are elected, are talking to a particular 
audience and not to the other member, that they are using this as a 
forum to communicate to other people unrelated to the House.
    But in the case of the court, the attorneys are addressing, 
particularly at the Supreme Court I would think, the Justices, 
and do not have the need as much to try to shape public opinion 
on the issue.
    It seems to me that you could make an argument that, in 
fact, it would work better in the court than it does in 
Congress, in that people would get a real feel for what is 
going on versus here in the House where I do not think people 
are getting a real feel at all for what is going on. They are 
getting a performance every day by many members of the House, 
not all, but by many members of the House.
    Mr. Rogers. What? [Laughter.]
    Mr. Dixon. I know that you are surprised to hear that, Mr. 
Chairman.
    Justice Kennedy. Well, if I could just jump in at some 
point. What many people when they visit our court see, when 
they observe an oral argument, appears to be a dialogue between 
two people--the counsel who is responding to a question and the 
Justice who is asking it. But as you indicate, the dynamic is 
much more rich, and it has a much deeper dimension than that.
    Basically, a skilled attorney enters into a conversation 
among the Justices. I ask a question because I want Justice 
Souter to know that I am concerned about the following thing, 
and so I am basically talking to Justice Souter through the 
medium of the counsel. And a very skilled counsel understands 
this dynamic and the argument can be quite a wonderful thing.
    This is why it is a quiet, deliberative, cautious process 
that is based on a logic and a tradition of its own that is 
different--not better, not worse, but different--than the 
political branch's. And, of course, there is educational value 
in that.
    The question is whether the television is really needed in 
order to enhance that process or in order to make it better 
understood. Ultimately, Justice Souter's position in the law, 
in history, and my position, will be assessed by what is 
written in this volume. (Witness points to Volume of U.S. 
Reports)

                      videotape of oral arguments

    Mr. Rogers. Well, Justice Souter, you have no problem, as 
you have said, with audio recordings of the proceedings for 
release as a historical record, at the end of that term. Would 
you have a problem if, similarly, a videotape of the 
proceedings were made verbatim, in a generic sense, to be 
released only at the end of the term, similar to the audio 
recordings, just for historical records purposes?
    Justice Souter. Well, I would, because in the real world, 
those would not be the terms on which the video was being made. 
The first video might be made, if that was the way to get the 
camel's nose under the tent, on exactly those terms.
    The next year what we would hear is, ``The camera is 
already in there. It is not distorting the process. It is not 
going to distort the process any more, depending on when you 
release the tape.'' And within a year or two, the tape would be 
out of the courtroom in time for the 6:00 news. So I would not 
run that risk.
    I would like, if I may, just to go back to a word on 
Representative Dixon's question. I agree with what Justice 
Kennedy said, by the way. Let me just take your question on 
your terms, bearing in mind the difference in the relationship 
between counsel and us, and a member of Congress and his 
constituents.
    There are days, even under the present system, when I have 
to admit that the ideal kind of argumentative relationship that 
Justice Kennedy speaks about does not always occur. I have been 
here, well, eight years now, going on eight years, and I have 
derived one tentative general rule, and that is that great 
cases at least raise a very high risk of lousy arguments.
    The best arguments that we have, the most helpful arguments 
that we have over there, tend not to be in the most spectacular 
cases. And the reason that sometimes things do not work in the 
spectacular cases is--and it is very apparent the minute the 
argument starts--that the argument is not being made to us.
    The argument basically is a statement, a dress rehearsal 
almost, of what is going to be said out on the terrace in front 
of the building when the argument is over. And when we start 
off on those terms, it is difficult for us to accomplish what 
we want to accomplish in an argument.
    If we have got cameras with instant release, we are going 
to be inviting that kind of breakdown in a much higher 
percentage of cases.
    Justice Kennedy. My experience is the same as Justice 
Souter's. The merit of an oral argument is inversely 
proportional to the public importance of the case. And you know 
from your own experience, Congressman, that if the attorney's 
clients are in the courtroom, he cannot resist talking to his 
clients and not to the court.

                       quality of oral arguments

    Mr. Rogers. We hear anecdotal stories that the Justices do 
not always think the quality of oral arguments are the highest 
quality. As the forum that hears the most exalted cases of 
law--and you debate some of the most pressing issues that our 
society faces--the Supreme Court is a place where probably most 
people believe that the most profound arguments take place. And 
we all believe that.
    What is your experience on the quality of arguments that 
takes place in the court?
    Justice Kennedy. Well, it is mixed. I think we do a 
disservice to the bar in stressing our disappointment at some 
of these arguments. I think overall they are very good. The 
object of an oral argument is to address the difficult issue in 
the case, not the easy issue in the case.
    And it is sometimes frustrating to us when we will take a 
case that is representative of many cases. There is only one 
counsel arguing, say, for a state, but many states are 
interested in the issues. And if the oral argument is not 
helpful to us, we then become somewhat frustrated.
    But I would not let that occasional frustration obscure the 
fact that the oral argument dynamic is generally excellent. 
Sometimes we do not behave very well. We interrupt each other, 
and we end up--we are very conscious that the clock is ticking. 
We have only a half an hour per argument, per side. And we are 
sometimes anxious to make our own points.
    I think we sometimes should and do reflect on the fact that 
civility begins at home, and we must be more conscious of 
allowing the counsel to get his or her point out. But we become 
so interested in the argument that we sometimes forget. It is a 
great dynamic, and I cannot make any generalization about the 
percent of good ones and the percentage of bad ones.
    But the ones that are not good are ones where we are 
disappointed. We came out there looking for help, and we often 
ask questions of the counsel who we think is going to prevail, 
just to test our position. I have to sit there, or Justice 
Souter must, and think, well, you know, the Chief might assign 
us this opinion. What am I going to say about this? And we need 
the help from the counsel.
    Maybe Justice Souter would disagree with that assessment.
    Justice Souter. Well, no, just more of the same. I mean, 
there is not any question that there is an enormous range of 
quality in Supreme Court arguments. Some of them are not very 
good, and some of them are simply magnificent. And at least 
based on a comparison, in my own experience, between the State 
Supreme Court and this Supreme Court, I know that we are lucky 
here. The mixture is just richer. We get a higher percentage of 
the really magnificent.
    I never heard Rex Lee argue in the Supreme Court of New 
Hampshire, and I heard him argue down here. And you do not 
forget those days, and you are not unappreciative of the fact 
that on the whole the mixture is rich.
    Mr. Rogers. Are there ways available for lawyers to be 
better trained and educated about a presentation before the 
court?
    Justice Souter. Well, there are. I am not sure in all cases 
they are very practical. But I know that a lot ofstate's 
counsel from the State Attorneys Generals' offices will avail 
themselves of the chance to basically have a kind of dress rehearsal 
argument thanks to the volunteer services of some Washington lawyers 
who will try to prep them for what they can expect. And I know that 
other counsel go through that, too. But, you know, the best guarantee 
of a good argument is a good lawyer.
    Justice Kennedy. Routinely, the Solicitor General of the 
United States and his deputies present superb arguments. They 
will never go before us without having had at least one full 
dress rehearsal where there is someone playing each of the 
Justices. And new counsel, private counsel, sometimes forget to 
do that.
    Mr. Rogers. Would it help if an inexperienced lawyer, 
although a good one, was preparing himself or herself to argue 
before the court--would it help if they were able to look at a 
videotape of a Rex Lee performance before the court, for 
example?
    Justice Souter. Not if they are not Rex Lee. [Laughter.]
    Mr. Rogers. Or any of the other good ones?
    Justice Souter. Well, actually, what they do--and I think 
this does help them--we frequently find, just because we notice 
faces in the bar section of the court, that a lawyer with an 
argument will either come for a couple of days of argument in 
the session preceding the one when he is going to argue, or 
will come a few days early on the week that his argument is 
planned, and will just begin to get a feel of the court and a 
sense of what to expect. I think, you know, they can do that 
also by getting the transcripts of the arguments, if they want 
to.
    Mr. Rogers. You do not think that the non-verbal language 
that we all communicate with, body language, facial 
expressions, inflections in voices, inflections in faces, have 
any part of the communication before the court?
    Justice Souter. Oh, I think they have a great deal of it. 
But the cost of providing that by video coverage of the court 
would be too high for the system to bear.
    Mr. Rogers. I just cannot get around the objection here.
    Justice Kennedy. You can see what it is like arguing with 
Justice Souter. [Laughter.]
    Mr. Dixon. I think the answer, Justice Souter, is yes, it 
would be of value to the lawyers, but on balance, as you said, 
you would resist it because of the cost. I have mixed emotions 
about it, and I think they make very good points.

                           judicial vacancies

    Mr. Rogers. Let me switch gears quickly. Much has been 
made, even by the Chief Justice, of the number of judicial 
vacancies in the Federal system. In fact, there are currently 
85 judicial vacancies, by no means a historical high. Thirty-
four of the vacancies are nominees who were pending last year 
and have carried over to this session, well below the average 
number of vacancies.
    Thirteen have been nominated this year, so action on those 
nominees could not be considered overdue. Thirty-eight 
vacancies are for judgeships for which the Administration has 
failed to send up a nominee to the Senate. So does not that 
show that the current level of vacancies is not, number one, 
even average, above average? And, number two, does not it show 
that it is primarily due to the failure to submit nominations 
in a timely manner?
    Justice Kennedy. The Chief Justice in his year-end report 
made the point or addressed the problem that you are referring 
to. The Chief Justice is very prompt, and he issues the year-
end report at the end of the year. And I think the press 
reporting of the Chief Justice's statement missed his major 
point.
    He was, I think, careful to say that the responsibility for 
the current vacancy factor rests both with the Executive and 
with the Congress, and that they must together find a way to 
cure it.
    I have looked at the figures, Congressman. An 85 or 86 
vacancy rate is just about 10 percent of the judiciary. It has 
sometimes been higher than that, if there are many new judges 
that have just been authorized; sometimes lower, if an election 
has just occurred and the process moves along.
    The Chief Justice's point was that what might have been an 
acceptable vacancy factor when the courts were not so 
overburdened is no longer acceptable. A 10 percent vacancy 
factor 10 years ago was not nearly so injurious to the system 
as it is now. You are looking at a 10-year increase in court of 
appeals filings of close to 70 percent. And so a 10 percent 
vacancy rate hurts the courts much more now than it did then.
    One answer might be to increase the size of the judiciary, 
so that the vacancy factor, which will always exist to some 
extent, is no longer so injurious. I know the Chief Justice and 
Justice Souter, and I believe every one of my colleagues, would 
strongly resist recommending increasing the size of the Federal 
judiciary. The question is becoming more efficient, more 
expeditious with the appointment process that we do have. That 
was the Chief's point.
    On the Ninth Circuit, I think almost a third of the 
positions are vacant. It is our biggest appellate court. I 
think the Chief Justice this year, as he makes the point every 
year, he says we have got to address the judicial vacancy 
problem.
    So I think in the context of these repeated statements of 
his, and of the increased workload of the courts, his comments 
can be put into better perspective and be given a better 
perspective and a better interpretation than they have been 
given by some of the press reports that I have seen.

                     increased federal jurisdiction

    Justice Souter. Could I add just one thing? You know, there 
is one other factor in the mix that the Chief was addressing--
and it is reflected in what Justice Kennedy spoke of--is the 
increase in the workload, whether you measure it by cases per 
judge or cases filed, in, say, the course of this decade. That 
is simply the increase in the court's jurisdiction.
    The reason the number of cases is going up is not simply 
because the population is increasing. It is increasing because 
the judiciary is being given more jobs to do.
    And I think the Chief's point is--the problem that he is 
trying to address is a function of the size of the judiciary, 
the vacancy rate, and the jurisdiction of the court. And part 
of his plea is, ``Do not increase that jurisdiction of the 
Federal judiciary, because you are going to exacerbate the 
problem that we have got now. It can only get worse.''
    Mr. Rogers. Well, if the point is that even though the 
vacancy rate may not be higher than historical averages that 
your caseload has increased, and, therefore, the vacancies are 
much more pronounced than normal----
    Justice Souter. Yes.
    Mr. Rogers. I think that is your basic point, is it not?
    Justice Souter. Yes, and that is a function, in part, of 
jurisdiction.
    Mr. Rogers. Let me just point out two other things in that 
regard. Number one, the number of senior judges who have chosen 
to remain active and hear cases on the trial court, especially 
on the trial court level, are at a record high.
    Justice Souter. Yes. About 400, I think, all over.
    Mr. Rogers. 469.
    Justice Souter. Is it as high as that?
    Mr. Rogers. A record number. It is almost 100 more than 
five years ago, and that number is expected to surpass 500 by 
next year. So you have got a lot more wise heads there than 
appears because of the number of senior judges.
    Justice Souter. Well, without that, the system would not be 
working. I was talking with one of the first circuit judges 
last night, and he said that as a matter of course now when he 
sits in a panel of three on the first circuit, he said almost 
invariably one of those members is a senior circuit judge and, 
with great frequency, the other one is a ringer from some other 
circuit. That is sort of the informal mechanism for adjusting 
for the difference in the loads.
    But you are right. The system would not be working without 
the seniors.

               habeas corpus and prison litigation reform

    Mr. Rogers. And then, number two, on that point of higher 
workload--the Chief Justice's 1997 year-end report made good 
mention of the Congress' action in streamlining habeas corpus 
and prison litigation reform. And he stated that Congress acted 
wisely. We passed habeas corpus reform in 1996, and he says by 
June of 1997 that had led to a decrease in habeas corpus 
applications well below the average number of monthly filings 
during the 15 months prior to the enactment of the reform in 
April of '96.
    Prison litigation reform, which we passed as a part of this 
bill in 1996, has led to a 46 percent decrease in civil rights 
filings from April '96 to February '97. Do you agree that those 
two actions have dramatically decreased the workload?
    Justice Souter. Well, you know, I was going to say in the 
filings of the civil rights cases, the effect was pretty 
immediate. How the Habeas Reform Act is ultimately going to 
work out for us is still something we have got to see, because, 
number one, the one-year statute of limitations resulted in an 
immediate increase, quite dramatically, of habeas filings to 
get in in the one-year--under the one-year statute. So it is 
going to take a little time for that to work out.
    And, of course, we have had--although I do not have a 
figure in my head, we have had an increase in the number of 
petitions for original habeas corpus writs right in our court 
as a result of the limitations on the appeals.
    So it is going to probably take us another year or two 
before we see how it works out, but there is no question, as 
the Chief said, the effects are beginning to show up, and 
particularly in the 1983 litigation, very, very clearly.
    Justice Kennedy. Well, and it seems to me important to say 
that we for some years told Congress of our concerns with abuse 
of the habeas system. The Act addressed it directly. I think 
the results, as the Chief indicates, are already measurable; 
and they are salutary. I think it was an important piece of 
legislation.
    And the prisoner reform litigation means that prisoners 
have to pay, to the extent they can, some part of the cost of 
filing, and the thought is that this will be some sort of a 
rationing mechanism for frivolous suits. I simply have not seen 
enough data to know how that is playing out. We do know that 
prisoner petitions are down.

                     increased federal jurisdiction

    Mr. Rogers. Well, some have said that the Congress, while 
giving you some relief on those two--with those two reforms, at 
the same time we federalized so many more new crimes or former 
state crimes that we are increasing the criminal case load of 
the court. But the statistics really do not reveal that, do 
they?
    Justice Kennedy. Well, I think part of that is because the 
function of Federal prosecution is a function of the number of 
United States Attorneys there are, especially when there is 
concurrent jurisdiction. And I think those numbers have 
remained relatively constant.
    We are very concerned that you do not, for every salutary 
piece of legislation like the habeas corpus reform, take two or 
three steps back by federalizing more wrongful conduct. The 
United States courts are now a major source of employment law 
for American business. That is, about nine percent of our 
jurisdiction civilly is in employment cases. Ten years ago, I 
think it was probably less than three percent.
    Mr. Rogers. Employment cases?
    Justice Kennedy. Employment discrimination, wrongful 
discharge cases that are alleged to be in violation of Federal 
statutes.
    Mr. Rogers. And you have had a dramatic increase in 
immigration cases from 2,000 to 6,600. Those are not really 
particularly time-consuming or resource-intensive type cases, 
are they?
    Justice Kennedy. I am not sure. I would think----
    Justice Souter. I cannot answer that for the trial courts.
    Mr. Rogers. Mr. Latham?

                      televising court proceedings

    Mr. Latham. Thank you very much, Mr. Chairman.
    And welcome. It is a pleasure to have you here. I think you 
have talked about using television cameras in the courtroom, 
and I know your feeling. I think we talked last year about any 
kind of live broadcasts. Have you changed your opinion at all 
about the possibility of taping deliberations to be used, say, 
for students in law school, maybe five or 10 years down the 
road? Is your opinion still that this should be considered?
    Justice Souter. We have been over something close to that 
already, and that still is my opinion. The----
    Mr. Latham. As far as education?
    Justice Souter. Yes. He did not mention the education 
aspect.
    Mr. Latham. As far as law school?
    Justice Souter. But the Chairman did speak of taping for a 
later release, and no, I just think the risk of abusing and 
skewing the process, even with the best will in the world, is 
just inevitable, and it is not worth it.
    Mr. Latham. What is your----
    Justice Kennedy. I have taken the position for many years 
that I think it is a much closer question than my colleagues. 
But that if some of my colleagues, as Justice Souter and others 
do, feel that it will affect the way in which our courtroom 
dynamic works, I will defer to them.
    Mr. Latham. You know, the court is the one branch, I think, 
that most people are least aware of, and you are very fortunate 
in that regard. Are you doing anything as far as setting up a 
web page or anything to let the American people see more of 
what is going on?
    Justice Kennedy. Yes. We have a computerized system where 
you can get our docket sheet, our calendar, our rules, our 
admissions lists, and our opinions.
    Mr. Latham. Is there anything about the Justices themselves 
as far as background----
    Justice Kennedy. Oh. Well, nothing that we put out, so far 
as I know. But there is much biographical information that I 
think you can pick up off a standard web site.

                       year 2000 computer problem

    Mr. Latham. I see your written testimony addresses the year 
2000 concern. How much of a problem is that going to be for the 
Court, and what are you doing?
    Justice Kennedy. Well, as I indicated before you came in, I 
have not had anybody certify to me that it will not be a 
problem. They say that they have identified that there can be a 
problem; and they are working on it; and they are confident 
they have the people and the resources to solve it. But no 
guarantee. And because we do have dockets and payroll just like 
any other agency does, it is a problem.
    Mr. Latham. That is all. From my understanding, you have 
covered most everything already, Mr. Chairman. Thank you.

                           judicial vacancies

    Mr. Dixon. It seems to me, Mr. Chairman, that the issue of 
concern about vacancies is not the number but historically what 
is the rate of confirmation. According to the Congressional 
Quarterly, when you go from the 95th Congress to the 105th, the 
first session, that the rate, the percentage of confirmation, 
whether it has been one judge--one vacancy or 180--has gone 
from 92.8 percent, almost all of those who were nominated, to 
45 percent.
    That seems to be, from our perspective, the concern--the 
rate of confirmation, the number of people that the President 
nominates versus the number of people that are confirmed.
    Mr. Rogers. Would the gentleman yield?
    Mr. Dixon. I would be pleased to.
    Mr. Rogers. I would prefer to think that that reflects the 
quality of the nominees as opposed to anything else.
    Mr. Dixon. But the point is that they should be acted on 
one way or the other. You and I agree on many things, but the 
point is not whether there are retired judges or senior judges 
sitting to fill the vacancy. In our wisdom, we have these 
vacancies.
    For instance, I understand that there is a bill on the 
floor to create five new judgeships in Florida. And I am told 
here that there are already three vacancies of judges in 
Florida. So to me the real question is whether the Senate is 
letting up on their responsibility to confirm or reject a 
nominee.
    And it would appear by looking at the Congressional 
Quarterly, if they are correct, that the rate of confirmations 
or rejections is about half what occurred in the 95th Congress 
under President Carter, or in the 97th Congress under President 
Reagan, which was 97.8 percent.
    Mr. Rogers. If the gentleman would yield. Of course, the 
105th statistics that you refer to only cover the first 
session. I mean, we are only half through this 105th.
    Mr. Dixon. So assuming that we----
    Mr. Rogers. Hope springs eternal, and there are now 45 
vacancies. Let us hope----
    Mr. Dixon. If we go at the same rate the rest of the 105th 
Congress as we have the first part of the 105th, then we will 
be up to probably 90 percent.
    Justice Kennedy. Well, in all events, the Constitution 
commits some matters to the political branches and not to us. 
We are the final interpreter of the Constitution, in many 
instances, just because we are chronologically last in line.
    But the confirmation process is committed to--the 
appointment process to the President and the confirmation 
process to the Senate. And it is their constitutional 
responsibility to determine the standards for confirmation,the 
standards for appointment, and to the processes for making that 
determination.
    All we can do is speak from the standpoint of judicial 
administration, and looking at statistics and numbers and 
vacancies and say that we think that there is a problem in 
continuing to keep the courts current if vacancies are not 
filled. The Chief Justice suggested that there be action up or 
down on some of the nominees that have been pending.

                     Increased federal jurisdiction

    Mr. Rogers. Chief Justice Rehnquist, in his annual report, 
indicated that the Federal judiciary is in danger of becoming 
so large as to lose its character as what he called a 
``distinctive judicial forum of limited jurisdiction.'' Do 
either of you have any concerns about the effects of an 
expanding Federal judiciary and its impacts on the Federal 
judicial system? And what does he mean by losing its character 
as a distinctive judicial forum of limited jurisdiction?
    Justice Kennedy. Well, the Constitution, as you know, 
creates courts of limited jurisdiction. The design has been, 
and the tradition has been, that the bulk of judicial business 
is conducted by the state judiciaries. Over 90 percent of 
litigation today is in the state courts.
    The idea of a Federal judiciary was a judiciary that had 
particular expertise in matters that should and could be tried 
only in a Federal court--complex antitrust cases, security 
cases, certain crimes. If you continue to overload the 
judiciary with jurisdiction so that its numbers have to expand, 
you are going to find it more difficult for us to attract 
highly skilled attorneys, highly skilled professionals to our 
bench.
    You are going to turn them into police court judges. They 
are going to be hearing criminal cases most of the time. That 
is not the design of the judiciary. As it becomes larger, the 
problems that we have in finding highly qualified people, and 
in confirming highly qualified people, will be exacerbated. If 
you have a 10 percent vacancy rate now, it is going to be even 
more difficult to fill the vacancies that you create 
necessarily by an expanded judiciary.
    I think it would be tragic if the numbers of the judiciary 
increased substantially more than they are now. So we are now 
close to 900, and I think that ought to be a cap.
    Justice Souter. Just two details. The effect of increasing 
jurisdiction, and the pressure to increase, has shown up 
already in one way that you and I, Mr. Chairman, were alluding 
to earlier this morning. And it is going to show up in another 
way in which the dialogue within the committee referred 
earlier.
    You spoke of the number of senior judges who were working, 
and the number is--I said it was around 400. It is, in fact, 
higher than that you pointed out. I cannot give you an exact 
statistic, but I can tell you that the majority of those senior 
judges at the trial level, where they are really keeping the 
system going, are sitting on civil cases.
    The criminal cases, which by virtue of the speedy trial 
rule demand the most immediate attention, have necessarily got 
to get the attention of the regular sitting judges there, 100 
percent of whose time can be budgeted for that purpose. So 
there has already been a shift in the amount of civil 
litigation which is actually being handled by the active, the 
non-senior Federal judiciary now.
    The second implication of a demand for greater size is an 
implication going to the capacity of the Senate to scrutinize 
nominees. I mean, it is one thing to have to keep in effect a 
Federal judiciary, say, of 700 judges supplied with judges. It 
is another thing to have to go through the same process for a 
Federal judiciary of 800 or 900 or 1,000.
    There is simply a limit to the amount of legislative time 
that can be spent on this, and I think if the Federal judiciary 
continues to grow, the scrutiny that can be given to the 
nominees is necessarily going to fall or the system is going to 
start congealing.
    So there are I think very insistent institutional reasons 
to want to keep that number from going up.
    Mr. Rogers. Should we cap it?
    Justice Souter. If that is the only way to discipline, in 
effect, the process, sure. I would rather see a cap than simply 
see the number inching up every year. I do not have a great 
deal of faith in those kind of artificial restraints. The faith 
has got to be placed in the responsibility of Congress simply 
to recognize that when the jurisdiction goes up, somebody has 
got to do the work. And sooner or later, that is going to mean 
more judges.
    I would rather keep everybody sort of hammering away on 
that point than to put my faith in a mechanical cap. But if the 
mechanical cap is the only way we can have any hope for it, 
then let us have a cap.
    Justice Kennedy. But if you have a mechanical cap, plus an 
increase in the jurisdiction, that is a recipe for disaster.
    Justice Souter. Yes.

                           Federalizing crime

    Justice Kennedy. So you simply--the Congress simply must be 
very, very cautious and exercise the utmost discipline in 
resisting the cry to federalize every current social problem.
    The Federal balance--you know, people think of checks and 
balances as automatic, and in a large sense it is. But it also 
requires the constant attention of the political branch. 
Federalism is almost completely committed to the political 
branch. You determine what the Federal balance is.
    There are few constraints that we can or ought to put upon 
you to police that balance, and you have to make that judgment; 
and you have to understand that there is a tremendous cost to 
Federal intervention; and you have to believe in the 
Constitution. There are three or four mechanisms in the 
Constitution that the framers put in, and one is federalism.
    And if you do not believe in it, then you are sacrificing 
probably a third of the protection that the framers gave when 
they made the constitutional design. I understand it is 
difficult for you to do, but it is committed to you, not to us.
    Mr. Rogers. Well, I hear that. I think the Congress needs 
to be very, very cautious about federalizing a crime. But in 
this day and age of instantaneous communications worldwide, not 
to mention nationwide--and the new interstate commerce that is 
going on in new and fundamentally different ways--it creates 
the need to discipline those who violate our criminal laws in 
ways we never dreamt of 10 years ago, much less the founding 
fathers.
    Justice Kennedy. Well, if the states do not have the 
resources, then perhaps the Federal Government must do it. 
But----
    Mr. Rogers. Well, you could not have the state courts, the 
state laws, make it a criminal activity to pass pornography on 
the Internet when the crime is committed in New Jersey and 
maybe the impact is in California?
    Justice Kennedy. Assuming that that act is constitutionally 
punishable, I see no reason why the state in both the sending 
and the receiving jurisdiction cannot prosecute.
    Justice Souter. And to the extent that the Congress, as you 
point out, has got to consider new criminal methodology in 
deciding what the criminal jurisdiction of the United States is 
going to be, it is equally important from the standpoint of the 
Federal judiciary to look at what has been criminalized up to 
this point and say, ``Do we still need to give this, in a 
system that is not infinitely expansible, the Federal 
prominence that it has had?''
    It may very well be that the insistence for new criminal 
jurisdiction in one area is an argument for curtailing it in 
another in order to keep the Federal system manageable.
    Mr. Rogers. Well, it seems to me that while we must be 
mindful of the load of work that we are putting on a finite 
system, i.e. the courts, that at the same time we have the 
responsibility of trying to keep up with the times in 
establishing Federal crimes where state laws would be 
ineffective.
    And the way the technology of this world is moving and 
changing every day, it seems to me it is going to continue 
todemand that we, in the Congress, federalize some crimes that did not 
exist before or were ineffectively attacked by state jurisdiction.
    So I wonder--I am not sure that I agree with you fully that 
the size of the Federal judiciary can be set at some magic 
number.
    Justice Souter. Well, I am not suggesting that it ought to 
be set at a number. But I am suggesting that there is a direct 
correlation between the size of the Federal judiciary and the 
quality of the Federal judiciary, and we have got to accept--
both you and the judges have got to accept the responsibility 
for that.
    Mr. Rogers. Well, we are willing to take ours. However, I 
do not think the quality of the Supreme Court is any less than 
it was in times past. In fact, I think it is a good deal 
higher.
    Justice Souter. We are still at nine.
    Mr. Rogers. But the quality is better.
    Justice Kennedy. But the whole point of our last discussion 
is it is your judgment and it is your prerogative to determine 
the balance of federalism, but you must be aware of the costs. 
And so long as you are aware of the costs, both to our 
constitutional tradition and to the judiciary, of creating new 
Federal acts, so be it. And I agree with Justice Souter. For 
every new crime you create, you might look at decriminalizing 
other activity where Federal monies, Federal expertise has 
designed systems that the states can implement.
    Mr. Rogers. Point well taken.

                        Use of Modern Technology

    Number two, the courts have been reluctant--and I have 
tried to find the best word for this that I could find--have 
been reluctant to modernize, to use the modern means of 
communication, of training, of decisionmaking, i.e. computers, 
word processors, training long distance by satellite, what have 
you.
    I personally think--and I have ridden the AOC fairly hard 
on this type of thing--the courts need to try to utilize the 
modern means of communications and of training in order to make 
up for the lack of personnel. I think we could save money and 
save personnel if the courts utilized more than they do now the 
modern methods that the electronic age has offered us. Do you 
have a problem with that idea?
    Justice Kennedy. I do not have a problem. Our court, we 
think, is current. As our new clerks come in each year, we find 
that we need to have software systems that they can use, in 
part so they are marketable when they leave, and in part so we 
can use their skills when they come.
    The influx of new law clerks every year is one way to keep 
the courts up to date, and this applies to the district courts 
and the circuit courts as well as to us.

                      Increased Bankruptcy Filings

    Mr. Rogers. Now, one major source of growth in the Federal 
caseload is the increase in bankruptcy cases. They have climbed 
from 800,000 filings a few years ago to an expected 1,400,000 
this year, despite the health of the economy that we read 
about--numerous proposals being floated to reform the 
bankruptcy statute.
    In your view, is the bankruptcy area in need of an 
overhaul?
    Justice Kennedy. We overhauled it recently--I would say 10 
or 15 years ago--and to good effect. I am not sure what to make 
of those numbers in an expanding economy. Perhaps the subtext 
of your question is to wonder if there is an abuse. I cannot 
speak to that, Congressman. I will have to think about that.
    Mr. Rogers. Justice Souter.
    Justice Souter. Well, I am in the same boat. I do not have 
an opinion. I have assumed, and I may have assumed quite wrong, 
that the growth in the bankruptcy filings, given the state of 
the economy, was probably a reflection of the ease with which 
consumer credit is extended. That is probably too simplistic, 
but that is what I have assumed.
    So if that were correct, I do not know whether bankruptcy 
ought to be given a hard look or consumer credit policies given 
a hard look. I just do not know.

              Splitting the ninth circuit court of appeals

    Mr. Rogers. Justice Kennedy, let me ask you about the Ninth 
Circuit, since Mr. Dixon did not. Are you satisfied that the 
Commission on Structural Alternatives for the Federal courts 
represents a good way to examine what should happen with the 
Ninth Circuit?
    Justice Kennedy. Well, I certainly thought that the 
Congress was wise in asking the Chief Justice to appoint all of 
the members of that Commission so that they could talk with the 
bench and the bar around the country about circuit lines. In a 
way, the issue has been around so long that there is not a lot 
new to say about the Ninth Circuit.
    The five states of the Northwest, according to many of 
their judges, would form a logical and a very desirable unit. 
They want to have their chief judge, their own administration, 
so that they can make their own contribution to sound judicial 
administration.
    I have always been concerned that a court of 28 active 
judges simply could not function as a close collegial court. If 
I were a successful practitioner, and you asked me to become a 
circuit judge and be the junior judge on a 28-judge court, I 
might have to give it a second thought.
    We see systemic problems emerging with the Ninth Circuit. 
Part of the problem is the State of California--our state, 
Congressman. California now has about as many people as were in 
the United States at the time of the Civil War. I do not know 
the precise number--it is about 32 million. It is a huge state. 
It would need 15 circuit judges just for that state.
    So there has been some thought given to splitting the state 
for circuit purposes, and you would have two circuits. I have 
yet to see a satisfactory mechanism for resolving the conflicts 
that those two circuits within the State of California would 
have without the split of the State being prejudicial to the 
litigants and to the bar, and without adding a year to the 
litigation time. This, I think, is unfair to the state.
    Ultimately, this is a political judgment to make. I am 
anxious to see the commission report. I do not think that the 
justice system is necessarily well served by keeping the Ninth 
Circuit intact. Each of those judges is very dedicated. They 
love the circuit. They love its traditions. They have great 
respect for each of their colleagues. They are very hardworking 
judges. But I think we have to get a hard look at splitting the 
circuit.
    Mr. Rogers. Mr. Dixon.
    Mr. Dixon. Thank you, Mr. Chairman. Mr. Chairman, I thought 
your question was, is this the best methodology to proceed 
with. And I gather from your answer, Justice Kennedy, that in 
the political system that we probably came up with the best 
methodology, and that was to have a commission appointed by the 
Chief Justice of the Supreme Court.
    Justice Kennedy. Yes.
    Mr. Dixon. So the answer is yes, that we did come up with 
probably the best solution to a political problem.
    Justice Kennedy. Well, I am not so sure it is a solution. 
You ask them to give you information, so that you can make the 
judgment. And I assume they will give you some pros and cons, 
and perhaps a recommendation. I am not sure.
    Mr. Dixon. It is probably better than just us--either the 
Judiciary Committee or the Appropriations Committee--
redesigning the Ninth Circuit.
    Justice Kennedy. Well, I think it gives you the basis from 
which to begin some deliberations.

                           Federalizing Crime

    Mr. Latham. I just had one question I guess from your 
statement before as we have a tendency to federalize crimes 
here. And your statement was then we should look at 
decriminalization of other things. Would you have any 
suggestions? What would you decriminalize to make room for the 
expanded workload?
    Justice Souter. Well, that was my suggestion. I do not have 
any candidates. I would not start--I did not come prepared to 
do it. I have not been through the U.S. Code, but I probably 
would think very inhospitably of increasing the juvenile 
jurisdiction very much, for example. That is not 
decriminalization. That is going the other direction. So I 
would be more prepared to ask you to go slow there than to tell 
you exactly what you ought to lop off.
    Mr. Latham. Would there be any way of getting suggestions? 
I mean, I do not disagree with you. I am real concerned about 
the growth of the----
    Justice Kennedy. Part of it is discretionary. It used to be 
if you had a bank robbery--the old saying was--``If they have 
got a good strong case, the feds will do it. If not, they will 
give it to the state.'' And both this and the past 
administrations and the Justice Department have been good, I 
think, about setting forth guidelines to give the states 
primary responsibility, for instance, in the area of bank 
robbery.
    So much of what we seek to accomplish in decriminalization 
can be accomplished by making sure the states have adequate 
resources to prosecute crimes within their jurisdiction and 
allowing the United States Attorney General, where concurrent 
jurisdiction exists, to permit the state prosecution to 
proceed.
    Mr. Latham. Do you think large increases come because of 
the sometimes more severe Federal sentencing guidelines? I 
mean, I can think of a few cases where the state--the citizens 
would rather have things go on the Federal level because of the 
potential for a more severe sentence.
    Justice Kennedy. I have to assume--and I have no empirical 
evidence for this--that state and Federal prosecutors will 
sometimes sit down and say, ``We want the Federal--agree that 
the feds will do this because of the increased sentence.'' I 
just have to assume that is the case. I have no basis for it.
    Justice Souter. We also have to assume that one reason that 
Congress does not get more of an outcry from the states when 
the criminal jurisdiction shifts is because the buck is 
shifting along with it, literally the buck. The Federal 
Government is going to pay the bill for the prosecution, the 
investigation, the incarceration, and money is tight. And what 
gets lost in the process is federalism.
    You know, there is a lot that states can do, but they have 
got to pay the bill for doing it, too. And when somebody comes 
along and is willing to pay that bill, it is tempting to let 
them do it.
    Mr. Latham. I would just ask if you found areas where you 
could decriminalize or move, you know, to make--move some of 
these crimes back to the states, or your workload in an 
appropriate manner. If you could offer suggestions, that would 
be very helpful.
    Justice Souter. Well, in all candor, I probably would be 
reluctant to do it, because I do not think we should make those 
suggestions without, reviewing the whole darn Federal criminal 
code.
    Mr. Latham. And that is our difficulty.
    Justice Souter. Yes.
    Mr. Latham. Thank you.
    Mr. Rogers. Mr. Dixon.

                              jury system

    Mr. Dixon. Either Justice--I referred earlier to a 
commission that had made some findings and recommendations as 
to restructuring of the jury system. Justice Kennedy or Justice 
Souter, I do not know if you want to comment on this, but one 
of the suggestions--I am reading from an editorial in the Post 
today--would allow jurors to take notes and ask questions of 
the witnesses through the judge, which I thought was kind of a 
revolutionary idea. I have been in courtrooms where jurors have 
blurted out things.
    But is that something that you think that would be helpful 
to the system?
    Justice Kennedy. Okay. Whether we like it or not, we have 
the jury system. I like it.
    Mr. Dixon. Right.
    Justice Kennedy. I think it is very important, as I have 
indicated. So we have to make it work. If you have a complex 
antitrust case, you will sometimes have jurors come in and they 
are infuriated that they have been given this case. It is too 
complex. So you have to find ways to assist the jurors.
    One of the ways to do it is to take notes. The other way is 
to let them ask questions of the judges. Another way is to let 
them discuss it as the case proceeds.
    Now, attorneys do not like this, because every attorney 
thinks that the juror does not know anything until the attorney 
has stated everything he or she has to say. And there are also 
certain problems, incidentally, in control. You do not want 
three or four jurors talking about a case in the absence of the 
other eight or nine.
    But we have to do more to make sure that that jury is well 
informed, that it can deliberate on the case in a real 
decisionmaking environment, not an artificial decisionmaking 
environment.
    If somebody came in to this room and locked the door and 
said, ``The 12 of us are going to be together for four months, 
and the only thing we cannot do is talk about the only thing we 
have in common,'' that is a little bit odd. So I think we have 
to take a good hard look at the jury system. It is sacrosanct 
as an institution. It is not sacrosanct as to how it does its 
job.
    Mr. Dixon. Well, one of the things that kind of surprised 
me here--and I guess the----
    Justice Kennedy. I have not seen the report, and I do not--
--
    Mr. Dixon. I understand that. The focus is Washington, both 
the local courts and the Federal courts. It surprised me to 
read in this editorial that one of the suggestions is that the 
judges should thank the jurors personally. I thought that went 
on all the time, that judges thanked them for their services.
    But the comments I hear from jurors is that although we 
think it is a very important ingredient in the judicial system, 
they are treated like cattle. They are not given dignity or 
respect. And when I saw this particular point, that the judge 
had thanked the jurors, I just thought that was just common 
courtesy, and that most judges were doing that. Evidently, 
maybe they are not doing that.
    Justice Kennedy. The Federal system had a program in place 
several years ago to study juror utilization, and we have made 
tremendous advances in the Federal system.
    Rather than to keep the jurors waiting around forever and 
ever, they call them in advance, identify the days they can 
serve, so that they can go home. Good trial judges know that 
they have to have excellent relations with that jury, and that 
this is a marvelous civics lesson.
    Jurors come out and they are sometimes so very impressed 
with that trial judge. It is the closest they will ever come to 
the judicial system. And the Federal system is doing a 
marvelous job of educating the judges, and I would think that 
the increased awareness that state judges have of good public 
relations will serve them well.
    Mr. Dixon. Mr.--excuse me.
    Justice Souter. No, I was just going to echo that. I think 
we got copies of that report a couple of days ago. I looked at 
the summary at lunch the day before yesterday, and I noticed 
the same thing you did.
    I think it was in connection with the reference to thanking 
the jurors that there was a recommendation that, at the end of 
the trial, a judge go into the jury room and be willing to 
answer questions from the jurors. I think that is one of the 
indispensable functions.
    I was a trial judge for five years, and with the exception 
of one case, which I remember, I always sat down with the jury 
when the case was over. I would never tell them whether I 
agreed with their verdict or not. But beyond that, I would 
answer just about anything that came up.
    Mr. Dixon. And certainly thank them for their service.
    Justice Souter. Yes. And, you know, they realize that they 
are not being taken for granted. But a judge learns an awful 
lot from sitting down like that. I would not have missed one of 
those conversations.
    Mr. Rogers. Mr. Taylor.
    Mr. Taylor. Thank you, Mr. Chairman.

               improvements to the supreme court building

    According to the testimony provided by the Architect 
regarding the care of the buildings and grounds account, there 
are six capital budget items requested. It is about $2.8\1/2\ 
million. What are those six items and--or the ones that just 
come to mind? You do not have to name them all.
    Mr. Rogers. If the gentleman would yield, we have the 
Architect waiting to testify.
    Mr. Taylor. Okay.
    Mr. Rogers. We could perhaps deal with him on that, if you 
would like.
    Mr. Taylor. Okay. Well, I was going to complete the 
question, but I will wait and get that from the Architect. 
Unfortunately, I will not be here, so I will leave it in 
writing.
    Justice Kennedy. Well, he has a $22 million estimate, which 
he assumes is going to result from a $2 million study he wants 
to make. And he has this for the complete renovation of the 
basic building systems--wiring, plumbing, electric, roofing, 
and also some additions for perimeter security included in the 
overall budget, although not the $22 million figure.
    Congressman, we are not the technical experts. We leave 
that to the Architect of the Capitol. We have indicated that we 
hope you agree with him, so that our building can be modern and 
up to date and that we can continue to stay in it.
    Mr. Taylor. Well, you mentioned that there have been 5,000 
to 7,000 calls handled by the Clerk's office. Have these 
offices witnessed an increase now, or is there going to be? Do 
you anticipate increasing calls? I do not know all of the 
things that the Architect will be recommending, but I assume it 
has to do with modernization more than repair. I mean, there--
--
    Justice Kennedy. Within our own budget, we have a 
telecommunications position we want filled because these calls 
are increasing.
    You mentioned the web site earlier. Because of the 
immediate availability of our opinions, because of the web 
site, we get many, many more calls, and people now know when 
the oral arguments are going to be in advance, because they can 
pick that up from the web site.
    So the Clerk's office has an automated answering system 
that works extremely well, and the Clerk is our public 
relations arm. We do not talk to the public, or even to the 
attorneys; the Clerk's office does. They receive high marks 
from the attorneys, and I think from the public, on getting 
fast information. And we will continue to be just as up to date 
as we can in that area, Congressman.
    Mr. Taylor. Well, I guess the summation of what I am trying 
to ask is you feel that for modernization for new technology, 
and that sort of thing, this nearly $3 million increase on top 
of the $22 million is warranted. Could it be done this year or 
in 1999?
    Justice Kennedy. I am not so sure that the Architect's 
budget focuses on the specific electronics that we need. He is 
trying to give us the basic system so that we can put inthe 
wire, and he tells us we need that.
    Mr. Taylor. Thank you, Mr. Chairman.
    Mr. Rogers. To both of you, we appreciate very much your 
appearing here this morning. This is a remarkable process that 
our founding fathers dreamt up. There is no place on earth that 
I am aware of where the people's representatives can question 
the highest court of that land on the details that we are 
obligated, we think, to ask you here.
    I do not know any place in the world where we can ask the 
highest court of that land how much pressure are in the tires 
of the vehicles that carry you around, and such mundane things 
as that. It is remarkable that we have this system that we have 
in this country.
     And, number two, it never ceases to impress me, each time 
we have this hearing, with the separate, independent branch 
that the courts represent, meeting in open session before the 
world with another branch who is obligated to finance your 
necessary operations.
    And we will give you, by and large, what you ask. I mean, 
that is, I think, the obligation that we have under the 
Constitution. We feel obligated to find out what it is and 
illuminate what it is you are asking for. But if you say you 
need it, you are going to find an open ear here. And so that is 
sort of the way we look at it, and we hope we are taking the 
right approach toward it. It is sort of a ticklish friction 
point in the founding fathers' democratic machine.
    So we appreciate your being here and answering the 
questions that our members have posed to you. And we trust that 
you will give the Chief Justice and your colleagues our 
respects and greetings.
    Justice Kennedy. We will be pleased to do that.
    Thank you, Mr. Chairman, both for your courtesy and for 
your very thoughtful approach to the constitutional position 
that we are both in. And we appreciate all that you and your 
colleagues do in the discharge of your responsibilities to the 
Constitution of the United States.
    Mr. Rogers. Thank you very much.
    Justice Souter. Thank you.
    Mr. Rogers. Good to see you.
    [Whereupon, at 11:52 a.m., the subcommittee proceeded to 
other business.]


[Pages 36 - 37--The official Committee record contains additional material here.]



                                         Wednesday, March 11, 1998.

                   SUPREME COURT OF THE UNITED STATES

                    CARE OF THE BUILDING AND GROUNDS

                               WITNESSES

ALAN M. HANTMAN, ARCHITECT OF THE CAPITOL
STUART PREGNALL, BUDGET OFFICER
DAN HANLON, DIRECTOR OF ENGINEERING
    Mr. Rogers. How are you?
    Mr. Hantman. I am well. And how are you, Mr. Chairman?
    Mr. Rogers. We are pleased to have with us the Architect of 
the Capitol, Alan Hantman, who has jurisdiction over the care 
of the Supreme Court building and grounds. And we welcome you 
here. We'll make your statement a part of the record, and we'd 
be pleased to hear a summary of that, if you care to.

                           opening statement

    Mr. Hantman. Thank you. I am pleased again to appear again 
before this committee. As you recall, last year was my first 
initial appearance before this committee. I have been Architect 
of the Capitol since February 3rd of 1997. And it's been an 
interesting first year, Mr. Chairman. I've really been immersed 
in learning and evaluating the complexities of the agency and 
the responsibilities of the position.
    As you pointed out, my responsibilities for the judiciary 
branch, as Architect of the Capitol, is for the structural and 
mechanical care of the United States Supreme Court building and 
grounds. And we're really not charged with issues relative to 
custodial care, which is under the Marshal of the Supreme 
Court.
    In general, Mr. Chairman, the budget request for the 
buildings and grounds for fiscal year 1999 amounts to $5.9 
million, which is a significant increase of some $2.5 million 
over the fiscal year '98 appropriation, which was $3,400,000.

                          capital budget items

    The fiscal year 1999 capital budget request is grounded in 
a comprehensive, systematic study, and planning effort with in-
depth involvement of the Court. There are some 13 capital 
projects identified for the Supreme Court building and grounds, 
for the five year period which begins in 1999.
    And the total estimated funding for that five year period 
is currently estimated, before a lot of our studies are done, 
as an order of magnitude of $30.9 million.
    The bulk of that amount, $22 million is attributed to a 
project to provide an overall building improvement and systems 
upgrade, which is the first such comprehensive planned project 
for the building since its construction in 1934.
    The current fiscal year appropriation includes $225,000 for 
a study on the project, with a follow up of $2 million in the 
1999 request to actually do detailed design and construction 
documents.
    The $2 million for fiscal year 1999 is a no year 
allocation, so that we expect to be able to get into 
construction documents the next year, which may go into the 
following fiscal year, when we will actually request 
construction dollars.
    The other important project for the Court is the perimeter 
security enhancement project, which is currently estimated at 
$5.3 million. A preliminary study provided by funds in fiscal 
year 1997 is being completed right now. And we're requesting an 
amount of $500,000 for detailed design and development and for 
preparation of construction documents for implementation of the 
study.
    Of course we're now going to be bringing that study to the 
security committee of the Supreme Court, which is headed by 
Justice Souter, and various support staff there, the Marshal, 
Dale Bosley, and Jim Duff, the Administrative Assistant to the 
Chief Justice.
    So, once we get some feedback from the Security Committee 
itself, we'd certainly be able to come back to the Committee, 
and talk about their reaction, and what portions of this study 
they do, in fact, recognize as being important, and something 
they want to go forward with.
    It's important to note, Mr. Chairman, that the requirements 
in all of our budgets simply do not disappear if they're not 
funded, or if they're deferred. One thing I've been looking at 
throughout the Capitol buildings is that there's a recognition 
that the capital budget is often an easy place to cut.
    Clearly, if you have staff doing service jobs throughout 
the Capitol, it's more difficult to eliminate those service 
functions as they are justified. But capital projects have, in 
fact, been cut down very significantly over the past number of 
years.
    In the legislative branch appropriations hearing, I spoke 
about the same issue of capital budgets in that branch going 
down from $33 million in 1993 down to $14 million in 1997. And 
that's been turned around, gratefully, by the oversight 
committees. And last year, we were provided in fact some $33 
million, to begin to dig ourselves out of the hole that 
deferred maintenance has brought us to.
    A lot of the equipment that we see in the Supreme Court has 
outlived its usefulness. It's gone ten, 20 years beyond its 
expected life.
    And this whole master plan and restudy of the facilities in 
the Supreme Court will point us in the right direction, in 
terms of what we need to address, and how we need to bring that 
60 year old building back into modern standards, relating to 
telecommunications, electrical, and mechanical issues.
    Many of the reasons I felt that there was such a need for 
that was the replacement of the aging building systems, 
technological advances, regulatory compliance requirements that 
we are faced with, and security issues which are very real.
    We have just presented a budget to the legislative branch 
regarding the Capitol itself, and we've put in for a $20 
million perimeter security program there, as well, which is 
being very seriously considered at this point.
    But I assure you, Mr. Chairman, I'll work closely with you, 
and the subcommittee, as well as the Court, between now and the 
time the subcommittee marks up the bill, to take a look at 
what's rational, what's adequate.
    We recognize that this is a time of a zero growth budget, 
and very difficult to obtain funds. But Mr. Chairman, the needs 
are real.
    That concludes my comments. And I'd be more than happy to 
respond to any questions you might have.
    [The statement and biography of Mr. Hantman follows:]


[Pages 42 - 49--The official Committee record contains additional material here.]



                       PHASES OF CAPITAL PROJECTS

    Mr. Rogers. Well, I'll be brief because of the hour, and we 
covered some of this with the Justices, that you, I'm sure 
heard, as we had their hearing.
    But you're asking $2 million for the design of the 
replacement of the utility systems in the Supreme Court 
building. We just gave you $225,000 for what was called a 
schematic study. And I understand that's not yet complete.
    Mr. Hantman. That is correct.
    Mr. Rogers. But you're going ahead with the $2 million that 
you want for the design. Why are you not planning a pause 
between when you see the schematic report, before you actually 
design the project. Shouldn't that be the logical way that you 
would do that?
    Mr. Hantman. In terms of this conceptual schematic report 
itself, your point is certainly well taken. We don't have the 
information in from that study as of yet. But we feel very 
comfortable with the time that we have allotted left in this 
fiscal year, so that we can get started with an actual review 
and approval process, by both the Court and by the oversight 
committees. And that the $2 million we're talking about, Mr. 
Chairman, is no-year funding.
    So that, in all likelihood, you're correct. Some of that 
funding would not be spent in fiscal year '99. But the idea of 
putting another full year between the basic study, and 
requesting the funds to proceed, on the basis of a project 
right now, which is really such in crying need to get done, we 
didn't think we could give it another year.
    Mr. Rogers. Yes. Well now, what will be the approval 
process?
    Mr. Hantman. Well, even with the perimeter security study 
that we are wrapping up right now. It's in final draft. We have 
submitted it to the Marshal, and will have a meeting with the 
security committee, headed by Justice Souter.
    Once they review this information, we would then talk to, I 
would assume--the Chief Justice, and all the other Justices, as 
well, regarding what they are comfortable with, what they think 
is appropriate, relative to, say, the security effort.
    And then, we have to come back to you and the Committees, 
sir. And we have to take a look at what is being recommended 
over here. I think the community needs to be involved in this, 
also, if there are implications that might impact the 
community. Let them know what is being considered here, and 
then come back for actual construction funding.
    Mr. Rogers. Well, taking the perimeter security project as 
an example, it's taken two years from funding of the schematic 
study to get to the design phase. And the schematic study is 
still not complete.
    Of course, the utility upgrade project is an enormously 
much larger project than perimeter security. But why isn't a 
two year time period from schematics to design a more 
appropriate schedule for this replacement project, as it was 
for the perimeter project?
    Mr. Hantman. What we're trying to do, Mr. Chairman, is 
there are so many needs throughout the Supreme Court building 
that have been on hold for a long time, that we're trying to 
take a look at not spending money on an interim basis, and then 
having to re-do it in a final form, down the line.
    Telecommunications clearly is an issue that needs to be 
addressed with respect to the Supreme Court, as it does 
throughout our Capitol Hill campus, as are structural issues 
relative to driveways and sidewalks. We don't want to have to 
do things on a temporary basis, and then come back and re-do 
them in a final form.
    So, we're trying to move the process along. Clearly, the 
review and approval cycle is really what will determine 
ultimately when we actually put a spade in the ground, so to 
speak, and start on projects, providing funding is available.
    Mr. Rogers. When do you anticipate that?
    Mr. Hantman. Relative to the perimeter security project?
    Mr. Rogers. Yes. Perimeter security and the replacement 
project.
    Mr. Hantman. Again, part of that issue will come down to 
review and approval. But we are looking at fiscal year 2000, 
and $4.6 million at this point in time, for the security 
project, the year after the design is done.
    We need the $500,000 next year for the perimeter security, 
to do the detailed design work, assuming that we go through the 
review and approval process.
    If we obtain the $2 million design funds in fiscal year '99 
for the building project. And then, we do have a one year 
hiatus, year 2000 for the actual study for the total building 
improvements. And we're not asking for, in our master plan, any 
significant dollars, until some $5 million in the year 2001.
    So, that is a much longer process, as you well point out, 
Mr. Chairman. And I think we have the breathing room we need 
for that larger project.
    Mr. Rogers. Now, on the perimeter security project, you're 
asking a half million dollars for design of the project. And 
that's based on a preliminary study that hasn't yet been 
finalized. How can you----
    Mr. Hantman. The Marshal currently has a draft of that. And 
we're marking it up, as per his comments. And we're virtually 
ready within the next couple of weeks, to meet with Justice 
Souter and his committee, on that.
    Mr. Rogers. And when can we expect to see a copy of that 
preliminary report?
    Mr. Hantman. I think once we meet with Justice Souter, and 
they give us some indication of what direction they think we 
should be going, we'd be more than happy to come to you, sir, 
with that report.
    Mr. Roger. Well, we'll see it before we mark up, right?
    Mr. Hantman Yes, sir. That will be the case.
    Mr. Rogers. Now, on the larger project, the renovation of 
the building, I'm going to call it, tell us what that will 
entail.
    Mr. Hantman. All the base building systems, Mr. Chairman, 
have been there, and have been in place since the early 30's. 
So, the building's basically open since 1935.
    A lot of those systems have truly outlived their useful 
life. So, we're going to look top to bottom at the facility. 
Not only electrical, mechanical, air conditioning, but also 
telecommunications, life safety systems, ADA criteria, 
accessibility. All of these issues need to be looked at.
    A major issue also, Mr. Chairman, is the fact that the 
building was designed for some 170 or so people, and my last 
numbers, I think, there's some 380 people in that building, 
utilizing spaces that were not originally designed for office 
usage.
    So, we need to take a look at a master plan for where the 
Court is right now, with all its people, how they're using 
their space, and what recommendations might flow from that. As 
well as the building core, and shell, and all of the utility 
services in that building.
    It's a stem to stern review of where that building is, and 
where we need to take it. So that----
    Mr. Rogers. So, it's going to be more than the 
infrastructure. You're going to be looking at possibly re-
configuring rooms in the building?
    Mr. Hantman. I would think that would have to be part of 
any intelligent master plan, Mr. Chairman.
    Mr. Rogers. Are you thinking about putting, just in case 
they ever need it, television co-axial cables through the 
building?
    Mr. Hantman. Well, I think it's up to the Court, Mr. 
Chairman, in terms of what type of communications that they 
want to recommend to this committee.

           DISRUPTIONS AND INCONVENIENCES DUE TO RENOVATIONS

    Mr. Roger. Are the Justices and the Court officials aware 
of the magnitude of these projects we're talking about, and the 
efforts that are going to be required to carry them out, and 
the inconveniences that they're going to face as we go through 
this?
    Mr. Hantman. Mr. Chairman, until one goes through a 
renovation, restoration such as this, I don't think anybody 
really realizes what that's all about.
    Mr. Rogers. Yes.
    Mr. Hantman. Clearly, inconveniencing anybody who has a 
full schedule, they're trying to get their job done, is not a 
happy situation. Whether we're talking about the Capitol 
building, the Rayburn building, any building.
    There will be inconveniences. And one of the things that 
will clearly impact the time frame for doing the project, and 
the cost of the project, will be how many phases we need to 
carve it up into, to minimize the inconveniences to the 
Justices.
    Mr. Rogers. Will they continue to occupy the building in 
full as we proceed?
    Mr. Hantman. The intent at this point is that the master 
plan would certainly look at that. We're not aware, at this 
stage of the study, in terms of what options we have, to 
physically move people around, and have essentially turn-around 
space, where if we had to renovate this room, where would this 
committee meet in that time frame?
    That type of situation. But conceptually speaking, 
depending on the magnitude of the work, and I think it will be 
significant, we will have to have some dislocations during the 
project.
    Mr. Rogers. Would they be better off to move to a temporary 
location elsewhere, and leave you the building to work on?
    Mr. Hantman. We've been working, as you know, Mr. Chairman, 
in the House office buildings, and the Senate office buildings, 
also upgrading them, from a perspective of mechanical, 
electrical, telecommunications, air flow, indoor air quality, 
all of these issues. And we've been addressing the renovations 
almost a wing, or a suite at a time.
    And I think that's inherent in how we would also approach 
the Supreme Court. We have not vacated any of the House office 
buildings. We've done them sections at a time.
    Mr. Rogers. So, you don't anticipate that the Court would 
have to relocate temporarily to another building?
    Mr. Hantman. No. We do not.

           MAINTAINING INTEGRITY OF ORIGINAL BUILDING DESIGN

    Mr. Rogers. Will the appearance of the building change any, 
by either one of these two projects?
    Mr. Hantman. When we talk about the largest project, which 
is the total retro-fit and renovation, we would want to be as 
true and faithful to the original design as we possibly could, 
while we integrate modern utilities and, communications issues.
    With the issues relative to security, there would have to 
be some physical ramifications, of making sure that the 
perimeter of that building was secure. And these are the 
sensitive issues that we need to address with Justice Souter 
and his committee, and the full Court, as well.
    A lot of sensitivities, as you're well aware, Mr. Chairman, 
throughout all of Washington, and very sensitive facilities, 
and how they are subject to potential negative impacts.
    Mr. Rogers. On the perimeter security program, I know you 
don't have the details yet, and it's perhaps some weeks away 
from finalization. But in general, are you talking about 
perhaps some sort of a fence or barrier, on the outside edge of 
the property of the Court?
    Mr. Hantman. The type of elements that we're looking at, 
Mr. Chairman, really are very much in line with what we've 
recommended for the Capitol itself. We've had a perimeter 
security plan there, which deals with sensitivity to the 
original Olmstead walls. And we would do the same thing here.
    Bollards that are sensitive to aesthetics in lieu of pots, 
planter pots, that are ubiquitous on Capitol Hill at this point 
in time.
    So, the same type of themes, of working with the existing 
palette of walls, of stonework, and the introduction of 
bollards, and security measures, are very much in demand.
    Mr. Rogers. When would you expect the perimeter security 
program to be complete?
    Mr. Hantman. We have--our best judgment at this point in 
time is that once we do our design work in fiscal year '99 the 
project itself probably could be completed the subsequent year. 
We have some $4.6 million as a marker in fiscal year 2000 at 
this point in time.
    Mr. Rogers. So, they would be finished, and in place, 
during the year 2000?
    Mr. Hantman. That would be our sense at this point in time. 
We would like to move the design process, the construction 
documents, and the bidding process along. But clearly, basic 
approvals need to be had. And the approvals, as we discussed 
earlier, not only of the Court itself, but certainly of 
oversight committees, and the community, as well.
    Mr. Rogers. Will the appearance of the main chamber in the 
building change, in the renovation of the building?
    Mr. Hantman. We would try to avoid any significant changes 
to the original design, Mr. Chairman.
    Mr. Rogers. But you would modernize the appearance of the 
interior to some degree?
    Mr. Hantman. Well, whatever it takes for us to get the 
electrical, mechanical, telecommunications work in. We would 
try not to take care of--not to modify any significant design 
elements from the original design.
    Clearly, we would like to very much make this a restoration 
project. Keep the full design intent intact. It's a very 
pristine building. And as I indicated earlier, not very much 
has been done to it.
    Mr. Rogers. Structurally, the building is okay?
    Mr. Hantman. We have no indication that there are any basic 
structural problems. Security related issues may have to be 
addressed in that vein, though.
    Mr. Rogers. Once you get into the project, might the 
project change to some degree, when you get the wood off the 
wall, and the plaster uncovered, might you find something that 
you didn't anticipate?
    Mr. Hantman. Electrically, mechanically, I don't think that 
there are going to be any major surprises. I think that the 
major issue will really be how the Supreme Court is currently 
using the building, and how that differs from the original 
intent.
    The number of people they're housing, how those people 
work. I think that will be the biggest impact on what the 
master plan turns up.

                renovations to north and south driveways

    Mr. Rogers. Now, switching gears, you are asking $112,000 
this year, with a similar amount next year, for renovating the 
north and south driveways of the Supreme Court property. Why 
wouldn't it be more appropriate to do that as a part of the 
perimeter security project, since undoubtedly, the driveways 
will have to be incorporated into the security of the building?
    Mr. Hantman. The Marshal has specifically asked us to 
accelerate work on that, basically because it's a safety 
hazard.
    The bricks, in the current form that they're in right now, 
become a slipping hazard for trucks and cars going down those 
ramps. About a third of those bricks have been deteriorating 
the 60-odd years that the building has been in place.
    We need to review that, and take a look at how we can make 
sure that the safety issues are addressed. Perhaps where you're 
going with this, Mr. Chairman, clearly is, we don't want to do 
anything now that will have to be redone in the future.
    Mr. Rogers. Correct.
    Mr. Hantman. And we fully recognize that. In fact, we're 
taking a look at what type of surface material is most 
appropriate. We've been investigating the cast concrete 
elements, and have not been satisfied so far with the types of 
samples we're getting back.
    We don't think it fits with the historic nature of the 
building. And we only have some five inches to work with, 
before we get down to the structural slab. So, the bricks that 
are currently there have a sitting bed, and they're sitting 
five inches above the slab.
    The drains are there. We're trying to avoid replacing 
thedrains. And the entry ramp also has an elevation that needs to be 
relating to the street. And the bottom of the ramp needs to relate to 
the structural slabs down there.
    So, we're trying to work within that five inches. And also, 
get radiant coils in there, so we can, in fact, whether they're 
electrical of hydronic, melt the snow, melt the ice, and avoid 
some of that safety problem that we currently have.
    We don't think, Mr. Chairman, that we will have to redo 
what we do here now. And we certainly would take every effort 
to make sure that that does not happen.

                 site preparations for conduit pathways

    Mr. Rogers. That was my concern. And likewise, you're 
asking $100,000 for site preparation, for conduit, and 
pathways, related to computer cabling. Why could that not also 
be made a part of the renovation project?
    Mr. Hantman. The issue, Mr. Chairman, comes back to, again, 
the immediate need, and the time frame within which a master 
plan could be done, could be funded, could be built.
    The LAN network that needs to be put in is an immediate 
need with the Supreme Court. And we would design it in such a 
way where we would have slack cable, the ability to come on in, 
and replace wiring which is over 60 years old right now, and 
cannot support the technology.
    So, we think that, clearly, what we're doing right now, 
some of it may well be temporary in nature, and be relocated. 
But we're trying to minimize that, and still give the Court the 
ability over the next several years, to be able to react to the 
state of the art, and do their jobs most effectively.

                     replacement of x-ray machines

    Mr. Rogers. Now, you're proposing to replace two of the 
four X-ray machines in the building, is that correct?
    Mr. Hantman. That is correct, Mr. Chairman. Those machines 
don't have a very long life. They are not state of the art any 
longer. And we need to replace them, initially. And we also 
have money down the road, to replace the additional two 
machines that they have. Because, again, that technology 
changes so quickly. And the level of security that is necessary 
in these buildings also has increased.
    Mr. Rogers. That's way down the list, though. It's way down 
your priority list, isn't it?
    Mr. Hantman. Right. We have it under new requirements for 
1999 as $130,000. That is correct.
    Mr. Rogers. Well, you prioritize your requests. And that's 
way down your list. It's real low. I was wondering why it was 
not higher?
    Mr. Hantman. Well, when we look at what's up above it, Mr. 
Chairman, design, roof fall protection, for instance, $10,000 
to do a design on that. That is an OSHA criteria that we need 
to meet, in terms of life safety. It's a regulatory type of 
issue.
    When we look at driveways, that was a life safety issue 
that we just talked about, in terms of trucks sliding down the 
driveway.
    The communication for the LAN system is also very 
important. It's a question of how you prioritize the needs.
    Mr. Rogers. I wouldn't think there was anything more 
important than knowing whether or not a package delivered to 
the Supreme Court had been X-rayed properly.
    Mr. Hantman. That is a very important issue. It truly is. 
But, we did just replace other X-ray machines in 1997.

                       courtroom seating capacity

    Mr. Rogers. Mr. Dixon.
    Mr. Dixon. What is the capacity of the chamber itself? 
Seating capacity?
    Mr. Hantman. We certainly can get back to you, Congressman, 
and give you that specific number.
    Mr. Dixon. What roughly is it? I mean, somebody on the 
staff must have been over there, and I can tell you roughly 
what the seating capacity in this room is.
    Mr. Hantman. It must be several hundred people, at least. 
Staff, and visitors, audience, about 200.
    [Clerk's note.--The seating capacity in the courtroom is 
230.]
    Mr. Dixon. Will you be discussing with the Justices a 
modification of that capacity, making it smaller or larger?
    Mr. Hantman. Congressman, we don't know that at this point 
in time. I think what we need to do, when we go through a 
master plan program----
    Mr. Dixon. Will you be discussing that with them? You know 
whether you're going to----
    Mr. Hantman. Oh, absolutely. In terms of programmatic 
needs, I think how the building functions, and each of its 
major spaces, needs to be part of an interview process with the 
Chief Justice, and the other Justices, as well, to find out 
what's working well, what's not working well, and what kinds of 
corrections they seem to think might be appropriate.
    So, just as we are currently doing a study for a 
refurbishment of the Senate chamber, and we have a 
recommendation to the Speaker to look into a refurbishment, as 
well, of the House chamber. Part of that study would also 
include talking to the leadership, and key people, in terms of 
how things work, and how they might be changed, to more 
appropriately satisfy the needs of the chamber.
    Mr. Dixon. So there could be a possibility that the size of 
that chamber, as far as seating, could be either expanded, or 
to some extent, contracted?
    Mr. Hantman. I think there's a life safety limit to the 
number of people that you'd want to safely put in any room. And 
we would strongly come up with those recommendations, and 
indicate what kinds of limits we have to work within, as they 
relate to egress, should fire or any other event occur.
    Mr. Dixon. Thank you, Mr. Chairman.

                            Closing Comments

    Mr. Rogers. Thank you. Thank you very much for your 
testimony. We apologize for the delay. We've tried to make 
this, as your friendly dentist said, as painless as we can make 
it.
    Mr. Hantman. We thank you, Mr. Chairman. And we will be 
getting back to you once we have our information.
    Mr. Rogers. Thank you. The hearing is adjourned.
    [The questions submitted by Representative Charles H. 
Taylor follows:]


[Pages 58 - 59--The official Committee record contains additional material here.]



                                          Wednesday, March 4, 1998.

                         THE FEDERAL JUDICIARY

                               WITNESSES

JOHN G. HEYBURN II, CHAIRMAN COMMITTEE ON THE BUDGET OF THE JUDICIAL 
    CONFERENCE OF THE UNITED STATES, JUDGE, UNITED STATES DISTRICT 
    COURT, DISTRICT OF WESTERN KENTUCKY
LEONIDAS RALPH MECHAM, DIRECTOR, ADMINISTRATIVE OFFICE OF THE UNITED 
    STATES
ROBERT C. BROOMFIELD, MEMBER, COMMITTEE ON THE BUDGET OF THE JUDICIAL 
    CONFERENCE OF THE UNITED STATES, CHIEF JUDGE OF THE UNITED STATES 
    DISTRICT COURT, DISTRICT OF ARIZONA
RYA W. ZOBEL, DIRECTOR, FEDERAL JUDICIAL CENTER, JUDGE, UNITED STATES 
    DISTRICT COURT, DISTRICT OF MASSACHUSETTS

                              Introduction

    Mr. Rogers.  The committee will come to order.
    We are pleased to welcome the panel today, a distinguished 
panel of jurists from the Federal courts, to defend the fiscal 
year 1999 budget requests for the Federal Court System.
    The panel is being lead for the second year by Judge John 
Heyburn, who sits on the United States District Court for the 
District of Western Kentucky which, by the way, is a good place 
to sit.
    He is here in his capacity as Chairman of the Judicial 
Conference Committee on the Budget. He now has the benefit of a 
year under his belt in that position and a very successful 
year, I might add. It is again a special pleasure to welcome 
you, Judge, to the subcommittee.
    He is joined at the table by Judge Robert C. Broomfield 
from the United States District Court for the District of 
Arizona, also a member of his budget committee; Judge Rya 
Zobel, appearing as Director of the Federal Judicial Center, 
who has been here several times; and, of course, Leonidas Ralph 
Mecham, Director of the Administrative Office of the Courts, 
who has been here for more times than any of us care to admit 
to.
    As you know, fiscal year 1998 was a year in which resources 
were available to meet a number of needs. Fiscal year 1999 is 
the year which the spending caps will still be there from the 
budget deal and will tighten significantly as we seek a 
balanced budget and even a surplus.
    So, this will be a year we will have to work together 
closely and to do our best to determine what resources are 
absolutely required to enable the Judiciary to carry out its 
mission.
    Your written statements will be made a part of the record. 
Judge Heyburn, we will be delighted to hear from you.

                           opening statement

    Mr. Heyburn.  Thank you very much, Mr. Chairman and 
Congressman Skaggs. I would like to make just a very few 
introductory remarks.
    It is again a very distinct pleasure for me to represent 
the Third Branch in the appropriations process and, of course 
as it was last year, to appear before you, Mr. Chairman, for 
whom I have such high regard. It is a great honor.
    These appearances never cease to remind me about the 
majesty and the delicacy of our constitutional system. I was 
reading the Federalist recently and read that James Madison 
said that justice is the end of civil society.
    The founding fathers created a separate and independent 
branch of our government exactly for that very purpose. I come 
representing that branch; one which, in our constitutional 
system, is dependent upon others for the resources to do what 
Madison foresaw for us. I know of, Mr. Chairman, and respect 
your deeper understanding of these relationships.
    In fact, we see that understanding in the cooperative 
attitude of you and your staff as we work through this 
appropriations process. We do appreciate that very, very much.
    To begin with, I want to offer my sincere thanks on behalf 
of the Judiciary for our appropriation last year. As a tangible 
expression of that appreciation, I promise our continued 
careful stewardship of those funds.
    I am also pleased to tell you that this year our overall 
budget request is for a 6.7-percent increase over obligated 
funds for last year. This is our lowest requested increase I 
believe in 20 years, but it could be even longer. I do not 
know.
    Our job is law enforcement. That work is ever increasing. 
We are asking only for the limited funds to do that necessary 
job as the public demands. We also recognize, of course, our 
continuing duty to be more efficient.
    Our Economy Subcommittee has been leading those efforts. We 
have talked about that in the past. We think we have been 
successful in those areas. I must say that you, and Congressman 
Mollohan, and the other Members of this committee can share in 
the credit for the progress that I think we have made.
    A couple of years ago, you passed the Prisoner Litigation 
Reform Act which seems to be reducing the number of frivolous 
prisoner lawsuits. Partly as a result of that, we are 
requesting fewer personnel this year in our budget for pro se 
law clerks, and fewer personnel for the District Court clerks' 
offices around the country.
    The reduced need for staffing is, in part, a result of our 
ability to do that job, but it is also directly related to the 
legislation that you have passed, which we think is in the 
interest of justice and in the interest of economy.
    As another example, you may recall last year we had an 
extended conversation about the escalating cost of defender 
services and what we could do about it. We were both concerned 
about it.
    Your concern and prodding has encouraged us to re-double 
our efforts. We commissioned Coopers and Lybrand to do an 
independent study. This was a study which your legislation 
initiated.
    That study pretty much confirms what I told you last year. 
It is an interesting study and I will certainly be open to 
questions about that as we go along.
    Another area we discussed last year was that of courthouse 
security where you mentioned that the cost of that program 
increased about 20-percent each year in 1997 and in fiscal year 
1998.
    I am glad to report that this year we are requesting only a 
6.9-percent increase in courthouse security. Most of that is 
related to normal increases of ongoing operations.
    Also, in response to inquiries from yourself and from your 
staff, we are continuing to review our standards and the 
application of those standards to particular courthouses.
    We all wrestle with the question of how much security is 
enough security. Everybody wants our courthouses to be safe. No 
one should fear working there. Our citizens should not fear 
going there to be jurors. We are committed to providing the 
necessary, but also the appropriate security for our 
courthouses.
    I also want to convey my sincere thanks on your actions on 
the COLA last year. We think you should include provisions for 
a COLA for yourselves and for the Judiciary again this year. 
From my own personal experience and I think from the experience 
of working men and women around the country, I think they have 
grown to accept the fact that COLAs, in general, small yearly 
COLAs, are an appropriate and necessary part of compensation.
    From my view, I am no longer the political expert that I 
once tried to be, but it seems to me that the reaction or, it 
might be better put, the lack of reaction to what the Congress 
appropriately did last year proved that point.
    There are a couple of small accounts that we represent that 
also deserve some mention because they are vital to the 
Judiciary. The Federal Judicial Center; Judge Zobel is here. 
She can, of course, answer any questions. Their funding has 
remained about the same for the last five years. I think you 
will agree from their submission that they have worked hard to 
find alternatives to travel-based education.
    They are asking for only a 3.1-percent increase. They are 
doing a bigger job now than they were five years ago with about 
the same amount of funds. I would encourage you to grant their 
request.
    The Administrative Office of the United States Courts is 
the heart of our administrative and policy apparatus. In fiscal 
year 1999, the AO is going to be implementing some new 
automated systems.
    These systems will enhance our operations in the courts. 
The AO's ability to manage these systems is going to be 
critical to some of our plans to gain greater efficiencies. 
They are also asking for a modest increase.
    I would encourage you to give them the increase that they 
have requested. One last item I will touch on briefly. It is 
sort of a technical matter.
    Last month, Director Mecham and I sent you a letter 
requesting some language be included in the supplemental 
appropriations bill authorizing the Judiciary to establish 
statutory certifying officers. This goes along with our concept 
of decentralized budgeting and management which has proved so 
successful. We believe this language will give some additional 
technical authority to our local managers at the court level 
and is needed to make financial operations of the courts more 
efficient. We would appreciate your consideration of it.
    I will certainly submit my written testimony and that of 
Judge Zobel, and Mr. Mecham for the record. Also, on their 
behalf I would also like to submit the written testimony of 
Chief Judge Haldane Robert Mayer of the United States Court of 
Appeals for the Federal Circuit, and Chief Judge Gregory Carman 
of the United States Court for International Trade.
    Mr. Heyburn.  That completes my brief statements.
    I look forward to answering any questions that you might 
have along with my colleagues who are appearing with me.
    [The statements of Judge Heyburn, Mr. Mecham, Judge Zobel, 
Judge Mayer, and Judge Carman follow:]


[Pages 65 - 154--The official Committee record contains additional material here.]



                            carryover funds

    Mr. Rogers.  Thank you, Judge, very much. That was a good 
statement. You covered a number of the points that I was going 
to ask about. I will try to re-mention some of them.
    In the current fiscal year, we provided $175 million less 
than your overall request for the Judiciary last year and $159 
million less for the major salaries and expense account.
    Yet, you are able to fund all of that activity that you 
originally had requested and then some, to be frank. How were 
you able to do that?
    Mr. Heyburn.  We discussed this very thing last year, as 
you know, and every year we request the amount that we think we 
need. Every year, different things happen. Some things happen 
to increase our expenses.
    Some things happen to reduce our expenses. Last year, of 
course, the number of confirmations of judges was much less 
than we expected. That resulted in a significant savings of 
dollars.
    There was some space that we anticipated coming on that did 
not come on. That resulted in some savings. These are things 
really that are completely beyond our control.
    Also, once we get an appropriation, we allocate those funds 
to the local districts. They have broad authority to spend 
those resources.
    As I mentioned last year, we do not view it as our job, to 
spend every dollar you give us in order to justify the amount 
that we received.
    Last year, we got back from the courts, at the end of the 
year, about $38 million, I think it was. Those were funds which 
the courts, in their best judgment, believed were not 
necessary.
    Those funds were put back in our financial plan and were a 
part of the carryover that, of course, significantly reduced 
the appropriation that you were required to give us to fund our 
operations for this coming year.
    Mr. Rogers.  On that carryover point, since your original 
1998 request was submitted, the planned obligational level for 
the major court salaries and expenses account decreased by $83 
million.
    The carry over from 1997 increased from $35 million to $183 
million. You are already planning to carry over $110 million in 
to fiscal year 1999. What further growth in carryover, and 
changes in planned obligational levels for fiscal year 1999 can 
we expect?
    Mr. Heyburn.  Well, we cannot expect any more at this 
moment. I think your staff will confirm. What we are attempting 
to do in our FY 1999 request is give you estimated carryover 
earlier than we have in the past. You mentioned that we started 
out last year with predicting a carry over of $35 million. It 
was not as though it was a jump, of course, from $35 million to 
$180 million. It was the process that evolved throughout the 
year. This year, again to our credit I think, we have been able 
to estimate, much earlier on than we did last year, the 
existence of a potential carryover.
    Again, it is just a prediction at this point. I think the 
number is around $110 million that we have identified at this 
particular time, which is much earlier than we have been able 
to predict that kind of a carryover.
    We view it, again, as part of the cooperative spirit 
between our staff and your staff. We are going to try to keep 
you advised at the earliest possible time of whether the 
expenses are more than or less than we might otherwise have 
predicted.

                           bankruptcy filings

    Mr. Rogers.  The largest program increase in your S&E 
account in the budget is for 596 additional bankruptcy 
officials at a cost of $31 million.
    Mr. Heyburn.  Right.
    Mr. Rogers.  Presumably based on continued increase in 
bankruptcy filings.
    Mr. Heyburn.  Yes.
    Mr. Rogers.  Yet, your budget also assumes a decrease in 
bankruptcy filing fees, presumably based on a decrease in 
bankruptcy cases. Can you help me decide what to do?
    Mr. Heyburn.  Yes, I can.
    Number one, in the last fiscal year we had a huge increase 
in bankruptcy filings. I think it was about a 25-percent 
increase in bankruptcy filings.
    Because some of these court filings are volatile, they may 
go up one year and then may go down, although in the case of 
bankruptcy, they have been steadily increasing and they are at 
an all time high.
    Under our staffing formula, we do not request from you, nor 
do we staff the bankruptcy courts in this instance, at the full 
level of an increase. We phase it in over a two-year period.
    That is good for us and also good for you. Also, it is 
probably not possible to hire 1,500 bankruptcy clerks in any 
one year. So, what is happening in FY 1999 is, in effect, the 
second half of the phase-in begun in FY 1998 based on FY 1998 
estimated workload.
    So, the bankruptcy filings have increased 300,000, roughly, 
over two years. We are just now catching up to that. We think 
that is good management. It is more efficient. It is better for 
the bankruptcy courts.
    So, that is part of the answer. Also, of course, as your 
staff is aware and as I am sure you are aware, the estimated 
staffing needs for fiscal year 1999 are not based on future 
projections of bankruptcy filings, but based upon the actual 
filings for fiscal year 1998.
    For instance, if actual bankruptcy filings by September of 
1998 are actually going down then, as we have in the past, our 
budget request will be revised downward to reflect the staffing 
formula.
    Now, having said that, the projections that we use to 
determine the fees are based upon the projected number of 
bankruptcy filings each year. So, there is a slight difference 
there between what we use to project the fees and the actual 
number that we use on the staffing formula.
    It is a little bit of a technical answer. I suppose we 
could do it a different way, but it is based upon what we 
believe to be the best available information in order to 
satisfy your particular staffing needs and to anticipate fees 
from bankruptcy filings.
    Mr. Rogers.  So, in case the actual number of filings start 
going down, we will not have to provide the full increase that 
you have requested.
    Mr. Heyburn.  That is right. I mean the proof is in the 
pudding. This year we are asking for in the request to you, I 
believe, 203 fewer district court clerks because they will have 
fewer cases. Now, they are going to have to make some 
adjustments. Weare asking for fewer pro se law clerks because 
of the declining number of prisoner pro se cases.
    That is a part of the reason. Just to amplify, let us take 
bankruptcy clerks as an example. Although for the last four or 
five years, there has been a steady climb up in filings, 
bankruptcy courts know there could be a downward fluctuation. 
Therefore, they are naturally a little bit resistant to put on 
staff too quickly.
    That is a part of the reason why we get some of the funds 
returned at the end of the year. Instead of putting on 
personnel, they may do a little bit more travel. Instead of 
putting on another person which would be difficult to delete 
from the staff, the courts may elect to spend their funds in 
another way or return them.
    So, there are a lot of adjustments they make in order to 
avoid continuing costs. That is a part of the way the 
centralized management has, we think, worked so well for us.

                          habeas corpus reform

    Mr. Rogers.  Well, I was especially pleased to see the 
Chief Justice's recent annual report approving of this 
Subcommittee's and the Congress' action to decrease the 
workload. He said that we acted wisely, which I agree with, in 
the habeas corpus reform which we passed in 1996.
    He said in his letter that by June of 1997, that had led to 
a decrease in habeas corpus applications well below the average 
number of monthly filings during the 15 months before the 
enactment of that law.
    Prison litigation reform, which passed as a part of our 
1996 appropriations bill, he says has led to a 46-percent 
decrease in civil rights filings from April 1996 to February 
1997. Are those figures accurate to your knowledge?
    Mr. Heyburn.  Yes. I think they are. The prison litigation 
reduction has been very dramatic. The habeas corpus reform has 
more complicated affects because it set a statute of 
limitations when the new legislation took effect.
    We had a huge spike right before the statute of limitations 
when there was a record number of habeas cases filed. Since 
then, there has been a decline. What I personally think is that 
we are really going to see this effect over a period of time.
    A part of what the legislation does, as you know, is 
prevent the filing of numerous habeas cases. So, we are going 
to see, I think, more of a gradual decline over a period of 
years as opposed to the much more dramatic decline that we saw 
with the Prisoner Litigation Reform Act.

                         gsa security surcharge

    Mr. Rogers.  Now, Director Mecham, the budget request 
contains a $16 million item entitled General Services 
Administration Security Surcharge. What is that? What 
information do you have from GSA regarding their notice that 
you are expected to pay that?
    Mr. Mecham.  First of all, we do not have adequate 
information upon which to make the payment. We are assuming 
they are dealing with us in good faith. We have requested 
additional information.
    It arose because of an extensive security survey which was 
made following the Oklahoma City bombing case. They took a look 
at security needs all over the country. This occasioned an 
increase in costs.
    GSA believes that our share is $16 million. We feel that 
they ought to provide a little better justification than we 
have. We will get that to you as soon as we have it.
    Mr. Rogers.  Is this supposed to be for physical 
construction or personnel? What is it?
    Mr. Mecham.  As I said, it dealt with both. I think the 
chairman has better information.
    Mr. Heyburn.  My impression was it was both and that these 
were additional expenses which will be charged to, not only the 
Judiciary, but to other government entities as well.
    Mr. Mecham.  Right; Executive Branch agencies, and joint 
use facilities as well.
    Mr. Rogers.  But you are not going to pay it until you know 
more about it.
    Mr. Heyburn.  That is right.
    Mr. Mecham.  Correct.
    Mr. Rogers.  Good. Mr. Skaggs.
    Mr. Skaggs.  Thank you, Mr. Chairman.
    Maybe I have been inattentive in our last proceeding here, 
but I have not noticed our new microphone stand until just now. 
I wondered whether our staff had gotten a duct tape grant from 
the NEA.
    Mr. Rogers.  We only reserve the fine things for the 
courts.
    Mr. Skaggs.  That is right.
    Mr. Rogers.  That is our best.

                       cost of living adjustments

    Mr. Skaggs.  It is certainly award qualified, if not award 
winning.
    You chose your words, I think, carefully when you were 
talking about COLAs in suggesting that we might, again, include 
provisions.
    Of course, we do not have to include any provision for us. 
We just have to include a provision for you. That is, I think, 
no doubt troubling to you and problematic, I think, to me 
anyway.
    I just wanted to give you an opportunity to state what I 
suspect is the Judiciary's position on reconciling the legal 
treatment of your COLAs with the legal treatment of our COLAs.
    Mr. Heyburn.  Our position is, of course, we ought to 
repeal section 140 of P.L. 97-92 and then we would all be on 
the same playing field. I recognize that this is not 
necessarily a legal question. It is a matter of history the way 
the thing has developed over a period of years.
    We think the repeal of section 140 is the appropriate way 
to go. I recognize there are various Members of Congress who 
feel, for whatever reason, they like it the way it is. We also 
understand that it is unlikely that Congress is going to give 
itself a COLA and not give one to the Judiciary.
    So, certainly I have my preference as to how the law should 
read, but, you know, there are certain realities that we bow 
to. You are the legislators. We have confidence that you are 
going to treat us fairly and that you will treat yourselves 
fairly.
    We have made our recommendation. I do not want to come on 
too strong on a point that I really think is within your 
purview.
    Mr. Mecham.  Can I make one amplification of that?
    Mr. Heyburn.  Maybe he will come on strong.
    Mr. Mecham.  I will not come on strong here, but I work for 
judges. The 1989 Ethics Reform Act makes Members eligible for a 
COLA unless someone takes some action to either amend existing 
law, or place a prohibition on an appropriation bill to stop 
you from getting it. Members can receive a COLA automatically, 
whereas judges cannot, because of section 140 of P.L. 97-92, a 
provision that says judges have to have some sort of 
affirmative action to receive a COLA and that has to be in a 
public law. This calls unneeded attention to the COLA issue.
    Mr. Skaggs.  Right.
    Mr. Mecham.  This means it gives those who do not want 
Members of Congress to have a COLA an opportunity to offer an 
amendment to the judges COLA provision stating that Members 
should not get a COLA.
    So, if I were a Member, I would rather not have section 140 
on the books. I would repeal it and put the judges and the 
Members on the same playing field.
    Mr. Skaggs.  No extra charge for your political 
consultation.
    Mr. Heyburn.  I was never able to charge for my political 
advice before.

                           judicial vacancies

    Mr. Skaggs.  Give us a sense, maybe from your several 
districts, of what vacancies exist, how long they have existed, 
and what difference they have made in your daily lives.
    Mr. Heyburn.  First of all, I will speak from the position 
of a district which has no vacancies. I have both perspectives 
because I am from a district which had two vacancies for about 
five years which, when you only have five judges, is a lot.
    During that time, we went from having literally no cases 
that were over three years old to almost 300. Now, with a full 
complement of judges and working hard, we have reduced the 
number of cases that are over three years old down to 50.
    So, we feel like we are making progress and that, with the 
right number of judges, we can do a good job. There are many, 
many districts around the country who have a full complement 
and are in good shape.
    I think there are at least 20 districts around the country 
where the vacancies have been pending for 18 months. Having 
been in that situation once before myself, I can tell you that 
the quality of justice suffers.
    The timeliness of attention to motions suffers and the 
litigants and the citizens suffer. I think Congress needs to be 
attentive to where those circumstances exist. In my view, if a 
nominee is put forward, act on that nominee. It is your 
prerogative to not confirm that nominee.
    Mr. Skaggs.  The Senate's prerogative.
    Mr. Heyburn.  The Senate's prerogative, exactly. The others 
may have something.
    Mr. Skaggs.  Judge Broomfield, are there vacancies in your 
district?
    Mr. Broomfield.  We do not have any vacancies in our 
district, but I echo what Judge Heyburn has said. I agree with 
him completely.
    We are, in our district, about the eleventh busiest out of 
the 94 districts. On the criminal side, we are the fourth 
busiest district. We have almost twice as many weighted cases 
per judge than the national average.
    If we did have vacancies, our judges' weighted caseload 
would be out of sight. So, the fact that we have all of our 
complement is just barely causing us to be able to keep our 
head above water.
    Mr. Heyburn.  In Judge Broomfield's district, I think their 
average case load is something like 700 cases. Is that right?
    Mr. Broomfield.  Over that; closer to 800.
    Mr. Heyburn.  Our district actually mirrors almost exactly 
what the average is. We have about 400 cases per judge. I 
cannot imagine 700. So, we feel like we are in reasonable 
shape. I can understand why the District of Arizona must be 
working awfully hard to keep their head above water.
    Mr. Skaggs.  Judge Zobel, any from your area?
    Ms. Zobel.  Well, this is a rare trio because my district, 
which is Massachusetts, also has no vacancies at the moment. 
However, like Kentucky, we had out of 13 judgeships, five 
vacancies until they were filled about four years ago. So, we 
had exactly the same problem.
    Our caseload climbed. Our old cases climbed. Now, we have a 
manageable load. Indeed, because of the statute that allows a 
successor to be appointed while I am director of the Center, we 
have two people sharing one seat at the moment, although I am 
not exercising the prerogative to judge, except in some ongoing 
civil cases and criminal cases with fugitives that are caught 
while I am down here.
    Mr. Skaggs.  I assume the major impact is on your civil 
case load. The criminal cases have to move because of the 
constitutional right to a speedy trial.
    Ms. Zobel.  That is true.
    Mr. Skaggs.  I mean, the old cases are complicated civil 
matters.
    Ms. Zobel.  That is right and less complicated too. I mean 
they are just old cases and, you know, sometimes you simply 
cannot get to them.
    Mr. Mecham.  Judging statistically, we had 87 vacancies as 
of the first of March; 32 of these vacancies have existed for 
over 18 months. I would suppose the Ninth Circuit, from which 
Judge Broomfield hails, is one that has a record number of 
vacancies. There are nine Circuit vacancies out of their 28 
complement and 10 District Court vacancies.
    Some of the courts are hurting. I hear horror stories from 
places like Nevada or Alabama, or places where there are 
incredible case loads. There are some problems out there.

                     increased federal jurisdiction

    Mr. Skaggs.  Our budgetary windfall is a loss to justice, I 
guess. Do any of you care to make any comment?
    My question really relates to the impact of the expansion 
in Federal court jurisdiction that has especially come with 
some of our changes in the criminal law over the last few 
years. Where there were some projections of a pretty terrific 
effect from some of those changes in law. I am wondering what 
was actually experienced. I think we will start with the 
director this time.
    Mr. Mecham.  I yield to the Chairman on this one. I can 
speak, but he can speak with authority.
    Mr. Heyburn.  From personal experience, we have not seen 
too much change in our district. As Chairman of the Budget 
Committee, one tremendous impact has been the legislation that 
has increased the number of Federal capital crimes, for 
instance.
    About four or five years ago, we may have had ten capital 
prosecutions pending at one time in the Federal courts. Now, 
there are over 150.
    A part of the consequence of that is not only the 
tremendous time and effort that it takes to organize and try 
such a case, from a judge's point of view, but from a budgetary 
point of view, we have seen it reflected as one of the 
significant drivers of increased defender cost.
    So, that has been a big factor for the Judiciary. All we 
have said every time we have come here is that when Congress 
passes new legislation, it is making a choice. We are here to 
do the job that Congress and the Constitution assign us.
    You do make choices. As long as the resources continue to 
increase, then we can do every job that Congress asks. In a way 
it is a complement that you think the Federal courts do such a 
fine job, you want to give us more work.
    I know that your committee is not the one that decides what 
that job is. You just have to be responsible for finding the 
resources when someone else decides that Federal courts should 
do a much bigger job. So, it is a difficult task for you. We 
recognize that.
    Ms. Zobel.  Let me answer it from the point of view of the 
Federal Judicial Center rather than the District of 
Massachusetts. We anticipated, particularly in the area of 
capital cases, that there would be a great need for training.
    We have, therefore, instituted a number of programs to help 
judges deal with these cases. We have had training programs in 
circuit workshops. We have had training programs in our major 
district court workshops.
    We are doing research on the capital habeas side, on 
various programs that a number of circuits have to assist them 
in dealing with it. The problem for us is not merely the 
increase in jurisdiction, but also sometimes, with due respect, 
the difficulties of interpreting the laws.
    There are many times when it is very unclear what it is 
that you intended for us to do. So, we have had training 
programs on what we think you meant for us to do as well. All 
of that, I hope, has helped the judges to deal more 
efficiently, and to deal better, and more justly with these 
cases.
    So, it is both in the area of education, as well as in the 
area of research that we have tried to respond at the Center to 
this increase, and I think successfully so.
    Mr. Skaggs.  It might be advantageous for both sides if 
there was a representative of the Judiciary in our freshmen 
orientation program for new Members of Congress, just to 
seriously give even an hour overview of what imprecision in 
statutory drafting means in your lives, in crafting jury 
instructions and all of the rest.
    Mr. Mecham.  Would you believe we have asked for that 
privilege, both on the Senate and House sides. We have been 
respectfully said no to.

                                 jurors

    Mr. Skaggs.  Well, I am interested to hear that. Even 
though I am not going to be back next year, I hope to be 
helpful in the rest of this year as we plan for the new Members 
that will be coming in. So, I will see if we cannot make some 
progress on that.
    Just one final question. I am curious as to whether you 
make it a practice to have post-trial discussions with juries.
    If so, have you noted any particular trend in juror 
attitudes toward the justice system over the last several 
years? I think that is one place where we can certainly take 
the temperature of civil society in some way.
    Mr. Heyburn.  Since I became a judge, now just five and a 
half years, I have talked with every jury after the case is 
over. I started out doing it because I thought it would help me 
and not necessarily help them.
    I wanted to find out whether there were things that I was 
doing which confused them. Whether the instructions we gave 
them were confusing or whether there was something about the 
process that separated them from what their objective would be, 
which is to listen to the facts and come to a fair conclusion.
    It has been a fascinating experience for me to talk with 
them. Many of them are very apprehensive before they become 
jurors. My impression has been that they are uniformly 
impressed with the majesty of the occasion, the seriousness of 
the occasion, and they take their job so, so seriously.
    They make very good suggestions about how the process could 
be better, and sometimes how judges could be clearer, and often 
times how the lawyers could be better. So, it has helped me 
when, for instance, a lawyer wants to put on three or four 
witnesses, which essentially prove the same thing.
    I can tell the lawyers that I talk with jurors. They do not 
like it when lawyers cover the same thing four or five times. 
So, it helps me to speed along the trial.
    I also think that from time-to-time there is concern 
aboutthese high profile cases and concern about their own privacy. So, 
we do everything that we can to allay their fears that somehow they are 
going to be set upon by lawyers, or the press, or whatever and 
questioned and have to answer questions they do not want to.
    So, it is a good calming experience for them. I think they 
appreciate what I have done. They are also interested in 
whether you think they have done a good job. So, I think it is 
important to have the judge tell them, to confirm, that they 
have done a good job.
    When I tell them that I think they have tried their hardest 
and that I am glad I did not have to be the one to make the 
decision that they had to make, it makes them feel better. So, 
I have been tremendously impressed by my experience with 
jurors.
    It has given me great confidence in how much wisdom they 
collectively bring to a decision. Sure, you question a decision 
every now and then, but then you think, well, I wonder how I 
would do if I had to be the one who had to decide who was lying 
and who was not lying? I have been very impressed.
    Mr. Skaggs.  Mr. Broomfield.
    Mr. Broomfield.  I think you struck on the key or the core 
of the American system of justice. The citizen, as a juror, 
really is the hallmark of our society. We do not have to vote 
in this country, but we ought to serve on jury duty when we are 
called. I have been struck by the great willingness of people 
to serve on juries, even long ones.
    Now, there will be people who will ask to be excused. But 
so often, they will simply ask to be deferred to a later date. 
They do not try to get out of jury service. They truly take it 
seriously. It really is the hallmark of our society.
    I have served on jury duty. It is an amazing experience. If 
you never have, you ought to, if you ever get the chance. It is 
really the key to our system. It is what causes the people to 
have respect for the judicial process; the fact that so many of 
them are a part of it as jurors.
    Ms. Zobel.  I have not tried a jury case for three years, 
since I have been here. Before that, I would always speak with 
the jurors afterwards.
    One of the things I have learned--we have at the Center yet 
another training program. It teaches judges how to be clearer 
in communicating with juries. We did a program last year in 
conjunction with NYU that was directed just to that and also 
included it in our big programs for the district judges.
    It was very interesting. People speak a different language 
now. Their attention span is different. As a result of being 
used to computers and videos, jurors have a very different 
reaction to the way people communicate to each other. The 
Center has tried to translate that into teaching judges how 
they need to speak with jurors.
    I, too, was called as a juror here. I spent the whole day 
and was the last person bumped off the jury. I was so crushed.
    I understand that in the District of Columbia, you get 
called about every two years because there are so many cases 
and so few citizens. So, I fully expect to be called again and 
I look forward to doing my duty in that capacity as well. Thank 
you.
    Mr. Skaggs.  Thank you, Mr. Chairman.
    Mr. Rogers.  On that last point, I am reminded that there 
was a story recently that the reason that there are so few 
jurors called here is because they have such a horrible address 
list that they cannot get through but just a few people, who 
continuously serve on juries in DC.
    Ms. Zobel.  Well, that may be. So, I have a chance yet.

                           judicial vacancies

    Mr. Rogers.  Now, briefly, about the vacancies question.
    In 1997, there was an average of 90 vacancies. In 1987, ten 
years ago, there was an average of 48 vacancies. So, we are not 
really far removed from what it was 10 years ago.
    In fact, in 1991, there was 136. In 1992, 126. In 1993, 
116. In 1994, 111. So, we are not really far out of line here 
in our vacancies. I do not know who is making all of the noise, 
but they should have been making that noise five, six or seven 
years ago when there was a huge number of vacancies.
    We have now an average of 724 active Article II judges 
which, except for a couple of years, is a record number. We 
have a record number of senior or retired judges, 469, which is 
up from 298, 10 years ago.
    Those senior judges are productive people, very productive 
people. One vacancy is too many, but what is all of this noise 
about having a huge, abnormal number of vacancies? Does anybody 
have a comment?
    Mr. Mecham.  May I say that the Chief Justice has spoken 
out virtually every year since 1988 on the subject.
    Mr. Rogers.  Well, he is wrong. He is wrong.
    Mr. Mecham.  We have had a good many vacancies in most of 
those years, particularly when the Biden Judgeship bill was 
passed. In 1990, there were 85 new judgeships created, as I 
remember.
    Mr. Rogers.  Look at the chart. I mean the chart is as 
plain as your hand.
    Mr. Heyburn.  See, Mr. Chairman, you have the privilege of 
saying the Chief Justice is wrong and we do not.
    Mr. Mecham. My point was he has consistently spoken on the 
need to fill vacancies for the 11 years he has been Chief 
Justice.

                             court security

    Mr. Rogers.  It is a free country. He can speak what he 
wants. The truth is that the number of vacancies is not 
abnormally high. In fact, it is probably lower than average, 
given the two-decade count.
    Now, last year we gave a large increase to the court 
security appropriation. We went up $41 million; from $127 
million to $168 million in one year. A large part of that 
request was justified on providing funding for 426 new court 
security officers.
    That was later revised to 387, including 274 to bring 
existing court facilities up to the minimum standard in court 
security. We erred on the side of being generous on court 
security. I think that is the responsible thing to do.
    Well, this year, the budget has an increase of $12 million 
more and another 168 new court security officers, including 78 
more required to bring the existing court facilities up to the 
minimum staffing level for court security.
    Either that program is being poorly managed or somebody is 
not being straight with us in representing what is required to 
get existing court facilities up to standard. Cannot we have 
some rationality in that?
    Mr. Heyburn.  No one would like to find that rationality 
more than myself, Mr. Chairman. I think we are getting to that 
point. Let me just put it in a little bit of perspective.
    Number one, we are happy that after two years of 20-percent 
increases, we are asking for only a 6.9-percent increase this 
year.
    Total budget obligations that we are asking for is $179 
million, a net $12 million increase over last year. Now, about 
$11 million of that is for adjustments to the base, such as 
salary increases for existing employees. This is offset by a 
$16 million reduction to the base for non-recurring equipment 
and other expenses.
    For program enhancements we request an increase of only 
$4.7 million for the additional CSOs. So, it is a small dollar 
amount. We are asking for $11.7 million for new equipment. Of 
the 168 new positions that we are asking for, 78 are positions 
that we thought last year were over the standard.
    After the Marshals Service has reviewed the particular 
facilities, they have determined that they are within the 
standard. So, those were, really through a mix-up last year, 
not requested.
    This year we are requesting it. So, that is 78. The other 
additional 90 spots are to cover new facilities that we 
anticipate coming on-line this year. So, that is what it is. I 
know there has been some confusion in the past.
    At the prodding of your staff, we are going to be reviewing 
the numbers that we have assigned and the numbers we get from 
the Marshal's Service based on the standards and see if we have 
applied the standards correctly.
    We know the numbers have shifted somewhat. We think that 
when the dust settles that the numbers will come out to be and 
are consistent. It is pretty clear what we are asking for this 
year and the reason why we are asking for it. We think the 
program is now headed in the right direction.

                           defender services

    Mr. Rogers.  Judge Heyburn, you or the Director or you may 
both respond. As you know, we have been concerned about the 
rising cost of defender services, as have you. It has grown 
from an appropriation of $240 million in 1995 to this year's 
request of $361 million.
    Mr. Heyburn.  It is $391 million, actually, in obligations. 
I hate to tell you we are asking for $30 million more.
    Mr. Rogers.  No, you get that $30 from other sources.
    Mr. Heyburn.  That is true. I am talking obligations. You 
are talking appropriations.
    Mr. Rogers.  The appropriations level is $361 million.
    Mr. Heyburn.  Yes. That is correct.
    Mr. Rogers.  At any rate, that is a 50-percent increase in 
four years. We now have a weighty report on increases from 1995 
to 1997 done at our request, which in addition to increasing 
numbers of representations, points to changing case mix, and a 
handful of extraordinarily costly capital prosecutions as the 
reasons for the increase.
    Mr. Heyburn.  Right.
    Mr. Rogers.  Now, what is being done to focus in on those 
costly cases that really drive up the cost to bring this thing 
under control? We cannot afford to pay what this thing is 
costing us. It is going up too quickly.
    Mr. Heyburn.  Well, number one, I believe that the Coopers 
and Lybrand report shows that the program is not out of control 
at all. In fact, it shows good management.
    If you exclude the cost of the capital cases, the average 
annual cost of a case has increased one-percent or less a year 
over the last five years or so. So, it is just about a flat 
line. The average annual cost of a capital habeas defense has 
been a flat line. The increase in cost, as you have properly 
suggested, is the result of a number of very clear factors: the 
increased number of representations, the change in case mix, 
and the tremendous increase in the cost of these capital 
prosecutions.
    After discussions with this committee last year, we began 
to take a number of actions which we hoped would havean impact 
on those capital prosecutions.
    The FJC is developing plans for better education for judges 
because after all, when judges get capital cases, often times, 
it is the first time they have ever had to try a capital case, 
unless they have been a state judge.
    We have instituted a program of budgeting for these high 
profile cases. Now, we can already tell you and I think you 
have the graph in my testimony that the average cost of capital 
prosecutions last year got to a high of $150,000 per case. It 
is already being reduced. It has already been reduced now by 
about 50 percent. It is below $100,000.
    Mr. Rogers.  The big problem is the Ninth Circuit. Let us 
just be frank about it. Can we be frank about that?
    Mr. Heyburn.  Yes.
    Mr. Rogers.  For capital habeas corpus cases, the report 
says that the Ninth Circuit--California districts 
particularly--account for 48 to 63 percent of all panel 
attorney capital habeas representations. But it has 60 to 70 
percent of the costs. Now, what is going on in California that 
is not going on in the rest of the country?
    Mr. Heyburn.  Well, I will give a very brief answer. Then 
Judge Broomfield, who is from the Ninth Circuit, not from 
California I might add, has a perspective on that.
    Mr. Rogers.  I know of the non-California members of the 
Ninth Circuit; their attitudes toward California.
    Mr. Heyburn.  I will let Judge Broomfield speak for himself 
on that. Of course, the Coopers and Lybrand report identified 
the problem. A part of the answer, and I am not suggesting in 
any way, shape, or form, that this is all of the answer.
    A part of the answer may have to do with the particular way 
that capital cases are tried in the California State Courts. 
What we understand is that some of the California trial courts 
do not allow all of the kinds of expert witnesses and other 
resources that other states allow in the defense of a capital 
case.
    So, then when the case gets to the habeas side, the 
argument is made that these kinds of resources need to be 
devoted in order to appropriately deal with the habeas case.
    Mr. Rogers.  Well, it is obvious that you cannot deal with 
this. We can.
    Mr. Heyburn.  We are doing something about it. It is just 
that it is at its beginning stages. Judge Broomfield may want 
to comment on that.
    Mr. Rogers.  Well, if California cannot limit their 
appetite, it is just not going to happen. No one state is going 
to take two-thirds or three-fourths of the monies that we 
allocate for this type activity. Now, either you handle it or 
we will. I prefer you do it. So, what do you need from us to 
arm you to do that?
    Mr. Broomfield.  Mr. Chairman, I will tell you what is 
happening in the Ninth Circuit. I will reiterate. I am from the 
District of Arizona. The cost of capital habeas corpus cases in 
three of the four California districts are quite high.
    The fourth California District has virtually no capital 
habeas corpus cases. So, they are not on the radar screen. The 
Ninth Circuit Judicial Council is concerned. The Chief Judge of 
the circuit appointed a committee to study this issue. That 
committee reported its findings and recommendations last Friday 
at the Ninth Circuit Judicial Council session, which I 
attended. I am currently on the council.
    That report was received and certain things were adopted to 
try to contain costs, including the process by which budgets 
are going to be proposed in most capital cases, or at least 
those that go above a certain threshold number.
    Secondly, limitations on the hourly rate for the lawyers 
were adopted. If there is a second counsel, there will be a 
lesser hourly rate for the second counsel.
    Mr. Rogers.  When do you plan to do this?
    Mr. Broomfield.  The council adopted that last Friday.
    Mr. Rogers.  When will it be effective?
    Mr. Broomfield.  I assumed right away.
    Mr. Rogers.  So, what effect will that have on the 
California bite at the apple?
    Mr. Broomfield.  The honest answer to that is, Mr. 
Chairman, I do not know because there are some cases in the 
pipeline. Those will have to be finished up. For new cases, 
this can be implemented right away.
    I might also indicate that I think the word is out in those 
districts. I think the numbers we were talking about were caps. 
The lawyers' fees on an hourly rate are already in place.
    These are the actions we are taking to reduce costs. I 
cannot represent to you this moment that I know that they will 
work. That is what I understand.
    Mr. Rogers.  What I want to see, before we have the mark-
up, is the Ninth Circuit's plan to keep California from eating 
up everything we send to the Ninth Circuit and the whole 
country.
    That is absolutely ridiculous. You would have to admit to 
that. It is incredible. So, I want to know what, Mr. Chairman, 
what the Federal Judiciary is going to do about this problem 
that you have? If you admit that you cannot handle it, we will 
do it in our bill. I will guarantee you. We will handle it.
    Mr. Heyburn.  Well, we would like to handle it ourselves. 
We will get you that information.
    Mr. Rogers.  I will guarantee you, if you do not handle it, 
we are going to do it for you. You will not like what we do. We 
are going to handle this problem. Now, either you, or me, or 
somebody, but it is going to be handled this year.
    We have been talking about this now for how many years? It 
has gotten worse. It has not gotten better. It is just 
absolutely unfair, number one. So, let us handle it. I want to 
know what we are going to do before we mark up the bill in the 
spring.
    Mr. Heyburn.  We will do that. I think we can.
    Mr. Rogers.  Now, the cost of investigative and expert 
services for our attorneys seems to be going up astronomically 
as well. It was a $5 million increase, a 20-percent increase 
requested for 1999 to nearly $30 million; double what it was in 
1996.
    The cost of experts for Federal Public Defenders amounts to 
just $3 million, an increase of 2.6 percent. Now, what is going 
on with the cost of investigative and expert services for panel 
attorneys and no one else?
    Mr. Heyburn.  I do not have the precise answer to that. We 
will get it for you. I am confident that it is related to the 
increasing number of Federal capital prosecutions, which are 
normally not handled by the defender organizations, but 
normally handled by a panel attorney. We can get you that 
information.
    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]

    Investigative, expert, and other services are available to 
persons who are furnished representation under the Criminal 
Justice Act and to persons who have retained counsel but are 
financially unable to secure these services. Of the requested 
fiscal year 1999 increase, $130,000 applies to expert services 
in cases where representation is provided by Federal defender 
organizations. This increase represents a standard 2.6 percent 
inflationary increase to projected fiscal year 1998 obligations 
for these services.
    The remaining requested increase of $5,006,000 applies to 
the cost of experts in cases where representation is provided 
by panel attorneys. This increase represents the application of 
historical rates of increase over the last three fiscal years, 
which has been significantly higher than the rate of inflation. 
Much of the large historical increases can be attributed to a 
small number of very expensive representations. Since some of 
these cases may be completed by fiscal year 1999, the judiciary 
will recalculate the request for expert costs based on updated 
information. This information will be incorporated into the 
overall technical and workload reestimates for fiscal year 1999 
to be provided to Congress later this spring.

    Mr. Rogers.  Well, defender attorneys and panel attorneys 
will be handling roughly the same type of cases; would they 
not?
    Mr. Heyburn.  No, not necessarily. Typically, a defender 
organization would not be handling a capital prosecution. In 
other words, in the McVeigh case most of the attorneys that 
were on the McVeigh case were not defender organization 
attorneys.
    I do not know about the Kaczynski case, but for many of 
these high profile cases, it takes such an inordinate amount of 
time. It would take up all of the resources of the defender 
organization. So, they get a panel attorney.
    So, that would account for some of that increase because 
those panel attorneys might tend to handle the more complicated 
cases. They would certainly tend to handle the capital 
prosecutions.

                        federal judicial center

    Mr. Rogers.  Judge Zobel, last year the Federal Judicial 
Center put out its strategic plan. It recommended that the 
Center assume primary responsibility for education and training 
of Judiciary personnel which would eliminate unnecessary 
overlap in the Center and the Administrative Office education 
and training responsibilities.
    What is the current status of that recommendation? Has 
there been any movement toward consolidating education and 
training?
    Ms. Zobel.  The Chief Justice appointed an ad hoc committee 
to review that report and make recommendations to the judicial 
conference. The ad hoc committee has issued a report that will 
come before the conference next week.
    The report says, in essence, that the AO and the FJC should 
cooperate in providing education so that there be no 
duplication, or overlap, or even the appearance thereof. It 
also says even now any overlap is minimal. That is where it is.
    Mr. Rogers.  The plan also recommended that the Center seek 
to expand its funding by getting funding out of the 
appropriations provided to other parts of the Judiciary. What 
is the current status of that recommendation?
    Ms. Zobel.  There was no contemplation in the plan, and 
there is no intention by the Center to transfer any 
appropriations from any other Judiciary entity to us. If we 
were ever to do this, and as I say, we have no plans to do it, 
we would certainly come to you before we did it or sought it.
    Mr Rogers. Judge Heyburn, you and Director Mecham sent a 
letter asking for language to be put in an upcoming 
supplemental.
    While not officially requested by the Judiciary or the 
Administration, it would give the Judiciary the authority to 
designate disbursing and certifying officers, which would allow 
for electronic certification of financial transactions.
    This would allow the implementation of the new automated 
financial system in all of the courts. Tell us about that. Why 
is it urgent that we do it on sudden notice?
    Mr. Heyburn.  I mentioned that in my opening statement. I 
think the Director will respond.
    Mr. Mecham.  The reason it is necessary, I believe, is 
because it gives the clerks, at the district level, authority 
to act as certifying officers.
    Right now, under our decentralized budgeting program, we 
give staff in the courts the authority to spend the money. Now, 
they would have a greater authority to actually execute the 
check. It would speed up and make more efficient our financial 
management program on a district level.
    I think that is the basic answer. If you want a more 
technical answer, I can get one for you. It is going to 
eliminate a lot of paper work because we will not have to send 
all supporting documents to the district clerk in order to get 
a technical approval of a check. The district clerk can execute 
the check based on the certification of officers authorized to 
obligate funds in the courts.
    Mr. Rogers.  Why is it necessary to do that on an urgent 
basis?
    Mr. Mecham.  Well, because we were beginning a new 
financial management program on a trial level in certain courts 
last year. We wanted to have that authority when we started the 
full program.
    We are still implementing that program. So, the sooner we 
get that authority, the easier it will be for us to implement 
that program.
    It is not an emergency in the sense that something terrible 
is going to happen if we do not get the approval tomorrow. It 
is just going to make it easier for us to implement our new 
financial management program. We could not see any downside to 
it at all. It was not intended to be a controversial request as 
we understood it.
    Mr. Rogers.  Judge, in your 1998 budget request, you 
included $7.4 million for an electronic courtroom project. What 
is that? What difference would it make in a court like in 
Kentucky, for example?
    Mr. Heyburn.  Well, in an individual trial, it can make 
quite a bit of difference in the speed with which the trial 
goes and the comprehensive abilities of the jurors. We are just 
at the beginning stages of this sort of thing.
    It is not as though we are going to put an electronic 
courtroom in every single courtroom. There are some courts that 
have more complex trials that may have more need of it. The 
technology and the use of it is something that people have to 
get used to.
    So, on a trial basis we are trying to extend that 
technology. Judge Broomfield, I do not know whether your court 
is one of those. You may want to say something about that.
    Mr. Broomfield.  Our court is one of the courts that has 
that technology.
    Mr. Rogers.  I understand that the London, Kentucky court 
would be one of the experiments. Is that correct?
    Mr. Mecham.  That is my understanding. We are doing our 
best to get GSA to get that courthouse finished.
    Mr. Rogers.  Judge.
    Mr. Broomfield.  Mr. Chairman, I think it permits a better 
trial and/or just trial. It also has the potential to save 
money and time. Sitting on the bench in my courtroom right now 
are, I think, eight wide books of exhibits in a trial that I 
just finished.
    If we had had the electronic courtroom and were using it 
for the trial, all of that material would have been on a disk 
to be used in the courtroom and put on a screen to show to the 
jurors, to me, or to the lawyers as the case may be.
    So, I do think it has the dual effect of delivering better 
justice and, hopefully, some savings in time and costs.
    Mr. Rogers.  Now, is that dollar item a recurring item in 
your base funding for 1999?
    Mr. Heyburn.  No. I do not believe it is.
    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]

    There are funds included in both fiscal year 1998 and 
fiscal year 1999 associated with the implementation of 
electronic courtrooms, however, in both of these fiscal years 
the majority of the costs are for installing the technology in 
additional courtrooms. The only recurring costs budgeted for in 
this program are for communication costs for courts using 
videoconferencing. It is anticipated that when the program is 
fully implemented there will be other recurring expenses for 
things like maintenance agreements and cyclical replacements.

                judiciary economy and efficiency efforts

    Mr. Rogers.  The AOUSC has submitted what we would expect 
to be an annual report on steps that the Judiciary has taken to 
economize and make its operation more efficient. Can you tell 
me specifically what new steps the Judiciary has taken over the 
past 12 months to save money and become more efficient?
    Mr. Heyburn.  Over a period of time, including this year, 
we have continually had a committee that is working on best 
practices; surveying all of the courts throughout the country 
to see what practices they have developed that are more 
efficient and then advertising those practices to all of the 
courts.
    We are beginning the process of initiating a new financial 
accounting system at the district level so that those courts 
and the AO can have quicker financial management information.
    We have a new Jury Modernization Program which is just 
beginning and which will make the calling of jurors more 
efficient. It will allow us to, hopefully, only call the jurors 
that are necessary and not have twice as many jurors as we 
might need on a given day and have people sitting around all 
day. So, we think that will be a savings over a period of time.
    You know, really everything that we are doing now is a 
credit to the Chairman and this Committee who helped us change 
the whole consciousness of the Judiciary. We are a partner in 
your efforts to balance the budget.
    No longer, not that we were ever this way, but no longer is 
it simply a matter of whatever it is we want, we are entitled 
to because we are the Judiciary and the Third Branch.
    We try to instill in our staff, and in the judges, a 
consciousness of the financial component to the request that we 
make and the work we do. We need to be concerned about that 
every day in the job that we do.
    Certainly, that is a primary focus of the Administrative 
Office in everything that we do. I must say that we see the 
consequences of our efforts in little things that we do, in 
little savings that we make, and our ability to do much more 
work with correspondingly fewer resources.
    We are proud of that. Also, I see it personally in the 
conscientiousness of the judges. They are, I think, on a 
different mind set than they were five years ago. I think we 
deserve some credit for that. I know you deserve some credit 
for that.
    Mr. Rogers.  Well, I think you are right. I think the 
judges and the Judiciary understand that they are having to 
carry a load like everybody else in trying to get the budget 
under control.
    Ms. Zobel.  Mr. Chairman, may I add what the Center is 
completing?
    Mr. Rogers.  Yes.
    Ms. Zobel.  We have developed a number of programs that 
have in fact been going on for several years, designed 
specifically in this effort to make the Judiciary more 
conscious of costs and management.
    For example, we have developed what we call a risk 
prediction index, at the behest of the Judicial Conference, 
that assists probation officers in predicting the risk that 
offenders will commit future crimes which also then becomes a 
management tool for the chief probation officer to decide how 
to deploy the forces of that office.
    That is just one of many examples. This is one that we 
developed with an interactive video and a package curriculum 
that goes to the courts. So, all of the training is done in the 
courts.
    Similarly, we have broadcast management programs, 
leadership programs, to the clerks' offices, to the probation 
offices in order to assist them to understand their role in 
keeping down the costs and managing their offices more 
effectively with fewer resources.

                         long distance learning

    Mr. Rogers.  How is your program to use teleconferencing in 
place of conferences going?
    Ms. Zobel.  Well, as you know, we used some of our 
resources a year ago to build a studio for teleconferencing. It 
has a two-way video studio, as well as a studio for training, 
one that does not require a whole lot of production work.
    We have in the pipeline a series of programs for both of 
those. At the moment, we are waiting for the satellite 
downlinks to be put in place. The Administrative Office has 
done yeomen's work in trying to get that done.
    The contractor has, so far, been slower than they said they 
would be. So, once the courts have downlinks, we are ready to 
go with program after program to the courts. In the meantime, 
we are using rented spaces for downlinks, which is not terribly 
efficient for the courts because court personnel cannot watch 
from their courthouses.
    We are doing a lot now. I think we are reaching over 80-
percent of all of our participants by video and other distance 
education mechanisms.
    Mr. Rogers.  Maybe the Judge or Mr. Mecham can tell us 
about the downlinks. Where are we?
    Mr. Mecham.  We have it under contract. AT&T, regrettably, 
did not give us emphasis. There was an acquisition going on 
involving one of the companies involved in the contract. It 
slowed them down.
    We have been on their case now for about six weeks. They 
had promised to install 200 downlinks by the end of 1997. I 
believe they are talking about beginning installation this 
month.
    They now anticipate that they will get this job done in a 
much more expeditious way. So, we are after them. They were 
unacceptably slow, but I think they are going to be fine now.
    Mr. Rogers.  When do you anticipate they would have them 
all done?
    Mr. Mecham.  I believe that by no later than this fall is 
when they are scheduled to have them on.
    Mr. Rogers.  Do they indicate they can meet that target?
    Mr. Mecham.  Yes.
    Ms. Zobel.  Mr. Chairman, we have, in preparation for all 
of this, put together programs to teach the courts how to deal 
with the broadcasts as they come into the court.
    We put together this booklet as well which explains to the 
personnel in the courthouses what they need to do. I would very 
much like to make this a part of the record of this hearing.
    Mr. Rogers.  Okay.
    [The booklet referred to follows:]


[Pages 174 - 184--The official Committee record contains additional material here.]



    Ms. Zobel.  So, we are ready to go. Let me just reiterate. 
The Administrative Office has worked very hard to get this 
going. We are working with them in accomplishing this as 
quickly as possible.
    Mr. Rogers.  Well, we all know the power of television. We 
all know how effective it is and how easy it is to hold 
conferences by electronic means which saves enormous sums of 
money.
    I know there are times when you need to have meetings face-
to-face instead of conferences, but so much training can be 
done electronically at less cost and, I think, much more 
effectively.
    Ms. Zobel.  Well, we certainly agree with you. We are 
grateful to you for having pushed us because we are ready to 
go. We have a whole bunch of programs now in the pipeline and 
some actually ready to be broadcast.

                         eliminating judgeships

    Mr. Rogers.  Now, Judge Heyburn, becoming more efficient 
means that where there is a judge with a relatively small case 
load, we ought to consolidate somehow or eliminate a judgeship 
in that circuit, or that district.
    Now, there were six District Court judgeships that are not 
warranted in terms of case load. What have we done to eliminate 
those that are not needed in order to put the judges where the 
case load is?
    Mr. Heyburn.  Well, what has happened is the Judicial 
Conference has adopted a policy that, I think I can state it 
correctly, that not only will they recommend to Congress when 
new judges are needed, but they will also tell Congress when 
the case load is such that either a vacant judgeship might not 
be filled or a judgeship, in theory, could even be eliminated.
    I think we want our role in that regard to be one of simply 
passing along information. It is not our prerogative to either 
create or delete a judgeship. That is the Congress' 
prerogative.
    Of course, it will be the Senate's prerogative, based on 
information we provide, whether they want to fill or not fill a 
vacant judgeship. So, from our perspective, we are giving 
Congress and the Senate the information they need to make the 
political or financial decision that they want to make.
    Mr. Rogers.  Have you recommended certain actions be taken 
in that respect?
    Mr. Heyburn.  I do not know that it has gotten to that 
point yet. There are a number of districts where the 
information has been developed. At a point in time, the Senate 
would know that those particular districts have a lower case 
load than would support the number of judges currently in that 
district.
    Mr. Rogers.  Well, Judge Broomfield, for example, he has 
got a huge case load out there. It is unfair to him and other 
judges who have huge case loads to be penalized by someone 
sitting there doing much less being paid the same amount of 
money. Is that not correct?
    Mr. Heyburn.  I would agree with you. I think what we are 
committed to doing and what the Judicial Conference policy 
calls for is to provide the information to the Senate upon 
which they can act.
    As you know, the process of getting judges or certainly 
taking them away is not always pristine. We have, in times 
past, not gotten judges that we suggested that we should get. 
Sometimes we have gotten judges we did not want.
    I suspect the same will be true with respect to this 
process of taking away judgeships. We would like to be in the 
position, of providing the information, all of the information, 
and a recommendation if necessary to the Congress.
    We recognize that it is your decision to take action on 
that information, if you so choose.
    Mr. Mecham.  Mr. Chairman, you are perhaps aware that 
Senator Hatch and Senator Grassley, in particular, have said 
that they feel that we should be as rigorous in determining 
standards for filling vacancies as we are for creating new 
judgeships.
    The Judicial Conference has taken that seriously and has so 
resolved. The Judicial Resources Committee of the Judicial 
Conference has come up with a suggested group of judgeships 
that should be questioned based upon statistical and other 
data.
    They have been in touch with these seven or eight courts 
that are involved. The courts are now in the process of 
responding.
    The responses will then be collated and the committee will 
make its recommendation to the Judicial Conference on whether 
some of those judgeships should be filled. I do not think they 
will recommend that they be eliminated.
    They may recommend, conceivably, that they not be filled. 
So, the process is going. Let me just say that compared to that 
seven, the Judicial Conference has requested, based upon 
weighted case load data, the creation of 53 new judgeships. We 
are having difficulty getting those authorized.
    Mr. Rogers.  How many vacancies, average vacancies, are you 
projecting for 1999?
    Mr. Mecham.  We are projecting 61 for 1999 and 73 for this 
year of average vacancies. I think there are 83 or 87 right 
now. So, we are projecting some progress on confirmations.
    Mr. Rogers.  How many are currently vacant?
    Mr. Mecham.  Eighty-seven total.
    Mr. Rogers.  But you are projecting an average of 61 for 
1999; correct?
    Mr. Mecham.  Right.

                            courthouse space

    Mr. Rogers.  Now, for the record, would you give us the 
most current schedule of new courthouse space coming on-line 
and how that schedule compares with what is contained in the 
budget submission? Will you file that for the record?
    Mr. Mecham.  I will file that for the record, yes.
    [The new courthouse schedule referred to follows:]

    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided.]

    The FY 1999 budget submission requested $22,439,400 for 
965,094 square feet of prospectus space. The revised request 
provided prior to the subcommittee markup included $26,683,486 
for 966,851 square feet. The nonprospectus space costs also 
decreased $85,086 in the revised request. The total net change 
in the cost of space to be delivered in FY 1999 was $4,159,000 
($26,683,486-$22,439,400-$85,086). The space to be delivered in 
FY 1999 is shown below:
        FY 1999 Request               FY 1999 Revised Request
St. Louis, Missouri
Omaha, Nebraska
London, Kentucky
Montgomery, Alabama
New York, New York                  New York, New York
Brownsville, Texas                  Brownsville, Texas
Albuquerque, New Mexico             Albuquerque, New Mexico
Santa Ana, California               Santa Ana, California
Lafayette, Louisiana                Lafayette, Louisiana
Camden, New Jersey                  Camden, New Jersey
Tallahassee, Florida                Tallahassee, Florida
Beckley, West Virginia              Beckley, West Virginia
Milwaukee, Wisconsin                Milwaukee, Wisconsin
Albany, Georgia                     Albany, Georgia
Albany, New York                    Albany, New York
Hammond, Indiana                    Hammond, Indiana
Covington, Kentucky                 Covington, Kentucky
                                    San Juan, Puerto Rico
                                    Philadelphia, Pennsylvania
                                    Scranton, Pennsylvania
                                    Wheeling, West Virginia
                                    Los Angeles, California
                                    Sacramento, California
                                    Kansas City, Missouri

    Mr. Rogers.  Also, provide for us the U.S. Marshal's 
current schedule and explain it.
    Mr. Mecham.  I will be glad to do that, yes, sir.
    [The U.S. Marshal's schedule referred to follows:]

    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided.]

               FY99 USMS REQUEST FOR COURTHOUSE PERSONNEL               
------------------------------------------------------------------------
                                                              Revised   
                Location                     Original      opening date 
                                           opening date         \2\     
------------------------------------------------------------------------
Jackson, TN.............................            6/98            5/98
Ft. Myers, FL...........................            7/98            6/98
Brownsville, TX.........................           11/98           11/98
Tallahassee, FL.........................            1/99            2/99
St. Louis, MO...........................            1/99           10/99
Albany, GA..............................            1/99            6/99
Lafayette, LA...........................            2/99           12/98
Beckley, WV.............................            2/99            2/99
Scranton, PA............................            3/99            7/98
Islip, NY...............................            5/99            2/00
Albuquerque, NM.........................            3/99           11/98
Durango, CO.............................     \1\ Unknown     \1\ Unknown
San Juan, PR............................            9/98           9/98 
------------------------------------------------------------------------
\1\ Marshals Service Project.                                           
\2\ Although the month of occupancy may vary slightly, all projects are 
  scheduled to open in the year indicated. All dates have been          
  coordinated with the USMS.                                            


               FY99 COURTHOUSE SECURITY EQUIPMENT REQUEST               
------------------------------------------------------------------------
                 Location                         Opening date \1\      
------------------------------------------------------------------------
Phoenix, AZ...............................  2/00                        
Tuscon, AZ................................  12/99                       
Ft. Pierce, AZ............................  Project Canceled            
Jacksonville, FL..........................  02/01                       
Tallahassee, FL...........................  2/99                        
Covington, KY.............................  8/99                        
London, KY................................  8/00                        
Omaha, NE.................................  12/99                       
Las Vegas, NV.............................  4/00                        
Charleston, SC............................  4/99                        
Richland, WA..............................  12/98-GSA Renovation        
------------------------------------------------------------------------
\1\ Although the month of occupancy may vary slightly, all projects are 
  scheduled to open in the year indicated. All dates have been          
  coordinated with the USMS.                                            

                         mandatory drug testing

    Mr. Rogers.  Now, the mandatory drug testing provision of 
the Violent Crime Control Act and Law Enforcement Act of 1994 
requires that all offenders convicted of crimes that occurred 
after September 1994 submit to at least three drug tests.
    Now, that has been in effect for three years plus. Yet, you 
are asking for a $2.6 million increase for that activity; 
almost double what your current level is. Why the spike in 
1999?
    Mr. Mecham.  I confess I do not have a specific answer on 
that. I will get that for you.
    Mr. Rogers.  It has been in effect for three years. All of 
a sudden you are asking to double it in one year. I do not know 
what the anomaly is there. Perhaps you can help us with that.
    Mr. Mecham.  I do not know either.
    Mr. Rogers.  You will find out.
    Mr. Mecham.  Yes, I will. We will send that to you.
    [The information referred to follows:]

    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]
    The Crime Bill requires, as a mandatory condition of 
supervision, that all offenders convicted of crimes that 
occurred after September 1994 submit to at least three drug 
tests during the period of their supervision.
    The requirement for mandatory drug testing is based on an 
assumption that, as more time passes since the passage of the 
Crime Bill, more of the offenders under supervision will be 
under the new law and required to submit to the testing. 
Because of this, the costs for this provision will increase as 
the number of offenders under the new law increases. Because 
offenders are released from prison throughout the year, we do 
not assume that all 3 mandatory tests will be administered in 
the first year of release. Rather, we distribute the estimated 
number of releasees and resultant tests and treatment costs 
over the course of 2 years. The cost requirements for FY 1999 
include both offenders released in FY 1999 as well as FY 1998 
supervision cases with testing and treatment costs in FY 1999.
    Funding in the amount of $2.6 million is requested as an 
enhancement in the Probation/Pretrial line item above the $3.3 
million in the FY 1998 base. The increase is needed due to 
anticipated increases in the number of people under 
supervision.
    Therefore, a total of $5.9 million is included in the FY 
1999 Judiciary budget request. This consists of $1.3 million in 
personnel costs (22 authorized work units) plus $4.6 million in 
program costs to implement the provision. The $4.6 million 
includes $1.2 million for testing, $0.5 million for collection 
and $2.9 million for treatment costs associated with the 
program.
    The total requirement was developed by first determining 
the number of individuals to be tested under the Mandatory Drug 
Testing provision, then estimating the number of tests that 
would be performed on this population. We assumed an average of 
four tests per individual to be fully compliant under the 
provision, since the provision requires at least three tests. 
The unit costs used for collection, testing, and treatment are 
based on our current average costs.
    In FY 1999, our budget request assumes that 60% of the 
population under supervision will be required to submit to at 
least 2 tests based on the Mandatory Drug Test provision of the 
Crime Bill. Our assumptions also include remaining costs for 
testing and treatment for offenders released in FY 1998.
    To determine the FY 1999 testing population of 32,029, we 
included all new probation cases, plus 60% of all new prison 
cases, plus the remaining 7,076 offenders from 1998 who had 
only two of the required tests during FY 1998. Under the 
assumption that not all four tests could be administered to 
each offender in a given year, we estimated 97,329 tests will 
be given in FY 1999.
    Our assumptions are that approximately five percent of 
those tested under the mandatory drug testing provision, or 
1,601 offenders, will test positive and require treatment. At 
an estimated cost of $1,828 per treatment (our composite 
average treatment cost), the total treatment cost of mandatory 
drug testing will be approximately $2.9 million.
    Mandatory drug testing requires drug testing a larger 
segment of the post conviction population. Our budget estimates 
take into account that testing a larger population will dilute 
the current (approximately 11%) positive or dirty urine 
results. Therefore, resultant drug treatment and additional 
drug test requirements for FY 1999 were computed using a lower 
percentage rate.

                         federal circuits study

    Mr. Rogers.  Now, last year we created a study of the 
Federal Circuits.
    Mr. Heyburn.  Yes.
    Mr. Rogers.  Where are we on that?
    Mr. Heyburn.  The Chief Justice has appointed the committee 
with retired Supreme Court Justice Byron R. White as the chair. 
From everything I have heard, they are taking their job very, 
very seriously. The Commission could impact people in the Ninth 
Circuit and in all of the other circuits, because their job 
extends to looking at all of the circuits.
    I am sure their focus will be on the Ninth Circuit. I guess 
the people in the Ninth Circuit are waiting with baited breath 
as to what the answer will be.
    Mr. Rogers.  Judge Broomfield, do you want to add anything 
to that?
    Mr. Broomfield.  I am not sure I can add too much, Mr. 
Chairman. The commission is off and running. One of our judges 
is a member of the commission. I can tell you that Justice 
White is making them work hard.
    They have hired their executive director, Professor Dan 
Meador. They have scheduled, I think, six hearings across the 
country. They will have their report to the Congress by the 
deadline Congress has given them.
    Mr. Rogers.  Well, it was obviously a major blow up in the 
Congress. When we passed this bill last year, one of the major 
controversies in not only this bill, but in the closing days of 
the Congress. So, it has its followers on the Hill.
    Mr. Heyburn.  I was able to watch your performance on CNN 
during the end of the bill. I guess this was one problem that 
seemed like you were fighting them from all sides on. You did a 
terrific job getting it through.

                            methamphetamine

    Mr. Rogers.  Well, it was an interesting few days. Mr. 
Latham.
    Mr. Latham.  Thank you very much, Mr. Chairman.
    As you know, the production, trafficking, and consumption 
of methamphetamine is a serious and growing problem in my home 
State of Iowa. My colleagues, with the Chairman's leadership, 
are trying to do all we can as far as resources for law 
enforcement to confront the threat to our children and society.
    Would you tell me whether there has been a noticeable 
affect on the Judiciary's case load in this area, and 
particularly in Iowa and the mid-west, and what you are doing 
with the additional case load, if there is an increase in that 
area?
    Mr. Heyburn.  Well, just from anecdotal evidence, I think 
Kentucky has somewhat of the same situation as Iowa in that 
there seems to be an increase in those kinds of cases. So, just 
from that experience, it seems as though the United States 
Attorneys are paying more attention to it. Our budget requests 
the resources to deal with those cases.
    The criminal case load is steadily increasing, not 
dramatically, but steadily. We think our budget requests the 
resources to deal with the prosecutions that are brought.
    Mr. Latham.  Do you have any numbers?
    Mr. Heyburn.  I do not have any specific numbers on the 
methamphetamine cases, no.
    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]

    Each year the Administrative Office of the U.S. Courts 
(AOUSC) allocates resources to district courts based on work 
measurement formaulae that use caseload data and other data 
reported by courts. The U.S. Department of Justice has 
increased U.S. Attorney positions to prosecute methamphetamine 
defendants in Iowa. The AOUSC, using zero-based budgeting, 
automatically allocated resources to district courts, probation 
offices, and pretrial services offices in response to the 
increased caseload resulting from increased prosecutions of 
these cases. Locally, courts used the resources to train 
officers to identify and treat defendants charged with drug 
violations involving methamphetamine. Between 1993 and 1997, 
criminal case filings in the Southern District of Iowa (IA-S) 
grew 73 percent (up 67 cases) and drug filings doubled (up 39 
cases). During the same period criminal case filings in 
Northern District of Iowa (IA-N) increased 14 percent (up 20 
cases) and drug case filings increased 1 percent (up 1 case). 
Criminal case filings peaked in IA-N in fiscal year 1996 and in 
IA-S in fiscal year 1995, then declined in both districts in 
fiscal year 1997. Drug case filings in both districts 
constitute a significantly higher percentage of overall 
criminal filings compared to the 28 percent they constitute for 
the nation. During the past five years, this percentage peaked 
at 56 percent in IA-N in 1993 and peaked at 50 percent in IA-S 
in 1995. Because the Federal Judiciary does not collect data by 
specific drug types, we are unable to track the increase 
specifically of methamphetamine cases. However, according to 
the United States Sentencing Commission's fiscal year 1996 
data, methamphetamine defendants constituted 10 percent (1,667 
defendants March 18, 1998) of the defendants sentenced for drug 
law violation nationwide. For IA-S, methamphetamine constituted 
53 percent (75 defendants) of drug defendants sentenced and for 
IA-N they made up percent 26 percent (26 defendants) of drug 
defendants sentenced.

    Mr. Latham.  I know that in Iowa we have got one-percent of 
the nation's population--but about 9-percent of the meth-
related arrests.
    Mr. Heyburn.  Again, anecdotal, it seems in Kentucky that 
there are more of those cases than there used to be. So, my 
only conclusion would be there seems to be greater attention in 
terms of the prosecutorial resources that may be putting forth 
those efforts. Again, that is just an anecdotal experience in 
one district.
    Mr. Latham.  As you know, the Federal Judicial Conference, 
concerned that all criminal law was being federalized, 
recommended that Congress voluntarily narrow its authority by 
passing criminal legislation only when a ``paramount interest'' 
justifies a Federal enforcement effort. Among the interests 
identified was criminal activity with substantial multi-state 
aspects. Is it safe to assume that drug trafficking and 
production would be included in the Conference's definition of 
paramount?
    Mr. Heyburn.  I do not think there is any question about 
that.
    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]

    The Judicial Conference has on a number of occasions 
expressed concern about the federalization of what have 
traditionally been state offenses, and, in the ``Long Range 
Plan for Federal Courts,'' has suggested criteria for 
consideration by Congress when deciding to create new Federal 
offenses. Certainly, many drug trafficking and production 
offenses could meet some of these criteria and, in the 
commentary to the long range plan (which was not specifically 
approved by the Judicial Conference), multi-state drug 
operations were cited as an example of an activity that may 
call for the resources and reach of the Federal government.

    Mr. Latham.  You do not question whether or not we have 
that. Sioux City, Iowa sits on the border, with South Dakota 
and Nebraska. We have three States within those two units.
    Mr. Heyburn.  We have the same situation in the Chairman's 
district. There are a number of highways passing through. You 
see a greater number of cases on those heavily traveled areas. 
I am sure you do in your area.
    The key to the drug area, I think is the cooperation 
between--and I am stepping out of my judge's role--the local 
and Federal prosecutors and dividing up who is going to 
prosecute which cases.
    I know in Kentucky, we have an excellent arrangement 
between the State and Federal prosecutors. In Federal court, we 
tend to get the more significant cases, the more difficult 
cases, because the prosecutorial resources are better.
    Sometimes they bring them in the Federal court because the 
sentences tend to be longer. So, as long as the prosecutors are 
cooperating, then of course the courts are open to do that.

                           computer security

    Mr. Latham.  I see that there is a lot of new technology 
being employed by the courts and making its way into the 
courtroom.
    With regards to the computer systems, would you let us know 
what steps you are taking regarding security and the integrity 
of the records in criminal court.
    You know, we have a lot of good hackers out there. We have 
had recent problems in the Air Force with hackers getting into 
the system. What are you doing to secure the records?
    Mr. Heyburn.  We have excellent computer people. To my 
knowledge, we have never had a problem with the security of our 
computers.
    To the extent which we have been moving slowly on 
electronic court filing, for instance, and on some other 
electronic public access projects, it is because of our concern 
about that very subject.
    Now, we have implemented a program where the public, and 
particularly lawyers, can access certain parts of the court 
record. Those systems are secured. They also do not contain any 
privileged or confidential information.
    There are some other programs that maybe in the future 
could pose a concern. We are looking at it. We have not yet 
ever had a problem.
    Mr. Latham.  We have a bunch of very inventive people out 
there that seem to have little else to do with their time.
    Mr. Heyburn.  Right now, the only thing that the public can 
access from the court records generally is the court docket. 
That is, what particular documents have been filed and the date 
that they were filed.
    So, in most courts you cannot access a complete document. 
Any confidential documents are held in the court's safe. There 
simply are not court records that are accessible by the system.
    Mr. Latham.  They are not put in the system.
    Mr. Heyburn.  They are not put in the system, no.
    Mr. Latham.  Is that going to change over time?
    Mr. Heyburn.  It conceivably could change because at some 
point in time, we may have, and some courts already have, 
electronic filing systems; particularly Bankruptcy Courts where 
there is a large number of similar types of filings.
    The issues do become more complicated when you deal with 
different kinds of filings or a larger number of people. So, 
that is a concern. I think there are concerns that we believe 
ultimately we can overcome. We are not going to put a system 
on-line until we are satisfied about that.
    [Clerk's note.--Subsequent to the hearing, the following 
additional information was provided:]

    By the end of 1998, it is anticipated that all courts will 
be physically connected through the judiciary-wide Data 
Communications Network. This enables judges and staff to take 
full advantage of established and emerging technologies and 
access the Internet. At the same time, however, the judiciary 
recognizes the threats posed by computer hackers and has taken 
proactive steps to protect both the vital records stored within 
its automated systems and the wide-area communications network 
that serves the courts.
    The Administrative Office established the Computer Security 
and Independent Testing Office in 1996 to serve as a central 
policy and management focal point for computer security within 
the judiciary. This office has been working with the National 
Security Agency to conduct information security assessments at 
selected volunteer local court sites so that a national 
baseline of vulnerabilities can be identified and solutions to 
reduce these vulnerability can be developed.
    At its September 1998 session, the Judicial Conference 
approved a policy that for any computer connected to the 
judiciary's Data Communications Network, access to the Internet 
be provided only through protected national gateway connections 
approved by the Administrative Office.
    The Administrative Office is upgrading its incident 
response capability so that it can monitor, detect, track, and 
prosecute anyone who enters or attacks the judiciary's 
information systems without authorization.
    The Administrative Office is actively working on 
promulgating computer security guidelines and conducting 
computer security education and training. It will build on 
these areas to encourage the implementation of appropriate 
countermeasures at the national and local levels to reduce 
vulnerabilities to the extent possible. Additionally, local 
courts are encouraged to appoint a security officer to 
identify, analyze, and coordinate computer security issues.
    The judiciary is in compliance with the Computer Security 
Act of 1987 and provides computer security training to judges, 
probation officers, clerks of court and staff on a continuing 
basis. It also follows advice of the General Accounting Office 
disseminated through various publications.
    The judiciary's automation management process requires a 
security plan be developed and updated as new systems are 
developed.

    Mr. Latham.  That is all I have, Mr. Chairman.
    Mr. Rogers.  Mr. Skaggs.

                            use of wire taps

    Mr. Skaggs.  Just one other thing, Mr. Chairman.
    We get opportunities to consider the way the wire tap laws 
are administered from various points of view. I just thought I 
would take the opportunity with you all here to ask if you have 
noted any particular trends in the frequency or volume of 
warrant requests. Any notable change in the experience that the 
courts are having in dealing with that part of your 
responsibility?
    Mr. Heyburn.  I have not. We have very few, quite frankly. 
I have not noticed any change.
    Mr. Mecham.  There is a special court, too, that deals with 
wire tap requests for foreign intelligence cases.
    Mr. Skaggs.  For that particular kind of case.
    Mr. Mecham. They meet periodically here in Washington. They 
have a top security room down at the Justice Department and so 
on. I know they deal with them.
    Mr. Skaggs.  That is only for the foreign intelligence 
piece of the jurisdiction.
    Mr. Mecham.  That is right, exactly; that particular piece 
of it.
    Mr. Skaggs.  No. I am just talking generally; your run of 
the mill drug case or whatever it may be.
    Mr. Mecham.  We, as you know, have a heavy criminal case 
load. We have always had wire taps. I do not see any 
significant change in the level of requests. The process is 
pretty straightforward. It works reasonably well.
    Mr. Skaggs.  Is that largely delegated to magistrates?
    Mr. Mecham.  No. District judges hear the application and 
then any renewal of it, the reporting of it, and eventually the 
completion of the tap, including the sealing of the records.
    Mr. Skaggs.  Just one other point. We are told by folks in 
law enforcement by way of reassurance that this is not likely 
to be an abused investigative tool. That these are highly 
labor-intensive and resource-intensive.
    Given the limits on law enforcement resources, wire tape 
really are necessarily tools of last resort. I am just 
wondering whether, again from your end of the system, you can 
validate that general proposition for us.
    Mr. Broomfield.  That is correct. It is indeed in the 
application. Law enforcement agencies have to show how they 
have minimized the need for a wire tap, what they have done, 
up-to-date, to get the information they think they must have 
before they would even be entitled to get a court order.
    I do not have any sense that it is being abused currently. 
We are, as I say, in district court with a very heavy criminal 
case load and a very heavy drug case load.
    Mr. Skaggs.  Thanks a lot.

                               conclusion

    Mr. Rogers.  Thank you very much. We have had an 
interesting discussion. As Judge Heyburn pointed out in his 
opening statement, we are two different branches of government.
    It is a strange situation where that independent branch 
comes to the other branch to get funding to operate the 
independent branch.
    I think we have a very careful and time-intensive role on 
the Committee and in the Congress in reviewing your spending 
requests. Normally, we move the process along in the direction 
of trying to provide essentially what the courts ask for.
    We feel obligated to comb through it with a fine toothed 
comb to be sure it is something we can defend, not only to our 
colleagues, but to the country at large.
    So, it is a matter of great trust that we have between us. 
Again, we will comb through your budget request with a fine 
toothed comb. We will try our best to give you the appropriate 
funding to operate the nation's justice system.
    We hope it will be an ongoing process. We trust and hope 
that our staffs will stay in touch as we approach the time when 
we must put finally the pencil to the paper this late spring or 
whenever we have to refine the request down to the pennies.
    Mr. Heyburn.  We very much appreciate the opportunity to 
appear before your committee and to work with your staff.
    Mr. Rogers.  It is also nice to have a chairman of the 
budget committee who does not speak with an accent. Thank you.


[Pages 195 - 197--The official Committee record contains additional material here.]



                                      Wednesday, February 25, 1998.

                       LEGAL SERVICES CORPORATION

                               WITNESSES

DOUGLAS S. EAKELEY, CHAIRMAN OF THE BOARD
JOHN N. ERLENBORN, VICE-CHAIRMAN OF THE BOARD
JOHN McKAY, PRESIDENT

                   Chairman Rogers' Opening Statement

    Mr. Rogers. The Committee will come to order.
    Let me say that this is the first session of our 
Subcommittee in the new year. I am blessed to be a part of a 
Subcommittee whose members I like, admire and respect. We have 
got the pick of the crop, I think, on our Subcommittee of the 
whole House, and we have got some very dedicated, articulate 
and smart Members of Congress.
    I am blessed with the best Ranking Member that there is in 
the Congress, and I am in favor of establishing an award that 
rewards the best Ranking Member, and the first recipient is 
Alan Mollohan.
    Mr. Mollohan. I am afraid to hear what the prize is. 
[Laughter.]
    But I appreciate it.
    Mr. Rogers. But we do have some excellent Congressmen on 
our Subcommittee, and people who have been here a while and 
understand the bills and the agencies that we deal with.
    Mr. Mollohan. Thank you, sir.
    Mr. Rogers. This morning we begin our hearings for fiscal 
year 1999, and we would like to welcome the Chairman of the 
Board of the Legal Services Corporation, Douglas Eakeley; the 
Vice-Chairman of the Board and a former colleague of ours, who 
distinguished himself in service from Illinois in this 
Congress, John Erlenborn, whom we are pleased to see; and the 
new President of the Corporation, John McKay, who is appearing 
for his first time before the Committee. He will learn that we 
always have a very pleasant exchange in the Subcommittee with 
the President. But we are pleased to have all of you with us 
today to discuss your 1999 budget request for the Legal 
Services Corporation.
    Your budget request totals $340 million for fiscal year 
1999, a 20 percent increase over the amount you have now for 
1998. It has been less than a year since the Congress enacted, 
and the President signed, legislation to balance the Federal 
budget.
    As a result, this Committee will face the very difficult 
task of doing its part to implement the Balanced Budget 
Agreement, while at the same time finding a way to fund a 
number of competing and equally important priorities--
everything from the War on Crime and Drugs to the decennial 
census, which goes through this Subcommittee's funding process.
    So it is going to be another year of tough choices, and we 
will be looking for ways to maximize inadequate resources.
    In addition, there are numerous policy issues which we are 
required to face because the authorizing committees refuse to 
act in many cases. The entire Justice Department has been 
unauthorized ever since I have been in Congress, for example, 
and most of the Commerce Department is unauthorized. The State 
Department has been unauthorized for many of my 18 years in the 
Congress. So it falls upon this Subcommittee, not only to find 
money to fund the agencies that we cover, but to also pass the 
authorizing laws that authorize the very existence of all of 
these agencies.
    To me, it is passingly strange why the authorizing 
committees refuse to discharge the responsibility they were 
elected to do, and the Legal Services Corporation, obviously, 
has not been authorized since 1980. And we are required to do 
that, and that is where we get into the harsh environment of 
the floor trying to hash out policy issues that we don't have 
the responsibility to deal with and we are not equipped, 
frankly, to deal with because we cover such a broad range of 
the government.
    Nevertheless, we will have those numerous policy issues 
again, I am sure, to debate how we ensure that indigent people 
have access to America's civil legal system.
    Clearly, this Committee is well aware of recent actions 
related to implementing the reforms adopted by the Congress 
over the last three years and proposed to be continued in the 
fiscal year 1999 budget request. We will be watching closely as 
LSC implements and oversees the changes that have been made, 
both by you and by the Congress.
    At this point, we will insert into the record each of your 
written statements and, in a moment, I am going to allow you to 
proceed with your oral summaries.
    Mr. Rogers. One of our members, though, is Chairman of 
another Subcommittee of the Appropriations Committee, Ralph 
Regula, and he has a hearing at this moment of his own 
Subcommittee. I appreciate him being here for at least a part 
of our hearing, and I am going to allow Ralph to proceed 
quickly out of order, so that he can go back to his 
Subcommittee.
    Ralph, before they make their statements, would you like to 
proceed?
    Mr. Regula. Thank you very much. I would add there is the 
same frustration in our Committee that you have that we deal 
with a lot of unauthorized issues, and the authorizers just 
simply seem to ignore their responsibilities in that respect.
    Unanimous consent to put questions in the record.
    Mr. Rogers. Without objection.
    Mr. Regula. One question that I have, Mr. Erlenborn, you 
were here when there was a lot of criticism of the Legal 
Services Corporation because it was politicized, and now that 
you are on the other side of the table, what has been your 
experience as far as the politicization of the activities of 
Legal Services?
    Mr. Erlenborn. Thank you for the question. It is good to be 
here this morning to see all of you, in particular, a couple of 
the three members, I guess, that I served with before I left 
here about 13 years ago.
    To answer your question, I was involved initially in 
managing the legislation that created the Legal Services 
Corporation during the Nixon Administration, handling it on 
behalf of the Republicans from the Education and Labor 
Committee. That is back in the days when it was called that. It 
has changed its name several times since.
    Over the course of the years, I was disturbed by some of 
the things that were being done by grantees of Legal Services 
Corporation. There were many things that I thought that were 
the type of cases they just should not have touched, 
particularly those that were so politically sensitive, such as 
redistricting, reapportionment, suing state, county, city 
officials, and the day-by-day needs, the real needs of the poor 
were not necessarily being served by that, in my opinion.
    And so I can say, generally, many of the limitations and 
restrictions that have been placed upon the Corporation by the 
Congress in recent years, if I had been here, I would have 
supported.
    Now, when I joined the Board, for the second time--I 
served, by the way, under appointment from President Bush in 
1989 and 1990, and I won't go into the reasons for my leaving 
at that time--but I rejoined the Board a little over a year 
ago.
    I testified before this Committee last year for the first 
time. What I said then I can say, again, today, only with 
greater emphasis, and that is that there is no politicization 
of the Corporation. It is not being run by a cabal of far-left 
activists. As a matter of fact, I served on the Board for some 
time before I found out which of the members were Democrats and 
which were Republicans.
    It is a board that works together without rancor. It is a 
board that is dedicated, and I can attest to this because I 
serve on the subcommittee that drafts the regulations to 
implement the restrictions that Congress has enacted, and both 
that committee and the full board have done, in my estimation, 
everything possible within our purview of what we could do to 
see that the restrictions that Congress has imposed are 
implemented, not just to the letter, but also to the spirit of 
the law.
    I enjoy my service on the Board. As a matter of fact, I 
enjoy it much more than I did some almost ten years ago, when 
the Board was split, at each other's throats, and really it was 
quite dysfunctional. This board and the administration of the 
Legal Services Corporation today is unified and doing 
everything possible, and I think being very successful in 
seeing that the restrictions are implemented, as well as seeing 
that the proper operation of the grantee agencies is such that 
they are providing the services that Congress contemplated.
    Mr. Regula. Thank you and thank you, Mr. Chairman.
    Mr. Rogers. Thanks for being with us this morning.
    Now, at this point, we will insert into the record each of 
your written statements, and we would ask that you proceed with 
your oral summaries of your testimony.
    [The information follows:]


[Pages 202 - 221--The official Committee record contains additional material here.]



          Opening Statement of the Legal Services Corporation

    Mr. Eakeley. Thank you very much, Mr. Chairman, and I thank 
Mr. Regula for coming over and taking the time from his busy 
Subcommittee as well.
    As the Committee knows, I am an attorney in private 
practice in Roseland, New Jersey, and serve pro bono as 
Chairman of the Board of the Legal Services Corporation. I just 
want to add a few words to our formal submission.
    When we testified before this Subcommittee almost exactly 
one year ago, we were just concluding a period of transition, 
which had been going on for most of the preceding year, since 
April of 1996, when Congress made a variety of changes in the 
Legal Services delivery system. These included a new system of 
competition for grants, a new system of compliance monitoring, 
and a variety of new rules governing the kinds of activities 
that Legal Services' attorneys can engage on behalf of their 
clients and the kinds of clients they can represent.
    That period of transition is now over. The new systems are 
in place and working effectively. The constitutional questions 
relating to the Corporation's regulations implementing the new 
requirements appear to have been successfully resolved.
    As you have heard from the Corporation's Inspector General, 
who is also here today, the first round of compliance audits 
under the new system showed that the overwhelming majority of 
local programs have brought themselves fully into compliance 
with the new requirements.
    With these tasks behind us and the system working as, we 
believe, you intended, the Corporation has been able to turn 
its attention to the future. We have developed a strategic plan 
to guide us in the coming years as we seek to find new ways to 
expand and improve access to justice for low-income Americans.
    We have a new President, John McKay, who is with us here 
today, to lead the Corporation in those efforts. I will be 
turning the podium over to him in a moment to tell you about 
our plans, but first I would like to ask the Corporation's 
Vice-Chairman, John Erlenborn, to say a few additional words to 
those that he has already addressed in responding to Mr. 
Regula's question.
    Mr. Rogers. So recognized.
    Mr. Erlenborn. I thank you, Mr. Chairman and Mr. Chairman.
    I really stated most of what I had in prepared initial 
remarks. Let me say one other thing, though, that I believe 
that, as the Chairman has stated, the results are already 
coming in to show that the leadership of the Legal Services 
Corporation, both the Board and the management of the 
organization, what they are doing has produced the kind of 
results that the Congress was hoping for, and I think thatthat 
is ample evidence of the fact that they are doing the job that has to 
be done.
    I would also like to think that in the last--and from a 
partisan standpoint, let me say--in the last nine or ten 
months, we have had a Republican President of the Corporation, 
a conservative Republican, and I should think that this shows 
the bipartisan nature of the actions of the Board in choosing 
John McKay as our President. He has some great ideas for 
proactive management of the Corporation and the grantees. I 
think he has done an excellent job so far that bodes very well 
for the future.
    Mr. Eakeley. Now, Mr. Chairman, if I may introduce John 
McKay, our new President, and just say a few words about him.
    We found Mr. McKay as a result of a nationwide search that 
we conducted for a new President after Mr. Forger decided to 
step down. Mr. McKay was in private practice in the State of 
Washington, where he distinguished himself both in terms of his 
advocacy for his paying clients, as well as for his many pro 
bono efforts and, most recently, as Chairman of the Equal 
Justice Coalition in that State.
    He also had been president of the Young Lawyers Division of 
the State Bar, which was essentially a service organization.
    Mr. McKay is no stranger to Washington, however. He has had 
two tours of duty here in the District; first, as a legislative 
assistant for the late Congressman Joel Pritchard, Republican 
from Washington, and later as a White House Fellow during the 
Bush Administration, when he worked for FBI Director William 
Sessions.
    It has been a wonderful experience having John on board. I 
said this publicly before, but I find him exhausting at times 
because he is in perpetual motion. He has challenged all of us 
to look anew at what we are doing, and why we are doing it, and 
how we are doing it, and to explore new ways of making sure 
that we fulfill the congressional purpose of securing access to 
justice for those who need it, while living up to the letter 
and the spirit of the restrictions that are, as we recognize, a 
precondition for continued congressional support.
    So let me introduce our new President, John McKay.
    Mr. Rogers. So recognized.
    Mr. McKay. Thank you, Doug. Mr. Chairman, thank you, and 
Members of the Subcommittee. I consider this an honor to be 
here and have an opportunity to help present our fiscal year 
1999 budget.
    I would like to say that my background, in terms of Legal 
Services, has been as one of the thousands of volunteer lawyers 
around the country who, through, one way or another, a local 
Legal Services office, have done free legal services for 
indigent people. I think it is one of the secret strengths of 
the Legal Services Corporation and the Legal Services system 
that many lawyers like me, regardless of their own political 
backgrounds, if any, are interested in one simple thing, and 
that is to help ensure that everyone has access to the justice 
system.
    To me, and I think to all of those who participate, that is 
a very nonpartisan concept and that, I think, is where, as our 
Vice-Chairman, Mr. Erlenborn, indicated, where we really ought 
to be and what we ought to be perceived as, as a nonpartisan 
key and essential part of the justice system.
    When I came to the Corporation a little more than nine 
months ago, I was pleased, really, to learn that I would be 
working for and with a board that had that same view about 
access to justice; that is, that our primary function is to 
serve as the gateway, if you will, to the justice system for 
poor people, to make sure that access to justice and that equal 
justice applies to them as well as to everyone else. That is 
the fundamental basis from which our board approaches its job, 
and I want to report further to you that that is the way our 
staff views their job, and I am pleased to see, as I have 
worked more closely with the staff over these last several 
months, how truly outstanding they are, and I want to 
compliment them on some of the difficult tasks that they have 
had, particularly, as we have moved to efficiently, carefully, 
and aggressively implement the will and the intent of Congress.
    I want to just indicate, Mr. Chairman, that I appreciate 
your opening remarks regarding the financial situation, the 
fiscal situation, that faces this Committee and faces the 
Congress. We are very much aware of that and, as we have 
submitted our proposed budget for fiscal year 1999, we have 
borne that very much in mind.
    I hope that as the Committee has the opportunity to review 
the particulars of our budget request, that the increase that 
you mention over our current appropriation level of $283 
million are essentially threefold.
    The first is, I believe, a modest increase based on, 
essentially, a cost-of-living adjustment to maintain our 
ability to provide current levels of service to the field.
    The two other areas are areas which we think are really of 
critical importance to the Legal Services delivery system.
    The first is a client self-help and technology 
appropriation, which includes a one-time request of $10 
million.
    The second are programs, specific grants out to the field 
which are specifically tailored to reach the special needs of 
domestic violence victims and the unmet legal needs of 
children.
    We have arrived at these priorities, in part, because we 
have surveyed our own grantees to determine what the 
mostpressing needs are, and we are absolutely convinced that those are 
very important areas that we need to be involved in.
    So I know that our prepared statement has more detail. The 
budget itself contains the particulars. We look forward to the 
opportunity to respond to any questions that the Chairman or 
the Committee Members have.
    Again, I thank you for this opportunity. It is a privilege 
to be a part of what I think is really a model public-private 
partnership.
    Mr. Rogers. Well, thank you, all three, for your excellent 
statements.
    We all know the situation that we are all in here. There 
being no authorization of LSC, every year it falls upon this 
Subcommittee, as I have said, to not only appropriate your 
funds, but to pass an authorizations bill and, of course, that 
violates House rules to authorize on an appropriations bill.
    Consequently, when the bill comes to the floor, it is 
required that that rule be waived or else a single person can 
stand up and object and the bill is off the floor.
    Consequently, it means that every single member of the 
House has to be unanimous, if you will, on the passage of the 
authorization bill, unless the rule protects the bill.
    So therein comes the rub. And, again, it falls on deaf 
ears, but the authorizers ought to act. That is the simple 
answer here.
    And, again, I doubt that they will. So we are in the same 
mode, as we have been since I have been in Congress, 
particularly on this Subcommittee.

              interest on lawyers trust accounts programs

    Now, there is a new twist to your funding, the IOLTA aspect 
of your financial base. If I am not mistaken, 40 percent, 
roughly, of your total funds come from non-Federal sources; the 
largest non-Federal source being the States' Interest on 
Lawyers Trust Accounts programs, the IOLTA programs, which is a 
big chunk of your financial base.
    As you mentioned in your written statement, the Supreme 
Court is currently considering the constitutionality of the 
IOLTA programs, which have been declared unconstitutional by 
the Fifth Circuit.
    Do you have an idea of when that decision may be rendered?
    Mr. Eakeley. No, I don't. I think it is hard to predict 
when the Court will decide.
    Mr. Erlenborn. It has been argued, I believe.
    Mr. Eakeley. Yes, it has been.
    Mr. Erlenborn. Mr. Chairman, if I might just add, you are 
correct in that a good deal of funding for the grantee agencies 
that we fund also comes from IOLTA, but I would point out, for 
the record, that none of those funds flow through the 
Corporation. We do not make the IOLTA grants. That is done at 
the State level.
    Mr. Rogers. Can you tell me how much money the IOLTA 
programs expect to generate during the fiscal year 1999 year 
for the State program grantees?
    Mr. McKay. I believe, Mr. Chairman, that our recipients 
will expect to receive approximately $50 million in total.
    Mr. Rogers. In the event the Court strikes down the IOLTA 
contribution, how will that affect LSC and the local grantees 
and the various States?
    Mr. Eakeley. That will be a serious loss of an important 
revenue source, the second largest source of revenues after the 
Federal funding for the programs across the country, and that 
will mean a further reduction in our ability to meet an already 
overwhelming set of unmet legal needs of low-income persons.
    Mr. Rogers. Will all of the States be impacted equally by 
that decision?
    Mr. McKay. Well, Mr. Chairman, as each State receives a 
different amount--it is a question of how many funds are 
actually in lawyer trust accounts in a particular State. So 
based on the lawyer population, the client population, the 
numbers would shift.
    But I think what our Chairman said is absolutely accurate. 
There would be a huge impact among our recipients and others 
who provide legal services if IOLTA were to disappear.
    Mr. Rogers. The States vary on how much of the percent of 
the local program gets funds from IOLTA. It varies quite 
dramatically, I think, from State-to-State.
    Mr. McKay. Yes.
    Mr. Rogers. Given that the States created the IOLTA 
programs and, in many cases, support non-LSC programs with 
those monies, it seems that this is very much an issue which 
the States will have to address if the Court knocks down the 
IOLTA contribution. Do you agree with that?
    Mr. McKay. My view would be we would all have to address 
that problem.
    Mr. Rogers. Are there any efforts by the States to replace 
IOLTA funding, that you are aware of, through some other State 
mechanism in light of the court challenge?
    Mr. McKay. I don't think so, at this point, Mr. Chairman. I 
think what is happening is everyone is looking at the Supreme 
Court, and those who are responsible for obtaining funding are, 
I think, on their knees in prayer in hopes that it does not go 
away.
    Mr. Rogers. Well, it is something we are going to have to 
deal with, perhaps.
    Mr. McKay. Very much so.
    Mr. Rogers. No one knows what the Court will do or when.
    Mr. McKay. I think that is right.
    Mr. Rogers. But it seems to me that there is a reasonable 
chance that they could uphold the lower Court. Not knowing 
anything about the merits of the case, the Fifth Circuit is not 
an insignificant place.

                   puerto rico legal services program

    Quickly, our colleague, Congressman Lobiondo of New Jersey, 
brought to my attention the problem involving an LSC grantee 
employing questionable tactics in his district against farmers. 
He explained the problem to me that when serving complaints 
against New Jersey farmers, the Puerto Rico LSC grantee is 
filing its complaints and other actions in Spanish rather than 
English. As a result, the farmers are at some great 
disadvantage in trying to respond in a timely manner in those 
cases. Clearly, that is not acceptable.
    Are you aware of the problem and has there been any action 
taken on that?
    Mr. Eakeley. We are aware of the problem. I think it has 
been resolved, but it is, in part, due to a lack of resources. 
The Puerto Rican program, acting within the law, apparently, 
served process written in Spanish on defendants in New Jersey. 
I guess they provided them with notice in advance that this was 
coming, but did not provide them with certified translations, 
which cost money, and this was a State proceeding and needed 
not to be translated.
    That program has now voluntarily undertaken to provide 
certified translations of all process served on defendants 
residing in other parts of the United States.
    Mr. Rogers. Have you had a similar problem anywhere else?
    Mr. Eakeley. Not to my knowledge. We have the undertaking 
in writing, although it will be a substantial cost to provide 
that certified translation, but that is the undertaking that we 
have received.
    Mr. Rogers. I have other questions. I will wait my turn.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman, and thank you for 
the kind introductory words. I appreciate them. I certainly 
appreciate the way you conduct the Subcommittee and allow the 
minority to input the process. We are appreciative of that 
attitude and also of the fine and competent way in which you 
manage the Subcommittee. So we look forward to starting the 
hearing process.
    Mr. Rogers. You are now trying to copy my predecessor.
    Mr. Mollohan. Yes, sir. I don't know what is coming. 
[Laughter.]
    I would like to join the Chairman in welcoming the 
distinguished witnesses to the hearing here today.

                    west virginia program reductions

    We have been in communication with Mr. Jim Martin, who is 
head of the West Virginia Legal Services program. I note that 
from 1995, when your appropriation was $400 million, to 1998, 
when your appropriation was $283 million, that you experienced 
a very large decrease in funding.
    Mr. Martin indicates that funding increases have impacted 
West Virginia very dramatically and very seriously and limited 
the capability of the three programs in West Virginia to 
deliver legal services under this program.
    I would like to ask you for comments, using West Virginia 
as an example. Mr. McKay, I understand you are going to have 
the primary responsibility for operational running of the 
L.S.C. Therefore, I would like you to talk about that reduction 
in service to West Virginia as a result of this decrease in 
funding, recognizing that this funding decrease is probably a 
reality, as the chairman explained, for a number of reasons.
    This funding level is probably a reality for the future, 
however the sentiment might be on the committee to want to 
increase funding.
    So how, in that prospect of scarce resources, what kind of 
strategies can be employed with regard to providing quality 
legal services to our people?
    Mr. McKay. Congressman Mollohan, you are right in, I think, 
both of your assumptions, which are that nationally, as well as 
in West Virginia, there has been a very dramatic impact in the 
reduction in funding for the Corporation.
    We start from a recognition that the Corporation retains 
less than 3 percent of the overall budget for administrative 
purposes and that the funds go out to the field programs in 
places like West Virginia to deal with the everyday critical 
legal problems of poor people. Using West Virginia as an 
example, I believe before there were significant cuts in the 
budget you referenced in excess of $400 million, there were, 
approximately, 17 or 18 offices in West Virginia.
    Mr. Mollohan. Forty lawyers and now there are 15.
    Mr. McKay. A greatly reduced number of staff lawyers in 
order to meet the reduction in funding. There is a direct 
impact in the reduction of funding and the level of services 
that we can provide to poor people.
    What we have found is that in dealing with the reductions 
with two things are happening; one, the level of urgency that a 
case has the bar has risen. Not only do you see offices closed 
and staff levels reduced among staff lawyers, but you end up 
with situations like, if I could use an example from my home 
State of Washington, in the City of Everett, Washington.
    Shortly before I came to the Corporation, the staff there 
had to issue an instruction that they could not represent a 
woman who called the office and said that she was a victim of 
domestic violence. She could not see a staff lawyer unless she 
could say she had been beaten within the last 24 hours.
    Now, that is a dramatic example, but it is not apocryphal. 
It is, in fact, a situation that has occurred in offices around 
the country as a response.
    The second part of this, and what we want to do at the 
Legal Services Corporation is to accept--we do have, as you 
pointed out, a level of funding with which we must work, and so 
the second half of the answer to your question is we are 
working every way we possibly can with what are limited 
resources to try to reach as many poor people with critical 
needs as is possible.

                  technology-based delivery mechanisms

    One of the most exciting new programs that we see, as we 
try and look to the future with some hope and some 
anticipation, one of the exciting things is the new technology, 
which allows us to do telephone intake, brief advice and 
referral.
    Many times we are finding, and a number of programs have 
been able to put together the hardware and the software 
necessary and the telephone equipment to do this, that we can 
reach some legal problems before they get to the point 
wherethey have to be filed in court through brief advice and referral. 
But we may be able to send, for example, the woman who is the victim of 
domestic violence to another agency to get some assistance before it 
evolves into an issue that a lawyer has to get directly involved in, 
but some brief advice and referral can be very helpful. This is a new 
and better way, more efficient way, and maybe a more effective way, in 
some circumstances, to do more with less.
    And so we recognize that we must deal with the funding 
level, as it currently stands, and we are doing our very best 
to try and come up with new solutions.
    But the situation in West Virginia is not unusual. It is, I 
think, a good example of what is happening around the country.
    Mr. Mollohan. But how do we really reach those geographic 
areas? You are talking about a jurisdictional basis where you 
are raising the bar with regard to cases.
    And I am wondering if this technology initiative that you 
are undertaking here might not be addressing that aspect of the 
problem. Would you describe it in terms of being able to 
outreach for us here today?
    Mr. McKay. Yes. Exactly. You are correct in assuming that 
there are portions of States which otherwise would have had an 
office that, perhaps, someone could find who was in critical 
need of legal services. The telephone system is really an 800 
system, and what our grantees or our recipients are attempting 
to do is provide greater coverage through the use of the 
telephone, an 800 number where they can call and get advice.
    Mr. Mollohan. Is that the extent of your technology 
initiative?
    Mr. McKay. It is part of what we are attempting to 
accomplish in our technology, our $17 million special request 
this year in our budget. Yes, we want to be able to provide to 
grantees the opportunity to purchase the initial equipment to 
do that sort of work if they can otherwise satisfy us that they 
have a reliable grant.
    Mr. Mollohan. Purchase what equipment?
    Mr. McKay. Well, you would have to purchase telephone 
equipment, computer equipment, software to run the system. Our 
board, in fact, just was briefed this month at its board 
meeting on an analysis prepared by our staff, a survey of five 
programs that have adopted this new really cutting-edge 
approach of a telephone intake brief advice and referral 
system.
    It is not a perfect way to try to make up for the offices 
that were closed, for example, in West Virginia. But it does 
give us some hope that we may be able to be a resource for that 
battered woman who otherwise couldn't get to the office that 
was closed.
    Mr. Mollohan. I heard a report on technology being used in 
the District of Columbia, where people in need of legal 
services come into the courthouse, to access a computer, 
actually, a user-friendly screen, and go through a process of 
getting advice. It is hard for me to imagine a machine giving 
legal advice, being a lawyer. It is humbling, actually. 
[Laughter.]
    But maybe higher quality. [Laughter.]
    Is that notion any part of your technology proposal? I can 
see the usefulness of really reaching out into the remote areas 
of, for example, West Virginia. If it were successful, it would 
be a great way to save money.
    Mr. McKay. Absolutely, Congressman. There are a number of 
exciting programs. Most of these I think what you are referring 
to are the kiosks that a number of States have been 
implementing. They are appearing in Arizona, New York, and 
Georgia. They are beginning to spring up, and they are 
appearing in courthouses, libraries, and they, essentially, are 
either stand-alone or Internet-based providers.
    Mr. Mollohan. Is that idea a part of addressing this 
challenge, would you say?
    Mr. McKay. It is in two ways; one, in the $10 million, one-
time appropriation request, but we also request $2 million for 
demonstration projects and, in fact, the kiosks that you are 
mentioning are very much a focus of that proposal.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Rogers. Mr. Taylor.
    Mr. Taylor. Mr. Chairman, thank you.

              farmworkers legal services of north carolina

    My concern with this organization is not just happening. Of 
course, I believe that government will mess up a one-car 
funeral, and if we could get pro bono work, and I am not--a 
question about that in a moment--but in what was just said, we 
tell a woman she will receive no advice unless she has been 
beaten because our resources are so scarce.
    And, yet, Mr. Chairman, the Farm Workers Legal Services of 
North Carolina is a subgrantee of LSC, and in January of 1998 
Farm Workers Legal Service of North Carolina sent letters to a 
number of Mexican farmers at their homes in Mexico. The letters 
announced that in February, which is a good time to be out of 
the States and be in Mexico, which wehave a lot of snow, they 
will be visiting Mexico to discuss the H-2A Agricultural Workers 
program, and they invite the recipients of the letter to come to the 
meetings--there are several dates mentioned. They are planning to stay 
some time there--and to bring their family and their friends.
    It goes on to say that they will be purchasing radios to 
present announcements and that sort of thing and for anyone in 
the community to call collect to North Carolina and discuss 
this matter.
    Now, I don't know whether these folks will be coming back 
to North Carolina. I don't know how much of Mexico will be 
educated, but this is a lot of money being spent to advise 
people in the H-2A Agricultural Workers about whatever is going 
on with that Farm Workers Legal Service.
    And, yet, you are saying we don't have the money to advise 
our clients here, the poor people here. How do we have all of 
this money to travel to Mexico and to advise people in Mexico, 
who may or may not be coming back to work, or may not ever go 
to work in the United States?
    Mr. McKay. Well, Congressman Taylor, I don't know 
specifically what outreach effort you are referring to, and I 
would be----
    Mr. Taylor. I would be glad to furnish you a copy of the 
letter, a copy of the legal service program that sets forth, 
Mr. Chairman, that they are a grantee, and here is the letter. 
We have translated it from Spanish into English, so you can 
read it.
    If you believe what they say in the letter, they are coming 
down, and I doubt if they are driving, and they will be 
spending a considerable amount of money to educate these folks.
    Mr. McKay. Let me just say, as a general proposition, that 
in terms of outreach on farmworker cases, if these folks are 
residing in Mexico and they are not citizens of the United 
States, I would certainly like to know about that outreach 
effort, and I would welcome the information that you have.
    You can understand that I haven't had the opportunity to 
review that. I would be glad to do so and supplement my 
comments.
    Mr. Taylor. It is always--there is a lot going on there. I 
am sure all three of you would be interested in it. We have to 
live with the consequences, you know, out across the country.
    Mr. Rogers. Before you leave that, if the gentleman would 
yield.
    Mr. Taylor. Yes.
    Mr. Rogers. Can you, for the record, when you go back, 
research this and give us a report on the status of this 
matter?
    Mr. McKay. I would be very pleased to do that, Mr. 
Chairman.
    Mr. Taylor. It is my understanding that H-2A workers are 
allowed to be represented due to a loophole in the last 
appropriations, and the restrictions placed on LSC by Congress 
it allowed that loophole, and we can't close everything.
    I wonder does LSC maintain statistics, for instance, as to 
how many non-citizens receive legal assistance from LSC each 
year under that loophole? Do we have any idea?
    Mr. McKay. I don't, Mr. Taylor, I am sorry. I can certainly 
get the answer to that question for you.
    Mr. Taylor. It is a concern. I believe in a Christian 
attitude, but we cannot serve the whole world, while people in 
West Virginia or North Carolina or wherever that have needs 
that we say we can't serve because of lack of money.
    Let me ask another question, then. The recent reports that 
I have seen in several newspapers, including the Legal Times, 
have indicated that the amount of pro bono work is increasing 
across the country. How large is the pro bono work, do you 
think, and how much of an impact has it had? Is that helping 
you?
    Mr. McKay. Very much. Yes. Each of our recipients, 
Congressman Taylor, are required to expend some of their funds, 
in part, seeking out volunteer lawyers like me. That was my 
involvement with Legal Services in my career was as a volunteer 
pro bono lawyer. Many lawyers volunteer their time.
    We, at the Corporation, want to encourage even more 
lawyers. The note of caution I would just add for the 
Subcommittee, however, is that the need for legal services and 
the types of subject matters that we need to handle for the 
poverty population in this country are such that we are very 
confident that the pro bono or volunteer legal services by 
private attorneys won't come close to meeting the needs of poor 
people in America.
    But answering your question directly, we welcome it, we 
support it, and we want to encourage more of it.
    Mr. Taylor. One final thing, Mr. Chairman. There is a North 
Carolina citizen who has been sued more than once, I think, by 
Legal Services, and I am not maintaining whether he is right or 
wrong, but he is served by Legal Services in Spanish, the 
complaint is, and that, of course, puts a burden, whether he is 
innocent or not. If he is innocent, it is a lot of extra time 
and that sort of thing.
    Do you not agree that at least the complaint should be 
prepared in English, since this is America, and the English 
language is one that we really recognize and that that would be 
at least something that Legal Services could do?
    Mr. McKay. Yes, I agree with you.
    In fact, I have asked our staff to contact our program in 
Puerto Rico. They have indicated to us in writing, which we are 
going to make part of the record, that in the future all of 
their complaints will be translated into English. It is legal 
in Puerto Rico, but I agree with you. I don't think that that 
is a wise way to do business, and we have corrected that 
problem.
    Mr. Taylor. Thank you.
    Mr. Rogers. Mr. Skaggs.
    Mr. Skaggs. Thank you, Mr. Chairman.

               legislative requirements and restrictions

    I notice in your submission you propose to delete section 
505, language that pertains to this year's appropriation, which 
we added in the last cycle, having to do with filing certain 
information about any cases filed by grantees. I infer from 
that that we have some evidence as to its utility and cost? I 
am just wondering if you would share that with us.
    Mr. McKay. I think you are referring, Congressman, to the 
Administration's budget proposal. Have I got this right? I 
think that is--yes.
    In the Administration's budget, apparently, they have not 
submitted that language. We have, at the Corporation, already 
begun the process to prepare a regulation which implements that 
provision and, in fact, we really have had no contact with the 
White House with regard to that specific provision.
    I think our staff made the position of our recipients clear 
that we didn't favor that particular language, but it is now, 
at this point, it is law, and our Board is moving forward to 
prepare regulations to implement that section.
    Mr. Skaggs. In your booklet it recites the fact that it is 
the same as submitted by the Administration. I didn't know 
whether to infer that you were providing it for informational 
purposes and not something as advocacy.
    Mr. McKay. I think you should consider it informational. We 
are moving forward with implementation of a regulation.
    Mr. Skaggs. In fact, section 505 says, ``Not later than 
January 1 you shall implement a system,'' so we are a little 
behind, I gather.
    Mr. McKay. We have, in fact, sent a letter with the force 
of our Office of Program Operations indicating to all of our 
recipients that they must, on an interim basis, begin gathering 
this material. The regulatory process does not allow us, and I 
think our Board will consider public comment to our proposed 
regulation at its Board meeting in April. So we are in that 
process as deep and as quickly as we can be.
    Mr. Skaggs. I want you to take an advocacy position as to 
the retention, or not, of this language.
    Mr. Erlenborn. Mr. Skaggs, I might add, as you are no doubt 
aware, that that was not language that came from this 
Committee. It was added on the floor. And we had discussion on 
the proposed regulation, which is now published out for 
comment, and some of the interpretations, which I think may be 
accurate of that language, would be that if a Legal Services 
grant was given to, say, a law firm to provide as the local 
Legal Services provider, that the provision would require all 
of the clients of that law firm, not just those that were being 
served as eligible clients, but all of the clients of the law 
firm would have to be identified in the filing; the name, the 
case number, and so forth, even though they were private 
clients of the law firm.
    So, as often happens, as I think we are all aware, 
sometimes amendments on the floor that haven't gone through the 
committee process may not have been refined as much as they 
should be.
    Mr. Skaggs. Let me ask you to take it one step further. You 
are being very gentle and circumspect.
    Mr. Erlenborn. It's my nature.
    Mr. Skaggs. Yes, yes. Do you see any useful purpose to be 
served by retaining this language?
    Mr. Erlenborn. I, personally, have not been aware of any.
    Mr. Skaggs. We, of course, carried forward into fiscal year 
1998 all of the restrictions that had been brilliantly 
introduced in earlier years. What would you all identify at 
this point as the two or three that seem, from experience now 
gathered, to be the most counterproductive in terms of 
providing good service to poor people?
    Mr. Eakeley. That is hard to answer and awkward to answer 
because we have really been intent upon making this work in a 
way that invites stability and increased funding.
    I think that if we ever got back to an authorization 
process, and we intend to seek to encourage the authorizing 
committees to take another look at us this year, that we will 
be in a better position to engage in a consideration and 
discussion about how well or badly some of the restrictions may 
impact upon the mission of the Corporation, which is to provide 
cost-effective legal assistance to low-income persons.
    But I would rather dodge your question today.
    Mr. Skaggs. I appreciate the candor of the dodge. I 
understand your assessment of the real world that you have to 
survive in. It is just, as I expressed a couple of years ago 
and last year, it is too bad it was not fixed.
    I assume that some of these areas have now been picked up 
by pro bono counsel or by other programs that exist out there. 
But you are proscribed even from having any role in such cases 
if they get outside funding; is my recollection correct on 
that?
    Mr. McKay. That is correct.
    Mr. Skaggs. So are we, to your knowledge, seeing 
situations, for instance, in which multiple cases are having to 
be filed that otherwise could have been handled in a class 
action?
    Mr. McKay. Oh, yes.
    Mr. Skaggs. Does that consume more time of more lawyers in 
your programs than it otherwise would?
    Mr. McKay. That is a pretty reasonable assumption.
    Mr. Skaggs. And aggravates your inability to serve all of 
the client needs that you would otherwise be able to serve?
    Mr. McKay. Right. Like my Chairman, Congressman Skaggs, in 
the wisdom of the Congress, the device of the class action is 
no longer available to recipients. We are certainly aware of 
some cases that have been filed that, as a practicing 
commercial lawyer, I think would normally have been filed, gone 
through the very rigorous process of certifying a class. That 
is not happening.
    As I said in my earlier comments, we prefer to look forward 
rather than back. We will make it work as best as we can on 
behalf of poor people.
    Mr. Skaggs. Well, I am not asking you to take an editorial 
position, but just to help us know the real consequences of our 
actions so that if they deserve to be revisited, we may have 
the data with which to then form a judgment.
    I suspect my time is up.
    Mr. Rogers. Mr. Dixon.
    Mr. Dixon. Let me follow-up on what Mr. Taylor was 
addressing, and that is the pro bono work.

                           pro bono activity

    I think the testimony before the Subcommittee in the past 
has been that pro bono work had reached some kind of plateau, 
and it is much more difficult now to expand the pro bono 
service.
    You were saying that part of the budgets of the grantees is 
dedicated to an outreach program to increase that. What is your 
measure of success going to be? What is your goal? And what 
makes you think that that can happen? I read the same article 
Mr. Taylor did. But the testimony here has been, well, there is 
kind of a plateau, and we have exhausted that potential market.
    So I am trying to figure out which is it?
    Mr. McKay. I think, from my own response as the new 
President of the Corporation, but coming to this from a pro 
bono background, I think that we can do more. I think that 
private lawyers can do more. But I also think that the need 
that is out there is far greater than the resources that the 
Federal government supplies, that State governments supply, 
that IOLTA programs supply that we have learned recently in a 
report by the Justice Department that there are thousands and 
thousands of unreported cases of domestic violence.
    If we can't, through our leadership at the Corporation and 
through our recipients, help bring more lawyers who aren't yet 
doing pro bono work into the system, that is not good for all 
of us.
    If the question is do I think that will meet the need in 
lieu of other resources, I will tell you resoundingly the 
answer to that is, no. I have been a defense lawyer. I have 
been a prosecutor. I have been a pro tem judge, and I am firmly 
of the belief that there is a vast unmet need; people who can't 
get into a Legal Services office or don't yet have an 800 
number that they can call to get some help. That is what 
motivates me to come to this. I know it motivates many other 
lawyers to volunteer their time.
    I am not going to turn away from the challenge of trying to 
bring more volunteer lawyers in, but I think the need is so 
vastly understated that we will not be able to address it 
through that device alone.
    Mr. Eakeley. And the reality of the private practice of law 
today is such that, while we believe there is more potential 
for encouraging more lawyers to do better at this, the 
pressures to deliver billable hours, almost to the exclusion of 
all else, continue to increase.
    So there is a challenge behind the potential that makes it 
difficult to do this without any resources to do it.
    Mr. Dixon. To some extent, you are saying two inconsistent 
things here. I was asking what does the outreach consist of and 
how are you going to measure success of this outreach?
    Mr. McKay. Exactly. We do have, as part of our recipient 
requirement, an obligation to involve private attorneys. That 
happens in a number of ways, including pro bono.
    Our recipients spend money doing training programs, for 
example. If I, as a volunteer lawyer, am assigned to a case in 
my hometown of Seattle, the likelihood is that is going to be a 
domestic case. It would be, at this point, unfortunately, 
malpractice for me to take that case unless I were trained, and 
so the Legal Services programs around this country are the 
principal trainers of pro bono lawyers, and I think that is a 
universally true statement across this country.
    So that the specific subject matter, poverty law work, the 
training that gets done of the volunteer lawyer is done by 
Legal Services lawyers, in many cases, and that is an expense 
to that office. That is part of the private attorney 
requirement that we suggest. There is also advertising in the 
sense that they will try and bring people in, explain the value 
of pro bono and what it really means to provide legal services 
to a poor person. A lot of lawyers just haven't had that 
opportunity.
    I guess maybe if there is an inconsistency it might be 
based on the relative levels of optimism here about the legal 
profession. I remain optimistic that we can get lawyers to do 
more, but I think I am enough of a pragmatist to say that our 
problem of the unmet need is so great that that is not the 
answer.
    Mr. Dixon. Would you provide the Committee next year some 
remarks about how successful this program is, or its lack of 
success?
    Mr. McKay. We'd be delighted.

               funding for domestic violence and children

    Mr. Dixon. I notice from your prepared statement that two-
thirds of your clientele is women or children and that you say 
that 70 percent of the increase in funding would go for an 
outreach program for domestic cases. Exactly what does that 
mean?
    Mr. McKay. What that means is we will be asking our 
recipients, Congressman, to propose to us new programs to 
provide legal services to women who are victims of domestic 
violence and the unmet legal needs of children.
    Those would include, we have specific proposals, I think, 
that have already been submitted by some of our grantees that 
are in our budget request, but there are a number of things 
that our grantees are telling us they would like to be able to 
do. Some are very simple. We need to add two staff lawyers to 
meet our crushing burden.
    Some are a little bit different; we need todevelop an 
expertise, for example, to assist children who are disabled. As the 
Committee is well aware, there are a number of new laws with respect to 
the eligibility of individuals and, in particular, children who are 
disabled. Oftentimes, as the Subcommittee knows, that will devolve into 
a legal question and someone may have to advocate for that child with 
regard to access to either education or to health care, and there needs 
to be training for that, and we probably need some new expertise as 
those State laws change.
    So we expect to get some proposals along those lines. We 
are looking for, also, new ideas. If we have a new submission 
from Kentucky or from Colorado or California or West Virginia, 
we would expect to learn from that submission, act as an agency 
that will promote that new idea to our other recipients. We are 
hoping it will sow the kinds of seeds for new ideas in outreach 
to, in particular, unmet legal needs of children and domestic 
violence victims.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. This just demonstrates sometimes the 
frustration of most of us. Here you are asking for a $23 
million increase in your budget, the biggest single item, for 
domestic violence initiatives and unmet legal needs of 
children.
    Last year this Subcommittee increased the funding of the 
Justice Department for violence against women, domestic 
violence programs in the Department of Justice, by 246 percent. 
In fact, this year, 1998, we provided $271 million, $74 million 
more than last year, $22 million more than what the 
Administration requested, aimed at domestic violence against 
women and children. It is laying there. The Administration has 
not gotten the money out and, yet, they complain about not 
having enough money to fight violence against women. The money 
is laying there.
    This Congress went overboard in providing more money for 
this type of effort, and this Subcommittee created and funded a 
new program within the Department of Justice specifically for 
the civil legal needs of domestic violence victims and made LSC 
local grantees eligible to apply for those monies. There is 
more money than you could ever use and, yet, I am not seeing it 
happen.
    And, yet, you come in here with a budget request for that 
type of thing, and there is money laying there that is a 
bottomless well.
    Now, tell me about it, how can you come in here in good 
conscience, with a straight face, and ask for more money for 
that when you know that your local grantees can apply for 
millions of dollars for that very purpose, and that is why we 
made it available because there is a dramatic problem out 
there, and your local grantees, the biggest, as you said, the 
biggest percent of their caseload is women and children, and a 
big share of that is domestic violence activities.
    There is money available for those local grantees to 
represent women and children who are in this battered condition 
right now, and those grantees can apply and get those monies 
from the Justice Department just like that. They haven't done 
it. What is wrong?
    Mr. Eakeley. Could I take a first pass and then turn it 
over to Mr. McKay or Mr. Erlenborn?
    Mr. Rogers. Yes.
    Mr. Eakeley. First, I think what we are saying in our 
budget request is that we recognize that the Congress shares 
the same priority to address a very serious problem that exists 
at all socioeconomic levels in our society.
    I think what we are saying also implicitly in the request 
is that we can do a lot with a lot less than allocated to the 
Justice Department.
    We have met several times. We had a meeting with the Deputy 
Attorney General and his staff, and there have been subsequent 
staff follow-up meetings to see how we can coordinate, to see 
how grantees can become eligible for grants under either the 
Violence Against Women Act or the Victims of Crime Act, but it 
is not quite as if that 246 percent increase in funding is 
available to be drawn down by grantees. It is limited, in many 
respects.
    The activities for which it can be used are limited to 
emergency services that don't really represent the full array 
of needs of victims of domestic violence, and we think that----
    Mr. Rogers. Let's just stop there before we get off on 
something else.
    Justice is not limiting it to those emergency conditions. 
If they are, they are doing it illegally and we'll stop it. 
Those monies were appropriated by the Congress for programs to 
prevent violence against women and children. We specifically 
made LSC grantees eligible knowing that your funding was going 
to be scarce. It is another big source of monies, which I am 
absolutely astounded have not been seen to by you and the local 
grantees. It is a huge new source of funding, and I am puzzled.
    You have never been bashful in the past.
    Mr. Eakeley. We have not been bashful with the Justice 
Department either, but we have identified obstacles that remain 
in the path of grantees qualifying for funds in a way that 
would permit those grantees to apply for those funds.
    Mr. Rogers. I would be interested to know today what those 
barriers are because tomorrow they will be gone.
    Mr. McKay. Well, if I may, Mr. Chairman. We are, as our 
Chairman indicates, we have at a number of different levels in 
the Justice Department been looking for some clarification on 
the Justice Department's----
    Mr. Rogers. Let me know, and we will help you see through 
that.
    Mr. McKay. We would be glad to seek the Committee's 
assistance.
    Mr. Rogers. We meet with the Attorney General Thursday.
    Mr. McKay. Our understanding is that a significant portion 
of those funds are not for civil legal representation; that 
they are, in fact, used in other ways by the Justice 
Department, but directed towards----
    Mr. Rogers. But there is $271 million there. You don't need 
that much. You just need a piece of it, and why don't you use 
it?
    Mr. McKay. We know we have a number of our recipients who 
are, in fact, already grantees of the Justice Department under 
this program. We, of course, encourage them to do so.
    We have now, and we are really learning of this anew, but 
we are aware of some barriers. We are working with the Justice 
Department here to try and resolve them. I can give you an 
example. Some of our recipients are finding that the grants are 
being made on a short-term basis and so, while they will apply 
for them on a short-term basis, they can't hire the staff 
necessary to continue that sort of legal representation.
    So this is what we are hearing from our recipients. We are 
trying to engage in a dialogue with the Department of Justice.
    If it involves civil legal representation of poor people, 
we will, and our recipients will, in the strongest terms, seek 
those funds from the Department of Justice.
    Mr. Rogers. Now, I am not talking about here monies that a 
local grantee would get to hire a social worker or to duplicate 
something that is already being done by some other agency. We 
have got monies in other agencies--Health and Human Services 
and the like--for that type of thing, and I think some of your 
applications are applying for things like social workers for a 
local grantee. That is just not going to happen. We have got 
people doing that already.
    But I am talking about money for local grantees to 
represent in court women and children who are being battered. 
That money is there waiting, and we put it there. We upped 
everybody's ante to put that money there, and I am absolutely 
chagrined that the White House/Justice Department has not been 
aggressive in spending that money, as we gave it to them, and 
all of the time wanting more money for this. They have got 
money laying there, just as they have got money in the INS 
laying there to hire Border Patrol agents that they won't hire 
and then get on television saying we need to increase or double 
the number of Border Patrol agents or do this. It is absolutely 
frustrating.
    I have never seen an Administration that is able to double-
talk more and more successfully than this one, and somehow the 
press doesn't take them to task for it. But that money is 
laying there.
    Mr. McKay. We are attempting to get as much as we possibly 
can for our recipients, Mr. Chairman, and we will continue to 
do that. We welcome the offer of the Subcommittee to assist us 
with the Department of Justice. We have begun a number of 
conversations at different levels in Justice to address what we 
see as some of the barriers, but I am confident that we will 
work some of those things out, and where there are funds 
available for civil legal representation of victims of domestic 
violence, you can be sure we will be attempting to get it.
    Mr. Mollohan. Mr. Chairman, may I just ask a follow-up?
    Mr. Rogers. Yes, I yield.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Did I understand you to say, Mr. McKay, that some of the 
grantees were pulling down this Justice grant money for 
domestic violence?
    Mr. McKay. Yes. That is correct.
    Mr. Mollohan. What percentage of them did you say were 
taking advantage of it?
    Mr. McKay. I would have to provide you with those numbers. 
I know----
    Mr. Mollohan. Will you?
    Mr. McKay. I would be glad to, yes.
    [Clerk's note.--The following information was submitted 
subsequent to the hearing:]

    Two Violence Against Women Act (VAWA) Grants are available 
to legal services programs. The first, the STOP Violence 
Against Women Formula Grants, are administered by the 
individual states and territories that receive the grants. The 
second, made available for the first time through the FY 1998 
Department of Justice appropriation, are administered by the 
Violence Against Women Grants Office (VAWGO) in the Office of 
Justice Programs (OJP), and provide $12 million specifically to 
provide civil legal assistance to victims of domestic violence. 
All LSC grantees received an application package for these 
grants from the Department of Justice in April, and decisions 
are to be handed down in early June.
    Based on a survey of all grantees conducted by LSC on June 
2 to which 215 of 262 grantees responded, approximately 20 
percent (50 programs) currently receive some funding pursuant 
to the Violence Against Women Act. Grants range from as little 
as $10,000 to over $100,000 in a few cases. An additional four 
programs received VAWA grants during previous cycles, but do 
not currently receive them. Additionally, nine programs receive 
VAWA grant money through a subgrant from another entity. Over 
60 percent of all LSC programs have applied for this type of 
funding. A significant number of programs, 101 of those who 
responded, or 38.5 percent, applied but did not receive 
funding.

    Mr. Mollohan. And then the other thing I heard you saying 
was that there are impediments to doing it. So how do those two 
sentiments not conflict?
    Mr. McKay. Some have taken, what my understanding is, the 
Department of Justice has categorized some of these funds for 
particular uses.
    Mr. Mollohan. The grantee?
    Mr. McKay. And so the grantees, while trying to fit within 
the terms of the Justice Department guidelines, some have 
successfully been awarded grants. We believe and understand 
that there are some impediments to our grantees obtaining those 
funds and, again, we are trying to work with the Department of 
Justice now to get those resolved. And I would like to say to 
the Subcommittee I think we are making some progress. It is a 
little soon to say. We would like to see more progress.
    Mr. Mollohan. That is a bit of clarification because it 
sounded like that money was unavailable to you at the beginning 
of your testimony.
    Thank you, Mr. Chairman.
    Mr. Rogers. The second bells have rung. We have about nine 
minutes left. Mr. Skaggs?
    Mr. Skaggs. I just have really one question which I would 
ask be answered for the record, since I don't expectyou to have 
data with you, and I will certainly ask the Chairman to bless the 
answering process as not involving any disloyalty to the law that now 
circumscribes what your grantees may do, if he is kind enough to do so.
    But I would ask if you could identify the one or, if there 
is a close call, two proscriptions that were introduced into 
the program back in the 104th Congress, that, in a 
dispassionate sense, seemed to be counter-productive; that is, 
which, if deleted, would enable you to make more cost-effective 
use of the funds that you have.
    Mr. Rogers. Do you want that information now?
    Mr. Skaggs. No. For the record.
    Mr. Eakeley. We will submit that, sure, the response.
    [Clerk's note.--The following information was submitted 
subsequent to the hearing:]

    The new Congressional restrictions that took effect in 1996 
have significantly changed the national legal services delivery 
system. Legal services attorneys are not permitted to initiate 
or participate in class actions. They may not challenge or 
engage in any activity to influence welfare reform. They may 
not engage in direct or grassroots lobbying on behalf of their 
clients, although they are permitted to use non-LSC funds to 
respond to written requests of officials for information or 
testimony. For cases and claims initiated after April 26, 1996, 
they may not collect court-awarded attorney's fees. Litigation 
on behalf of prisoners and representation of undocumented and 
other categories of aliens are also prohibited. Other new 
requirements address redistricting, cases involving eviction 
from public housing of individuals charged with or convicted of 
drug violations, participation in government rulemaking, and 
solicitation. Unlike past efforts to restrict the work of legal 
services, these provisions apply to all of the recipient's 
funds, with a few specified exceptions.
    The great need for critical legal services by indigent 
clients, coupled with the new restrictions, has resulted in a 
refocusing of many legal services programs. Over 98 percent of 
all legal services cases deal with basic legal issues including 
family, housing, income maintenance, consumer, and employment 
matters. LSC has mandated that all programs participate in a 
state-focused planning process to determine the best and most 
efficient use of Federal resources to meet the legal needs of 
low-income individuals. These state planning efforts, which are 
under way in every state, should provide valuable information 
on the impact and effect of new restrictions upon the legal 
representation available for poor clients.
    LSC continuously evaluates its effectiveness and the unmet 
legal needs of America's poor. While it is perhaps too soon to 
evaluate the impact of the new congressional restrictions on 
LSC's statutory mission, LSC will provide the committee with 
data and analysis when it becomes available. In the meantime, 
LSC remains fully dedicated to following the letter and spirit 
of congressional direction while serving as a model public/
private partnership to enhance access to justice.

    Mr. Skaggs. Again, I just wanted the Chairman's blessing 
that answering that question would not be seen as an act of 
disloyalty, but really one of informing Congress' judgment on 
this matter.
    Mr. Rogers. The gentleman would never be accused of 
disloyalty.
    Mr. Skaggs. Not me--them. [Laughter.]
    Mr. Rogers. Now, like we discussed last year, a group of 
grantees and outside parties filed a lawsuit challenging the 
constitutionality of the restrictions that the Congress placed 
on LSC. Where are we on that case and when do you expect that 
to be resolved?
    Mr. McKay. I am pleased to report to the Subcommittee, Mr. 
Chairman, that in the lawsuit in Hawaii, summary judgment was 
granted in favor of the Legal Services Corporation. That matter 
has been appealed by the plaintiffs to the Ninth Circuit. 
Argument is expected in March.
    In New York, the Court, after a lengthy delay, has declined 
to enter a requested preliminary injunction citing the action 
of the Court in Hawaii. That matter, also is scheduled for 
argument in March----
    Mr. Rogers. On appeal?
    Mr. McKay. On appeal. And so we are confident that the 
position of the Corporation, with respect to its regulations, 
which, of course, implement the congressional restrictions, 
will be upheld. We are confident, in part, because of the 
strong language of the case in Hawaii.
    Mr. Erlenborn. Mr. Chairman, if I might just add I think 
that this is an excellent example of how strong the Corporation 
has been and how sincere the Corporation has been in trying to 
see that the intention of Congress is carried out.
    With advice of counsel, we amended the offending 
regulation. It wasn't the law that was passed that was 
offending, but the way it was being implemented with a 
regulation.
    Mr. Rogers. Well, help me out here----
    Mr. Erlenborn. And we won the case.
    Mr. Rogers. Can you describe for us what the regulations 
regarding this matter are and how they will ensure that mirror 
corporations, using non-Federal funds, are not set up which 
would thwart congressional restrictions? How do the regulations 
prevent mirror corporations from being formed which would 
thwart congressional restrictions?
    Mr. McKay. Mr. Chairman, are you asking that question in 
the context of those lawsuits because they may be different 
issues. I would be glad to address it in either context.
    Mr. Rogers. The regulations that you adopted.
    Mr. McKay. I will take it in a broader sense than in terms 
of the regulations.
    The regulations that the Corporation currently has in place 
relate to program integrity, and within program integrity, we 
require each of our grantees, our recipients, to maintain 
records and to certify, first and foremost, that there is 
financial separation between themselves and any other entity 
that provides legal services that are restricted.
    Secondly, just to bottom-line the regulation, it also 
requires a certain amount of physical separation. The cases 
that you referred to--the case in Hawaii and the case in New 
York--both rely on a Supreme Court decision which provides 
entities some constitutional right to expression within those 
entities.
    So we have taken the U.S. Supreme Court case, followed that 
regulation with regard to program integrity.
    The construct that the Congress has set up involves a 
system of independent field auditors, and it is those auditors' 
responsibility to make sure that program integrity is 
maintained.
    Mr. Rogers. So can you assure me and assure the 
Subcommittee that the practice of mirror corporations is not 
occurring?
    Mr. McKay. Well, let me say this, that our recipients, 
consistent with our regulation, are not engaged in any 
impermissible contacts with affiliated other entities that 
perform restricted legal activities. So I hope you take that 
answer as assurance from us that no such activities are 
occurring.
    And I might just add that the independent field auditors 
perform their function, as the Congress requires the system to 
operate, under the auspices of the Office of Inspector General, 
and that the Inspector General then provides reports to both 
the Congress and to management, which is essentially my 
responsibility and the responsibility of my staff to follow up.
    Mr. Rogers. If you find an instance when a grantee is, in 
any fashion, participating in the formation or operation of a 
mirror corporation, which would have the effect of thwarting 
the congressional restrictions, will you notify the 
subcommittee?
    Mr. McKay. I believe the Inspector General will do so, and 
you can be assured that I will respond in a very careful, but 
aggressive manner if that occurs.
    Mr. Rogers. Well, thank you all for your appearance here 
this morning. We wish you the best. If you have anything you 
would like to add to the record, feel free to do so.
    Mr. McKay. Thank you, Mr. Chairman.


[Pages 242 - 255--The official Committee record contains additional material here.]



                                          Wednesday, March 4, 1998.

                   U.S. SMALL BUSINESS ADMINISTRATION

                                WITNESS

AIDA ALVAREZ, ADMINISTRATOR
    Mr. Rogers.  The Committee will come to order.
    We are pleased to welcome to the Subcommittee today the 
Administrator of the Small Business Administration, Aida 
Alvarez.
    The fiscal year 1999 budget request for SBA totals $724.4 
million, an increase of $8.3 million from the 1998 enacted 
level.
    Fiscal year 1999 promises to require yet more fiscal 
restraint. So, we will want to hear today about how SBA is 
improving its lending and other programs to support and assist 
the nation's small businesses in a climate of limited 
resources.
    We would like to know what program and administrative 
efficiencies are being achieved and what you see as the major 
opportunities and challenges facing SBA in the coming year.
    We are pleased to have the Administrator with us today and 
her staff. Madam, if you would like to proceed with your 
opening statement, we will make your written statement a part 
of the record and you can summarize it for us.
    Ms. Alvarez.  Mr. Chairman, how are you?
    Mr. Rogers.  Fine.

                           Opening Statement

    Ms. Alvarez.  Mr. Chairman, Mr. Mollohan was here a moment 
ago, Mr. Forbes, and Members of the Committee, thank you for 
this opportunity to appear before you today to present the 
fiscal year 1999 budget for the Small Business Administration. 
I am very proud to present this budget. It is arguably the 
strongest ever for America's small businesses, with record 
levels proposed in all of our major capital and credit 
programs, as well as in our entrepreneurial development 
programs.
    At the same time, we are able to achieve these record 
levels with only a modest growth of 1.16-percent in the overall 
resources for the agency. SBA is requesting total budgetary 
resources of $724.4 million.
    The Small Business Administration's fiscal 1999 budget 
offers small businesses unprecedented levels of capital and 
credit with $11 billion for the 7(a) General Business Loan 
Guarantee Program, $3 billion for the Section 504 Program, and 
$1.1 billion for the Small Business Investment Company Program.
    The funding level for the 7(a) Program is $1.8 billion more 
than the projected level for this year. The SBIC Program is 
more than triple the 1997 program level. I am particularly 
pleased to note that our budget proposes to decrease the fees 
charged to our Section 504 borrowers for the second straight 
year.
    SBA requests $901 million for disaster loans in 1999; an 
amount equal to the 10-year historical average level of 
disaster assistance. The SBA Disaster Loan Program provides 
families and businesses with a down payment on the future.
    As we speak, SBA employees are on location providing first 
class service to disaster victims, home owners, renters, and 
businesses which have been flooded by El Nino in California, 
frozen in the ice storms of New England or had their homes torn 
asunder in Central Florida.
    This year's budget also proposes a $15 million initiative 
to support mitigation activities to help small businesses 
prepare in advance for a disaster event, thereby reducing 
losses should the disaster strike.
    At the SBA, we are preparing ourselves and our small 
business customers for the 21st Century. The business 
environment in the 21st Century will be more diverse, 
technologically-driven, and global in scope.
    SBA's fiscal year 1999 budget will help prepare us for this 
future. SBA is already serving an increasingly diverse business 
population. Since 1992, we have more than tripled our loans to 
women, doubled our loans to minorities, and at the same time, 
the cost of our programs have gone down.
    In other words, lending to minority and women-owned 
businesses is good business. Our 1999 budget includes funding 
requests to more than double the funding for our women's 
business centers.
    With our $9 million request, SBA can establish an 
additional 30 new centers reaching our goal of establishing a 
Women's Business Center in every state. There are still 
considerable needs requiring government sponsorship with 
business development and training, especially in the 
procurement area.
    This is why we are requesting $9.5 million for the business 
training program known as 7(j). Through the 7(j) Program, SBA 
provides specialized training and executive development 
assistance to firms participating in the Section 8(a) Program, 
for example.
    The procurement landscape will expand to accommodate new 
8(a) participants, especially women. As it expands with the 
entrance of HubZone small businesses, we will need additional 
resources to provide the necessary training.
    The Fiscal Year 1999 budget reflects SBA's commitment to 
the now permanent MicroLoan Program. We propose to double 
MicroLoan levels from 1998 to 1999. I will work with the 
Congress to achieve a reasonable balance between the requested 
program levels and the demand for technical assistance funding.
    Just as technology will be a key to small business success 
into the 21st Century, so also technology is a key strategic 
piece of my overall mission to transform the SBA into a 21st 
Century leading edge financial institution.
    Upgrading our technology is an important part of upgrading 
our lender oversight capacity. We hope that the Congress will 
look favorably on our reprogramming requests to increase our 
resources for this initiative from $8 million, provided this 
year, to $18 million.
    The reprogramming will also allow SBA to increase available 
7(a) resources this year by $500 million to $9.5 billion. SBA 
already has one of the best financial management 
infrastructures in government.
    We were the only credit agency to receive an unqualified 
opinion on our 1996 audit. I was proud to learn this week that 
we will again receive an unqualified opinion on our 1997 
financial statements.
    However, I want to take SBA to a higher level. That is why 
the budget includes a $3 million initiative to allow the SBA to 
reach a standard of internal control comparable to ones sought 
by major private financial institutions.
    A 21st Century leading edge financial institution also 
protects the taxpayer against waste, fraud, and abuse. The SBA 
proposal requests $1 million to implement a system for criminal 
background checks on SBA borrowers.
    Our objective is to reduce losses in our loan programs. The 
SBA's budget proposal is modest in its request for increased 
resources, but far reaching in its vision for improving our 
services to America's small businesses.
    With this budget, SBA will continue to show small 
businesses the way to success into the 21st Century. Thank you 
for inviting me to appear here today. I have a written 
statement for the record which, of course, is much longer. I 
will be happy to answer any questions that you may have.
    [The statement of Ms. Alvarez follows:]


[Pages 260 - 275--The official Committee record contains additional material here.]



                         disaster loan program

    Mr. Rogers.  Well now, once again this year you are failing 
to request sufficient funds to provide for disaster loans. I 
assume that is at the request, again, of OMB.
    You play this game with us every year which means that the 
Congress will have to find a way to come up with the necessary 
monies from some other place. You request no new budget 
authority for disaster loans, in spite of the fact we are 
having a record number of disasters. Why is that?
    Ms. Alvarez.  Well, sir----
    Mr. Rogers.  Because OMB told you to; right?
    Ms. Alvarez.  Well, we certainly worked with OMB on our 
calculations and on our proposal.
    Mr. Rogers.  Did you request it of OMB or did they make you 
do it?
    Ms. Alvarez.  OMB asked us to explore proposing a cap on 
the interest rate of 6 percent.
    Mr. Rogers.  Yes.
    Ms. Alvarez.  Which would result in a reduction to the 
subsidy rate.
    Mr. Rogers.  Right.
    Ms. Alvarez.  And----
    Mr. Rogers.  So, the answer is OMB made you do it; right?
    And we hear that every year. I do not know why they go 
through this game every year. We have got to find the money. 
They know we have got to find the money to pay disaster loans. 
It is like closing the Washington Monument.
    We have got to do it. It means that they are playing tricks 
with the budget in order to file a balanced budget. It is 
trickery. It is unfair. It is not good government. It is 
sophomoric--tell them that. That will change it.
    Ms. Alvarez.  Maybe we should go in together and tell them 
that.
    Mr. Rogers.  So, you are going to be proposing again 
legislative changes that would increase the interest rates paid 
by disaster victims.
    Ms. Alvarez.  It would cap the amount, however, at 6-
percent.
    Mr. Rogers.  Yes. Here we go again. Why do you think that 
is a good idea?
    Ms. Alvarez.  Well, a 6-percent loan over 30 years is 
probably still a very reasonable loan, albeit that a disaster 
situation is a very stressful situation. Nobody ever wants to 
have to pay more.
    We think that it is a fair and reasonable expectation that 
they could pay 6-percent max on the loan. That would be spread 
out over 30 years.
    Mr. Rogers.  Well, presently it is capped at 4-percent; 
right?
    Ms. Alvarez.  Yes, sir.
    Mr. Rogers.  So, let me get this straight. The 
Administration is proposing to charge the poor people who 
cannot afford a loan anywhere else, two more percentage points 
when they are laying at death's door from a disaster. Is that 
right?
    Ms. Alvarez.  Well, sir, I think we have some very 
sensitive professionals who are providing first rate service to 
disaster victims. I have heard nothing but positive reactions 
to our disaster effort.
    Mr. Rogers.  Because they are paying 4 percent. You are 
proposing to increase it to 6 percent, at least. The poor 
people out there in California, and in Florida, and the other 
places, in Kentucky they have places in the country where we 
have got disasters going on right now.
    You are talking about people who cannot get a loan anywhere 
else because they are too poor or they have been wiped out. You 
are talking about ripping them off some more. Is that right?
    Ms. Alvarez.  Well, we are here to serve the American 
people.
    Mr. Rogers.  You are here to serve the American people with 
a higher interest charge.
    Ms. Alvarez.  I understand your perspective.
    Mr. Rogers.  Tell them where to leave that. Tell them that 
Congress is not about to act on increasing the interest rates 
on poor people who have been wiped out in a disaster and they 
cannot borrow money anywhere else.
    It defeats the whole purpose of the SBA Disaster Loan 
Program. So, where are you going to find this additional money 
that we are not going to give you on the interest rate increase 
of $700 million. Where are you going to get it?
    Ms. Alvarez.  Well, certainly Berky can comment, but of 
course when we asked for $901 million, it is really the result 
of a 10-year average. In fact, we really cannot predict just 
how much we will need in any given year.
    So, there is always the possibility that in fact we will 
not need the $901 million, which means that even if the subsidy 
rate were higher, we might be able to cover that cost.
    Mr. Rogers.  Well, you are anticipating disasters of $901 
million; correct?
    Ms. Alvarez.  Well, that is the historical average. Would 
you like to comment? Berky Kulik runs our disaster program.
    Mr. Kulik.  The figure of $901 million, is just an 
estimate. This year our estimate based on the same 10-year 
average was $785 million. As of now, we are running 
considerably below that figure.
    Once again, we cannot tell what that figure is going to end 
up as at the end of the year. It could very well be that we 
will have more carry over funds than we had anticipated.
    Mr. Rogers.  Well, the current projections, I am told, is 
that Florida alone can be accommodated within the projected 
disaster loan level this year of $785 million. We are talking a 
lot more than that around the country.
    Mr. Kulik.  We are talking about the possibility of a lot 
more. For the disasters that we now have in-house including 
Florida, the Northeastern States, and California; we have 
sufficient funds, very easily. Once again, we do not know what 
is going to happen during the balance of the year.
    Mr. Rogers.  I thank you. So, again, how do you propose we 
come up with this extra money since we are not going to agree 
to increase the interest rates on disaster loan borrowers?
    Ms. Alvarez.  If the subsidy rate does not go down because 
there is no legislative change, then we have the capacity or we 
would be funded to the amount of $335 million for fiscal year 
1999.
    Mr. Rogers.  That would not even pay the gasoline to go to 
California where all of the disasters are; would it not?
    Ms. Alvarez.  Well, we can only hope that there are no 
substantial disasters. But of course, even a crystal ball will 
predict there will be some activity.
    Mr. Rogers.  Yes. The average is $901 million; right?
    Ms. Alvarez.  Well, $901 million is what we estimate. We do 
a 10-year rolling average. That is what we estimate from that 
average.
    Mr. Rogers.  Again, my question is where are you folks 
going to find the money to pay for the disaster loans that we 
are not going to increase the rates to pay for them?
    I am going to wean you of this habit of coming here every 
year with what you know is going to be a ridiculously absurd 
idea of passing off on the Congress the idea of increasing the 
interest rates for these poor people, or finding a gazillion 
dollars somewhere else to offset it and make it happen.
    Now, we do not have that kind of money on this 
subcommittee. So, I am going to let the world know this is what 
your game plan is. We are not going to take the heat for it. 
So, you have got to find the monies.
    I am going to ask you to resubmit. I am going to allow you 
to resubmit your budget request. You are going to find those 
monies. If you do not, we are going to find them in places you 
will not like. Can I be plainer than that?
    Ms. Alvarez.  Very clear, sir.
    Mr. Rogers.  How soon can you resubmit your budget with 
realistic disaster loan monies in it?
    Ms. Alvarez.  I will certainly get back with OMB and talk 
to them about what we can do.
    Mr. Rogers.  We will reschedule you to testify at a later 
date.
    Ms. Alvarez.  That will be good.
    Mr. Rogers.  I see no reason to proceed further today, 
Gentlemen. Does anybody have word or thought about that?
    Mr. Dixon.  Mr. Chairman, I would just like to ask some 
questions about the existing conditions in California, if you 
do not mind.
    Mr. Rogers.  We will limit it to that. Does anybody else 
have anything they would like to bring up?
    Mr. Mollohan.  I would just like to follow-up.
    Mr. Rogers.  Please, Mr. Mollohan.
    Mr. Mollohan.  As explained, it does create a dilemma for 
the committee. Your request assumes an authorizing action that 
has not happened in a year since you requested it.
    As I compute your requested loan program $237 million, that 
is not going to touch the requirements--you are just going to 
have to find it from somewhere. That is a sizeable amount of 
money.
    Ms. Alvarez.  It is well-taken.
    Mr. Rogers.  We will allow her plenty of time when she 
reappears for questions in general, but if you would like to 
ask something.

                  disaster loan activity in california

    Mr. Dixon.  Yes, just in general.
    Ms. Alvarez.  I think you would like to get the latest in 
California.
    Mr. Dixon.  If you do not mind, Mr. Chairman. I hope that 
the disaster will have subsided and passed by the time she gets 
back here.
    As I understand it, you have enough money for the disasters 
that have occurred as a result of heavy rain in Southern 
California.
    Mr. Kulik.  Yes, for all of the declared areas in 
California right now.
    Mr. Dixon.  It is my understanding that March will be as 
bad as the recent months, as it relates to the storms. So, 
looking ahead, will you have enough funds?
    Mr. Kulik.  We are told that the storms are going to last 
into April also. As far as we can see now, even based on that 
kind of activity, we will have sufficient funds.
    Mr. Dixon.  So, all is going well in California as it 
relates to the coordination between FEMA and SBA?
    Mr. Kulik.  Yes.
    Mr. Dixon.  And SBA loans?
    Mr. Kulik.  Yes, very well. May the record show that my 
fingers are crossed.
    Mr. Dixon.  All right. It is my general understanding that 
the criteria are basically the same. SBA, well, first they go 
to FEMA. SBA will cover any non-insurable damage.
    Mr. Kulik.  That is right; any cost to repair or replace 
what was damaged in the disaster.
    Mr. Dixon.  Thank you, Mr. Chairman. They seemed to be 
doing fine in California thus far.
    Mr. Rogers.  Thank you. Madam, I am sorry to break off this 
hearing in this fashion, but until you can submit a budget 
request that is intelligible and reasonable, there is no point 
in having this hearing. So, we will see you in the next round.
    Ms. Alvarez.  I will be back.
    Mr. Rogers.  Thank you.
    Ms. Alvarez.  I hope. Thank you.


[Pages 280 - 292--The official Committee record contains additional material here.]



                                         Wednesday, March 18, 1998.

                U.S. SECURITIES AND EXCHANGE COMMISSION

                               WITNESSES

ARTHUR LEVITT, CHAIRMAN
JAMES McCONNELL, EXECUTIVE DIRECTOR
    Mr. Rogers.  The subcommittee will come to order.
    We are pleased today to welcome Arthur Levitt, Chairman of 
the Securities and Exchange Commission. He is accompanied by 
James McConnell, the Commission's Executive Director.
    The fiscal year 1999 budget request for the SEC totals 
$341.1 million; an increase of $26.1 million over the 1998 
enacted level. The Commission is responsible for the oversight 
of the nation's securities markets.
    In the past three years, these markets have experienced, I 
started to say extraordinary growth, but it is phenomenal 
growth, bringing new challenges for the SEC. We will want to 
hear today about how the SEC is maintaining market integrity 
and protecting the interest of investors in such a climate.
    We would also like to know what program and administrative 
efficiencies are being achieved at the SEC. Mr. Chairman, if 
you would like to proceed with your opening statement, we will 
make your written statement a part of the record.
    If you would like to summarize it briefly, we would welcome 
that. I note that you have been nominated for a second five-
year term. This would take you to 2003, if the Senate confirms 
you, I hope, as early as next week. So, we are truly looking at 
the man who is going to carry us into the next millennium.

                           Opening Statement

    Mr. Levitt.  Thank you very much, Mr. Rogers, Mr. Mollohan, 
and members of the Subcommittee. I appreciate the opportunity 
to testify here today in support of the SEC's budget proposal 
for 1999.
    We are grateful for the very strong commitment that this 
subcommittee has given to the Commission and its work. Our 
mission of protecting investors and promoting the integrity of 
our markets has never been more crucial.
    Consider the growth in our markets since 1980. Then, one 
out of every 17 American households was investing in our 
securities markets. Today, it is one household out of three. 
With that growth in mind, the Commission is seeking an 
appropriation of $341.1 million for 1999. This figure 
represents an increase of $26.1 million and 30 staff years over 
last year's level. I have tried to run the Commission as I have 
run other businesses. We have exercised strong fiscal restraint 
for the past four years, keeping our staffing essentially flat.
    I think we have fulfilled our broad legal mandate to 
protect investors without over-burdening taxpayers. When I 
testified here last year, we discussed the likelihood that the 
Commission would need to seek a modest budget increase this 
year.
    I am here to ask for your support as I make that request 
today. Our markets, as you say, are experiencing phenomenal 
growth in every area. The value of merger and acquisition 
activity increases at a record pace. The number of investors in 
our markets has grown to the highest level in history.
    The value of mutual fund assets is now greater than the 
total value of deposits in America's commercial banks. The 
additional resources that we request today will help the 
Commission keep up with those trends.
    The additional resources are intended to help our 
Enforcement Division step up the campaign to prosecute 
securities fraud, stop abuses in the microcap sector, crack 
down on fraud on the Internet, and pursue complex litigation 
when investigating a record number of insider trading cases.
    These resources will help our Division of Market Regulation 
assert effective oversight over the exchanges and over new 
technologies for trading. They will help our Division of 
Corporation Finance review companies' financial information, 
initial public offerings, and mergers and acquisition filings.
    They will help our Division of Investment Management and 
our Office of Investor Assistance keep Americans informed and 
protected as they invest, many of them for the first time ever.
    The year ahead presents the Commission with a number of 
challenging market developments. Our major management challenge 
is to retain experienced staff members to carry out our 
mission.
    The staff turnover at the SEC has increased dramatically, 
especially among attorneys, accountants, and securities 
compliance examiners. So, we have requested $7 million for 
retention allowances to help us keep highly skilled employees 
who would otherwise leave the Commission for private sector 
jobs. This is a pivotal step in ensuring consistency and 
experience in staff who bring important cases and oversee 
complex regulatory policies. Our capital markets are the 
strongest, deepest, and most liquid in the world. They are fair 
to investors. They are efficient for business. They are vital 
to our nation's economy. I know that you share my commitment to 
ensuring that they remain so. I look forward to continuing to 
work with you.
    Thank you very much, Mr. Chairman.
    [The statement of Mr. Levitt follows:]


[Pages 295 - 316--The official Committee record contains additional material here.]



                         fy 1999 budget request

    Mr. Rogers.  Mr. Chairman, thank you very much for your 
statement. Now, you are asking for 45 new FTE, $7 million for 
retention allowances, $5.7 million for automation improvements, 
and $700,000 for litigation support.
    Can you tell me which of those are your highest priority? I 
know they are all important to you, but try to qualify that for 
me.
    Mr. Levitt. I would say that the automated data processing, 
for which we have allocated $5.7 million, is terribly 
important. That amount includes a little bit more than $2.5 
million for the year 2000 conversion. Our examination program 
is also a part of our request which would be another $3 
million.
    The retention allowances, I cannot say to you, are going to 
eliminate the number of staff leaving us, but what we intend to 
use that for is to try to target the very most essential 
people.
    These allowances will not enable us to match what they are 
being offered in the private sector, but it is my feeling that, 
this kind of gesture could go a long way toward keeping 
critical people. So, I regard the retention allowance as 
terribly important.
    I would say that, in terms of the staffing increase, the 
most important area is our Enforcement Division where we simply 
need additional staff to keep up with fraud on the Internet, to 
keep up with microcap fraud, and to keep up with the pace of 
the market. The market that we are experiencing at this time 
brings out the worst elements in the industry. Our enforcement 
programs are essential to protecting investors.

                             staff turnover

    Mr. Rogers.  Now, speaking of staff turnover, you had an 
increase in staff turnover in 1996 from 9.5-percent to 11.9-
percent in 1997. For attorneys, the rate increased from 11.3-
percent to 16-percent from 1996 to 1997. That is substantial 
turnover; is it not?
    Mr. Levitt.  It is. When you think that in our New York 
region, where the competition is keenest with law firms and 
brokerage firms, our turnover was 26-percent. That is a 
terribly high figure for the Commission to have to train and 
replace attorneys.
    Mr. Rogers.  What would you consider a normal rate of 
turnover?
    Mr. Levitt.  Well, to give you some basis of comparison, 
the securities industry averages run around 20-percent. That is 
extraordinarily high. The best run companies in America, 
Merrill Lynch, for instance, have a turnover in their brokers 
of under 10-percent.
    I would say a number in the 6-percent or 7-percent region 
would be satisfactory. When you get beyond that, it is really a 
problem and a great expense.

                          retention allowance

    Mr. Rogers.  Now, how would you go about using these 
allowances?
    Mr. Levitt.  What I would do is go to my division directors 
and have them identify for me key people, people that are being 
constantly besieged by individuals in the private sector with 
very lucrative offers.
    If I was satisfied that those individuals were deserving, I 
would work with a committee that we have set up to screen all 
the people that we think should be targeted for those 
increases.
    The screening committee would make a recommendation, and if 
I was satisfied that the recommendation was sound, I would go 
ahead with it.
    Mr. Rogers.  What would be the largest percent increase in 
allowance to a given person?
    Mr. Levitt.  I would think that 20-percent would be 
probably on the largest side.
    Mr. Rogers.  Well, that is not uncommon for the private 
sector to offer salaries of 50-percent to 100-percent of 
government pay. Is that going to make much of a difference?
    Mr. Levitt.  Not in absolute terms. Without thinking very 
hard, I can think of eight people at the Commission who are 
working for less than $120,000 per year, who have had offers of 
over $1 million from the private sector.
    These people are really patriots. It is the only reason 
that I can explain why there is such a large number of 
committed people working at the Commission. Given the fact that 
they have a predisposition to try to help investors, to try to 
work for their country, I believe this kind of token increase 
could make a difference. Can I guarantee that? No. But the 
turnover is so alarmingly great that I would like to be able to 
try it.
    Mr. Rogers.  Well, any payment of tax dollars for bonuses 
would have to be scrupulously justified and documented. Have 
you mechanisms in place to be sure that those allowances are 
paid in some equitable and justifiable manner?
    Mr. Levitt.  I think we do. I think that the best way of 
determining that is through the committee which represents some 
of the most seasoned and experienced SEC employees. I think 
that the screening process, together with my personal 
oversight, will assure us of standards that I think are 
reasonable.
    Again, I cannot give you the assurance that this is going 
to stop the turnover. It will not, but I think for a relatively 
small amount of money, we could save enough key people to 
generate much more savings in terms of the dollar value than 
the $7 million allowance that we are talking about.
    Mr. Rogers.  You are working with the OPM personnel, are 
you not, on how to set this up and how it has to be documented?
    Mr. Levitt.  Yes, sir.
    Mr. Rogers.  I understand you plan to begin paying these 
allowances in 1998 within the monies we have already provided 
for 1998. We are likely in 1999 to face very restrictive 
spending caps. How would you proceed in 1999 if we are unable 
to find the additional funding that you seek for this purpose? 
Are there offsets that you could propose somewhere else in your 
budget to continue this effort, in the event that we cannot 
find the monies?
    Mr. Levitt.  Well, we have not started yet. So, I think I 
have enough flexibility to be able to adjust to that.
    Mr. Rogers.  Well, I appreciate you coming to us in advance 
on this. That is appreciated. We would like to keep in touch 
with you on what you are doing, what improvements you see, if 
any, and how we can be of help.
    We understand the problem and appreciate the problem that 
you face trying to keep your qualified personnel in government 
service.
    So, we would like to get quarterly updates on how your are 
implementing it, including attrition statistics, percentage of 
people receiving an allowance, percentage of salaries 
represented by the allowances that are granted, a description 
of the review decision process, cost implications and so forth, 
and if it is working.
    Mr. Levitt.  Okay, good.
    [The information referred to follows:]

    Once the Retention Allowance Program is implemented in FY 
1999, quarterly reports with the requested data will be 
provided to the Subcommittee.

                      retention allowance program

    Mr. Rogers. Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Just following up a little bit on the Chairman's questions. 
Do you currently have a Retention Allowance Program in effect?
    Mr. Levitt. It is a relatively modest one which impacts 13 
to 15 people.
    Mr. Mollohan. Who does it impact currently?
    Mr. Levitt. Some staff attorneys, and some of our 
information and technology people.
    Mr. Mollohan. Could you describe the current retention 
program you have and tell us how this proposed increase would 
be helpful?
    Mr. Levitt. I am going to ask Jim McConnell to fill you in 
on the numbers.
    Mr. McConnell. We are currently using the Retention 
Allowance Program that is allowed by the law passed several 
years ago, as are a lot of other agencies. It has been very, 
very modest.
    It essentially has allowed each major office to identify 
one or perhaps two key individuals that we want to use this 
program for. What we are proposing going forward is being more 
aggressive because retention has gotten to be such a problem.
    So, right now we have 13 people who have received it, and 
who are scattered throughout the agency. There is no single 
segment that has received it.
    Mr. Mollohan. Give the committee an example, if you will, 
of how it works. What would their salary be if you did not have 
it in place and what it is now with the Pay Retention Program 
in place.
    Mr. McConnell. One we did was for an information technology 
person who was receiving about $65,000. He got an offer for 
over $100,000 to leave. We increased that person's salary by 
20-percent. It did not match the offer, but it was enough for 
that person to want to stay.
    Mr. Mollohan. At the high end, what would be an example for 
this program?
    Mr. McConnell. We intend to limit it to GS-15s and below: 
We would not go into the SES category. The highest pay a GS-15 
can receive is approximately $100,000. So, if a person in that 
grade were to receive it and get the maximum which would be 20-
percent, then they would receive $120,000. That would be the 
high end.
    You generally see it going to people at the GS-14 level and 
the GS-15 level; people who have been here for three years or 
more and we want to keep them an extra couple of years. We do 
not think we can ever stem the tide with this program, but it 
will allow them to stay longer, finish what they are doing, and 
make that key contribution.
    Mr. Mollohan. How many employees are affected by the 
Retention Program now?
    Mr. McConnell. Well, right now we have about 13. We have 
proposed under the new program to have perhaps as many as 20-
percent of the staff that would be the upper limit. That would 
depend, of course, upon the budget authority.
    Mr. Mollohan. What would 20-percent of the staff be in 
numbers? You have 13 now in the program. If you increase it to 
20-percent of the staff, how much would that be?
    Mr. McConnell. Several hundred.
    Mr. Mollohan. So, this is a pretty massive increase in the 
number. No, that is the wrong word. It is a significant 
increase in the number of people. You say other agencies employ 
this procedure?
    Mr. McConnell. Yes. They are doing it on the modest scale 
that we are doing it now throughout the government.

                     year 2000 automation readiness

    Mr. Mollohan. How much of this increase in the automated 
data process request is for addressing the so-called year 2000 
problem?
    Mr. Levitt. That is about $2.5 million.
    Mr. Mollohan. What kind of a problem does the SEC have with 
regard to this? If you have a problem, that could be very 
serious.
    Mr. Levitt. I think the SEC is on top of this. The EDGAR 
Program, which is such an important part of the SEC interface 
with the public and with corporate America, is year 2000 
compliant. Our problem is trying to see to it that corporate 
America, that the major stock exchanges, the major brokerage 
firms, and for that matter international counterparts are ready 
for the year 2000.
    I think that for the Commission itself, I am very 
comfortable that we are ready. Our mission is to see to it that 
the rest of the industry understands the critical importance of 
this.
    Frankly, I am less concerned about domestic readiness than 
I am about international readiness. That becomes critically 
important because our domestic dealers, corporations, and 
brokerage firms have counterparts that may or may not be ready. 
I have reason to believe that international attention to this 
issue is far less than our own.
    Mr. Mollohan. International attention to this issue is far 
less than our own.
    Mr. Levitt. Yes.
    Mr. Mollohan. What does that mean?
    Mr. Levitt. Well, I spoke to the heads of all of the 
international stock exchanges six months ago. I was surprised 
at their apparent lack of concern for the importance of getting 
ready for the year 2000.
    I am told that this has been characteristic of various 
entities in different parts of the world that simply are not 
treating this as seriously as we have been treating it.
    We have done a great deal to awaken their awareness of the 
issue. I think today their situation is better than it was when 
I spoke to them six months ago.
    Mr. Mollohan. So, you are telling us that the SEC is 
prepared for the year 2000.
    Mr. Levitt. Yes.
    Mr. Mollohan. Your computer systems have already been 
adapted and they are ready?
    Mr. Levitt. Where we are at essentially is that all of the 
systems have been targeted. By February of next year we will be 
totally year 2000 compliant.
    Mr. Mollohan. You have companies working on the software 
problems that are associated with the year 2000?
    Mr. Levitt. Yes.
    Mr. Mollohan. And you are achieving success in being able 
to operate your systems in the year 2000?
    Mr. Levitt. Yes.
    Mr. Mollohan. What is the money you are requesting for?
    Mr. Levitt. To complete that program.
    Mr. Mollohan. To complete that program. Only to complete 
that program? Why did you bring up these other people you deal 
with in the context of my question?
    Mr. Levitt.  When you asked about the year 2000, I think 
this is such a serious issue that few people appreciate that we 
cannot take total comfort in the fact that our agency or the 
U.S. Government is ready.
    Mr. Mollohan.  Okay, I understand. The money you are 
requesting is simply for your systems.
    Mr. Levitt.  Absolutely.
    Mr. Mollohan.  Thank you, Mr. Chairman.

                      proposed amex/nasdaq merger

    Mr. Rogers.  Now, last week we heard about the proposed 
merger of AMEX and NASDAQ Exchanges. Do you have a reaction to 
that proposal?
    Mr. Levitt.  I think it is part of a rapidly changing 
landscape in terms of the way our markets are structured. I 
suspect we are going to see that change accelerate with new 
entrants coming in, new configurations, new alignments, new 
suggestions of mergers between various entities.
    This merger is something that has been discussed 
extensively in the past. It is difficult to effect mergers of 
this kind because we are talking about membership 
organizations. We will study this particular affiliation very 
carefully to be certain that it increases competition in a way 
which will protect America's investors and America's capital 
markets.
    Mr. Rogers.  What is the SEC's role, vis-a-vis, a possible 
merger of AMEX and NASDAQ?
    Mr. Levitt.  Where we get involved is in connection with 
the merger. There has to be a large number of filings that each 
of those entities will make with the Commission in order to 
effect the merger. If they intend to register this merger in 
some way because it becomes a corporate structure, rather than 
a membership structure, that will go through our Division of 
Corporation Finance.
    In terms of membership rights and the way each of these 
self-regulating organizations are structured, all of their rule 
filings must be approved by the Division of Market Regulation. 
So, we have a fairly extensive kind of approval process as they 
move forward to accomplish this.
    Mr. Rogers.  When will this likely be concluded?
    Mr. Levitt.  I am told that their boards hope to vote on 
the merger this week. The membership of the American Stock 
Exchange will have to vote on this issue. They generally allow 
several months before a membership vote takes place.
    So, I would guess that, if this merger were to proceed, it 
probably would take three to six months before it might be 
consummated.
    Mr. Rogers.  As I understand the process, the merger will 
be reviewed by SEC and perhaps by Justice for anti-trust 
potential.
    Mr. Levitt.  I think that is probably so.
    Mr. Rogers.  Does anybody else have any jurisdiction over 
it?
    Mr. Levitt.  Bob Colby who is the Deputy Director of our 
Division of Market Regulation says that it is only Justice and 
ourselves. He feels that my estimate of three to six months is 
good, if all goes well.
    Mr. Rogers.  What will your review entail? What are you 
looking for?
    Mr. Levitt.  The most important thing that we are looking 
for is to see to it that this affiliation in no way diminishes 
the competitive landscape in America's markets and that it 
provides investors with the same kinds of opportunities they 
had before the merger, if not greater opportunities. I view 
that our role at the Commission with respect to our American 
markets is to see that competition is fierce but fair.
    This is a very unique kind of affiliation. To see a 
membership organization turned into a corporate structure is 
very unusual. Historically, members have guarded the value of 
their membership as tenaciously as a lion does its cub.
    So, it will be interesting to see how that conversion 
proceeds. Our interest is in seeing to it that competition is 
not diminished and that investor protections are maintained.
    Mr. Rogers.  You sound like the Justice Department. Is that 
not what they are looking for as well, anti-trust connotations?
    Mr. Levitt.  Well, I think theirs would be a different 
context. They are concerned probably about monopolies. I am 
concerned that various participants in the market are giving 
investors the best possible deal. I must say to you, Mr. 
Chairman, I have traveled around the world. I have seen other 
markets.
    Every market in the world has a risk premium assigned to it 
because of the level of investor confidence in that market. 
This country has the lowest risk premium of any market in the 
world by a quantum amount because investors trust it. They 
believe in it. They think they are going to get a fair deal.
    A part of that belief is because the great organizations 
that operate in those markets really have competed fairly and 
openly in a way that investors have benefitted. The system has 
allowed us to move vast amounts of capital at the lowest 
possible cost.
    I think of our role as a kind of overseer. Not to micro-
manage, but to see to it that the right standards and values 
are maintained, and that we have a level, open playing field.

            amex/nasdaq merger advantages and disadvantages

    Mr. Rogers.  What possible advantage could come out of a 
merger of NASDAQ and AMEX, the number two and three markets in 
size in the country?
    Mr. Levitt. I think different participants would see 
different values of the merger. The member firms would view it 
and say well, it is just one less entity that we have to deal 
with; one less inspection vehicle; one less board meeting that 
we have to send members to; one less organization that we have 
to pay fees to.
    From the standpoint of the entities themselves, they would 
see cost savings. Instead of having two compliance divisions, 
they would have one compliance division, and so forth, up and 
down the line.
    Instead of spending money on marketing, they would be able 
to use that money to upgrade their systems. I have been long 
frustrated with the efforts of the various exchanges to 
advertise why they are the best exchange. I wish that money 
were spent to educate public investors rather than to use their 
members' money to promote the interests of the institutions. I 
think the exchanges are getting better in that regard.
    I think that investors, too, will see that instead of 
having to debate whether they should deal in one market or 
another, they may be getting the best of both worlds where 
these markets are affiliated.
    Now, that is what they expect. Will they get everything 
that they expect? I think only time will tell. Mergers of self-
regulating organizations have failed by a large amount more 
than they have succeeded.
    I cannot, for the moment, think of any that have succeeded. 
So, it will not be easy. As best I can tell, those are the 
relative advantages that each of them are seeking.
    Mr. Rogers.  Now, what conceivably could be a down-side 
from the public's point of view of the merger?
    Mr. Levitt. I think to the extent to which one or the other 
of those institutions has been able to offer a service that 
they would no longer offer. Right now they compete very 
aggressively to list companies.
    The American Stock Exchange and NASDAQ are going after 
essentially the same market--high growth, emerging kinds of 
companies. In order to compete, they have had to offer a 
variety of services.
    The American Stock Exchange has offered analyst meetings 
and research studies. They have brought their companies to 
international investors' attention. If, because of this merger, 
they felt that the lack of competition enabled them to cut back 
on some of those services, I think investors might be hurt by 
it.
    I believe that the competition with the New York Stock 
Exchange and the electronic markets that are developing will be 
so profound, that rather than offering fewer services, they 
probably will have to offer greater services.
    The combined capital of those two merged entities makes me 
more comfortable about their ability to offer those services 
than if they remained as individual entities.
    Mr. Rogers.  Did I hear you say, in so many words, that the 
merger might make the New York Stock Exchange even more 
competitive in their operation?
    Mr. Levitt.  It could. It could. Now, I have not seen all 
of the details of the merger. I have not studied it. I am not 
really in a position to say what my position on the merger 
would be. I am being hypothetical in terms of these 
assumptions.
    Mr. Rogers.  Do you think that this merger might trigger 
other exchange mergers?
    Mr. Levitt.  Absolutely. I would not be at all surprised.
    Mr. Rogers.  Is that good or bad?
    Mr. Levitt.  I have such enormous confidence in the markets 
of America that I would never say that what goes on there is 
bad. I think it will be interesting. We will have to watch it 
closely to see to it that it does not create distortions. I 
could hypothetically conceive of some affiliations which would 
give me great pause.
    Mr. Rogers.  Do you care to mention a couple of them?
    Mr. Levitt.  I would prefer not, if you would let me off 
the hook.
    Mr. Rogers.  Could this thing get out of hand, the merger 
mania?
    Mr. Levitt.  Well, I guess anything could get out of hand. 
I think the good sense of the people that run those 
institutions and our oversight will keep that from happening.
    I am not alarmed by the discussion of this present merger. 
I will have to analyze the details. I am not at a point of 
saying this is getting out of hand. I think there are enough 
remedies available to the Commission to address that, if we 
felt so.
    Mr. Rogers.  I do not want to put words in your mouth or 
cause you to short circuit the regular process this review will 
entail. It sort of sounds to me like that unless the review 
turns up something that you are not now expecting, that your 
inclination would be to approve the merger. Is that an accurate 
statement?
    Mr. Levitt. We are going to study it very closely. Again, I 
am reluctant to intervene in natural market processes. We are 
often importuned by corporations that are engaged in unfriendly 
mergers to intervene in some fashion.
    We try to maintain some detachment. I would have to wait 
until I saw what the impact would be on America's investors 
before I would suggest that the Commission is about to embrace 
this merger proposal.

                        market circuit breakers

    Mr. Rogers.  Now, after 1987, when you approved circuit 
breakers, the first time they kicked in was October 27th. I 
think you are among those who felt that the circuit breakers 
artificially deepened the plunge. You can correct me if you 
would like.
    The New York Exchange adopted new circuit breakers at 10- 
percent and 20-percent. SEC successfully urged them to loosen 
those limits, closing for the day when the Dow falls 20-percent 
after 2:00 p.m. or 30-percent at any point. What, in your 
opinion, is driving the market volatility that we have seen 
over the last several months?
    Mr. Levitt.  It is interesting. If you look at volatility 
as a percentage of the total volume, you would find that with 
the market at this level, we probably have significantly less 
volatility than we did following the decline in October 1987.
    For six months after that, the volatility was substantially 
greater than the volatility we have experienced in recent 
months. The numbers look larger today because today we have a 
market of over 8,000. At that point, it was substantially lower 
than this.
    So, I am not concerned about the level of market volatility 
at this point. I do not think that is a particularly worrisome 
characteristic of today's markets.

                          asian market crisis

    Mr. Rogers.  Do you see any direct and lasting adverse 
affects resulting from the Asian market crisis?
    Mr. Levitt.  I would not be surprised. I think that what 
has happened in Asia will inevitably impact America's 
corporations, which are becoming increasingly globalized. We 
are just beginning to see the impact on the earnings of those 
companies.
    I think the psychological impact of what occurred there has 
not run the course yet. I do not think the Asian crisis is 
behind us. I think that, in a market which has become more and 
more globalized, it has got to have an impact. So, my answer to 
your question is very definitely, yes.

                       impact of circuit breakers

    Mr. Rogers.  Last fall we saw in action for the first time 
the circuit breakers that I mentioned, enacted after the 1987 
plunge. We heard a lot of criticism that the circuit breakers 
actually had the opposite affect than what was intended. That 
they accelerated the sell off. Do you agree with that? Have you 
done anything to address that matter?
    Mr. Levitt.  I guess I have always had reservations about 
devices which interfere with the ordinary workings of the 
market.
    I regard circuit breakers as essentially an artificial 
device which was intended to create a pause for various 
participants in the market to reassess their positions and to 
consider the implications of what was going on--to be able to 
react to some dramatic development that might occur.
    The circuit breaker that was imposed in 1988 was an 
absolute number rather than a percentage. When the market moved 
up as dramatically as it did, the drop to that absolute number 
was much smaller than it should have been.
    I think it was unnecessary that the circuit breaker 
triggered. Yes, personally I believe that the first circuit 
breaker accelerated the move to the second circuit breaker, 
because traders felt that the second circuit breaker was 
certainly going to be reached. They wanted to get out before 
they were closed down for the day. The New York Stock Exchange 
has wisely implemented a program which moves to percentages. I 
think a pause at 10-percent, which is roughly 800 points, and 
another pause at 20-percent, which would shut the market for 
two hours if the decline took place before 1:00 p.m. is 
appropriate. Until that is phased in, which I believe will be 
in April, we are still operating under the old circuit 
breakers.
    In April, if we approve the filing of the New York Stock 
Exchange, the 10-, 20-, and 30-percent circuit breakers would 
be imposed. I feel a lot more comfortable about them than I do 
about either the present breakers or the ones that were 
implemented in 1988.
    Mr. Rogers.  Well, it sounds like the Board of Directors 
have met.
    Mr. Levitt.  Yes.
    Mr. Rogers.  On this.
    Mr. Levitt.  It would be fair to say that we are certainly 
leaning in that direction.
    Mr. Rogers.  Do you think that will solve the problem?
    Mr. Levitt.  No. Nothing ever totally solves the problem.

                             sec automation

    Mr. Rogers.  Now, switching gears here.
    You are putting a great deal of money into automation and 
rightfully so. You are taking some money away from your 
information technology activities; ten fewer FTEs. I understand 
that is a result of the reorganization of that function which 
began in 1997.
    Will this small organization be equipped to manage all of 
the automation projects, including EDGAR modernization?
    Mr. Levitt.  I think it will. I think that we will have a 
more efficient structure which enables us to outsource much of 
the work that we are doing. It will help us improve our data 
delivery programs to the regions.
    The basic program involves outsourcing much of this in a 
more efficient configuration. So, I am very optimistic about 
the efficiency of this new structure.
    Mr. Rogers.  Is your FTE reduction simply a result of 
outsourcing? Are there other factors?
    Mr. Levitt.  No. I would say that is clearly the driving 
factor.
    Mr. Rogers.  On your modernization of EDGAR, what are your 
next steps?
    Mr. Levitt.  We are about to complete the second phase, 
which means that we are ready to go out for the best and final 
bid, which is the final contract bidding.
    Mr. Rogers.  Well, as you recollect, we wrote you a letter 
approving the three-year, $22.5 million EDGAR modernization 
Reprogramming request that you had made of us. That is an 
unusually large investment. As I mentioned in my letter, we 
would like to be regularly informed of your progress, and have 
a chance to review your spending plans in advance for 1999 and 
beyond.
    Mr. Levitt.  I share your concern about that. We are very, 
very appreciative of your support represented by that letter.
    I followed EDGAR when I was in the securities industry when 
it was first suggested. I have seen it evolve to a point where 
it has become a vital tool and probably one of the most broadly 
praised governmental programs. I regard as a very vital part of 
my responsibilities seeing to it that the EDGAR money is wisely 
spent, and that we get the best value for our dollars, and that 
America's investors have a program that is a program for the 
next millennium; not one representing the last ten years. So, 
we will work very closely with the Committee in keeping you up-
to-date on where we stand on EDGAR and its progress.

                           litigation support

    Mr. Rogers.  Why are you asking for a $700,000 increase for 
your litigation support?
    Mr. Levitt.  The reason that we are doing that is we have a 
general broad definition of litigation support. That includes 
our efforts to modernize document management. If you walked 
around the Commission's halls in the Enforcement Division, you 
would see boxes, and boxes, and boxes of documents which has 
troubled me enormously. I just wondered whether that is the way 
lawyers do business. We clearly have to modernize the way our 
documents are managed.
    We also are about to implement an interagency agreement 
with the Department of Justice for coding, optical imaging, and 
scanning of case files into an automated tracking system which 
will allow us to store, search, and retrieve critical documents 
without stumbling over boxes, which I think is just a terrible 
way to keep them.
    We also need extra funds for expert witnesses. We are 
anticipating higher expenditures for our litigation support 
program in terms of being able to compete with outside counsel, 
opposing counsel, generally with many more years of experience 
than the counsel within the Commission, and, generally, with 
vastly greater resources than Commissioncounsel have available 
to them.

                            securities fraud

    Mr. Rogers.  Collectively, the American public now has more 
money invested in the stock market than in their own homes. 
This obviously magnifies the risk posed by fraud because the 
numbers are so large.
    We see it in the news. The indictments of ten New York 
Stock Exchange traders, price fixing at Nasdaq, allegations of 
fraud in the microcap market. Is there a sudden increase in 
fraud or are we just uncovering it better?
    Mr. Levitt.  I think what we have seen is a predictable 
increase in fraud that comes with markets that have traveled 
further and faster than any markets in history. We are in the 
midst of an exuberant bull market with more investors, more 
products, more IPOs, and more mergers than ever before in 
history.
    That level of activity tends to attract more scamsters as 
well. So I would say that increased fraud is predictable. If 
you gave me a hypothetical situation of 20 years from now where 
the conditions were amplified, I would be able to predict, I 
think, with relative conviction the number of frauds that we 
would have at that time. They would be different; maybe more 
clever. Maybe they would be geared at different people, but 
this sort of market brings out the worst in our society.

                     review of enforcement division

    Mr. Rogers.  I understand that you are undertaking a review 
of your Enforcement Division. Why are you doing that and when 
do you expect to conclude it?
    Mr. Levitt.  Whenever I've run a business for any period of 
time, I periodically have looked at various parts of the 
business to see whether we have kept up with the times, whether 
we are doing it as efficiently as possible.
    The Enforcement Division is a division that probably has 
the greater relationship to investor protection. We are at a 
point where our division director is leaving the Commission to 
go to the private sector.
    We have a new Commissioner who is an alumna of the 
Enforcement Division. I try to ask each Commissioner to 
undertake the oversight of different divisions of the 
Commission. Part and parcel of that was a request to this 
Commissioner to review the practices of the Enforcement 
Division to be certain that we were aware of any changes, any 
suggestions that we should consider.
    It is a program that we have used for other divisions and 
we will continue to do that as long as I stay at the 
Commission. I want to be certain that we are up-to-date and 
that our systems are appropriate. In no way will this study 
impact the direction of the Enforcement Division, but just the 
way they reach their goals.
    Mr. Rogers.  What changes do you think are likely?
    Mr. Levitt.  I am not sure. I have asked Commissioner Unger 
to talk to me about her suggestions for changes over the course 
of the next 60 days. I will then discuss it with the new 
division director and the division itself.
    I have asked that this study be conducted with key members 
of the division. The danger of any such study, particularly in 
a government agency, is that people begin to get very fearful 
about their jobs and the direction the division is going to 
take.
    I think it is terribly important that the division members 
view this as an ordinary exercise that they have a vital part 
in, and see it as a way to enable them to do their jobs more 
efficiently than ever before.
    Mr. Rogers.  Well, you are losing both the director and the 
deputy director of the Enforcement Division. Have you gotten 
replacements for them yet?
    Mr. Levitt.  Not yet. We are in the process of screening 
candidates, both from within the Commission and outside of the 
Commission. I would say that I am very encouraged by the 
caliber of people that have come forth to fill those places.
    Mr. Rogers.  When do you expect to select someone?
    Mr. Levitt.  I would say within the next 30 days.

                     impact of technology on fraud

    Mr. Rogers.  Now, what has been the impact of technology on 
both the incidence of fraud and how you go about fighting it 
with the electronic age upon us?
    Mr. Levitt.  Fairly dramatic because any of us who use the 
Internet knows the vast numbers of get-rich-quick schemes that 
we are inundated with. A day does not go by without eight or 
nine offerings coming to me to buy ostriches, rare coins, or a 
whole host of screwy investments.
    We are seeing more and more cases of fraud. That troubles 
me because many of America's investors have never seen a down 
market. They are looking for a quick way to make money. The 
best way to counteract that is not necessarily a regulatory 
fix.
    There is no possible way this Commission or any agency in 
government can protect people against their own foolishness. I 
think that our program of investor education, which costs under 
$2 million a year, has done more to help investors protect 
themselves than anything I could imagine. We started this 
program four years ago with 30 investors who came out of 
Camden, New Jersey.
    In Los Angeles, about two months ago, we had 6,000 people 
who stayed at an investor seminar for hours, asking questions 
about their investments. We watch the Internet closely in the 
Enforcement Division. Because it is an open system, scamsters 
cannot hide what they are doing.
    So, that is the positive side of it. We are developing more 
sophisticated techniques of screening the Internet, but that is 
only one kind of technological fraud. There are a lot of other 
kinds as well.
    I think a combination of investor education, technology, in 
terms of our ability to screen vast amounts of electronic 
offerings, and the learning curve of those who deal with 
technology will work together to try to respond to a totally 
new kind of fraud that is preying on America's investors.
    Mr. Rogers.  Has there been an instance when you have taken 
any legal action against a scamster on the Internet?
    Mr. Levitt.  Yes. We had one scamster who sold several 
million dollars worth of interests in an eel farm. The eels did 
not exist. The farm did not exist. I tell investors all the 
time not to deal with a broker unless you meet him or her face 
to face, look them in the eye and make some judgment as to 
their fundamental integrity.
    Mr. Rogers.  An eel farm.
    Mr. Levitt.  An eel farm.
    Mr. Rogers.  Mr. Skaggs.

                         decimal pricing system

    Mr. Skaggs.  Good morning. I apologize for coming in late. 
I had another committee meeting that overlapped.
    I think it was last year when you were before this 
committee. We talked briefly about the then-current proposals 
to push the markets to a decimal pricing system. If I recall 
correctly, you demurred on that for the moment in part because 
there was enough change going on to absorb without doing that 
as well.
    I am just wondering how things look at this point? I have 
heard that there is a push on to do that from a legislative 
side, anyway, but if you could give us a status report.
    Mr. Levitt.  I do not think this is the kind of issue that 
you legislate. I think that decimalization is the way our 
markets should develop and will develop. The Commission intends 
to push decimalization.
    I would say to you that if there was no Commission, the 
natural movement of our markets would be in that direction, 
just as it has moved us to 16ths at this present point in time. 
It was not the Commission that moved the markets there. It was 
the natural market forces. So, I am supportive of that. 
Probably the sooner decimalization comes, the better.
    However, our markets today are faced with a number of 
factors which are life-threatening. If our markets are not 
prepared for the year 2000, that will be the end of our 
markets. It is that draconian.
    If our markets cannot accommodate the very dramatic new 
order handling rules that the Commission imposed transferring 
billions of dollars from dealers to investors, if either of 
those systems go awry, the consequences are very, very serious.
    My long-winded way of answering your question is that I 
would prefer to see the year 2000 changes in place before the 
decimalization takes place, which would mean deferring 
decimalization for under a year.
    There are no life-threatening consequences to a deferral of 
decimalization. So, we support it. We will do everything we 
possibly can to see to it that decimalization is implemented 
very shortly after the year 2000, which is a delay of under a 
year.
    Mr. Skaggs.  Well, I wonder if there is some unintended 
benefit even in terms of American numbers if we are forced to 
deal with those odd fractions.
    Mr. Levitt.  Absolutely.
    Mr. Skaggs.  It requires a different--than just the 
simplicity of decimals.
    Mr. Levitt.  Absolutely, it does.

                         computer data security

    Mr. Skaggs.  I serve also on the Select Intelligence 
Committee. One of the things that troubles us a lot in that 
realm is the vulnerability of both national assets and private 
assets to techno-terror or communications warfare, however you 
want to put it.
    I just wanted to invite your observations and assessment of 
how well our securities markets and exchanges are equipped to 
defend themselves in the event of such an attack; either a 
hacker or an international foe of some kind. Also, what that 
may imply with regard to national encryption policy, if 
anything.
    Mr. Levitt.  I think that the securities markets, the major 
markets of the country, are very much aware of the dangers of 
electronic interference. SIAC, which is the Securities Industry 
Automation Corporation, has a whole battery of back-up 
procedures.
    The individual exchanges themselves, if you look at them 
today, are vastly different physically than they were as 
recently as five years ago, to prevent terrorism. I cannot 
answer your question for the moment about the ability to 
protect against hackers.
    As far as encryption is concerned, my greatest interest is 
to see to it that the brokerage firms and the banks have the 
same opportunities. Jim, do you have any thoughts about it?
    Mr. McConnell.  No, sir.
    Mr. Levitt.  I am reminded that all of our markets undergo 
security and assessments. This is Bob Colby, Deputy Director, 
Division of Market Regulation.
    Mr. Colby. Several years ago we developed an automation 
review program where we require the markets to undergo internal 
and external assessments of their capacity planning and their 
security procedures.
    We have also had, in particular instances, outside 
assessments of clearing agencies by very formidable 
organizations to check their security preparedness. Where that 
has been undergone, the markets have very high performance 
ratings.
    Mr. Skaggs.  Thank you.

                        use of ``plain english''

    Mr. Rogers.  Thank you. Now, on March 10th, you passed 
rules simplifying the mutual fund prospectuses to use ``plain 
English'' How does that benefit individual investors? Is it a 
good thing or a bad thing?
    Mr. Levitt. Let me say first that I became interested in 
this when I came to the Commission. I never owned a mutual fund 
before. I had to sell everything I owned and put it into mutual 
funds.
    I began to read prospectuses for the first time. Even after 
years in the securities industry, I found parts of them totally 
unintelligible.
    Our subsequent studies of investor attitudes and 
performance indicated that investors do not take large bulky 
convoluted prospectuses seriously.
    Now, prospectuses are very important for the information 
that is available to investors, as well as analysts. I do not 
want to denigrate that, but the language that conveys that 
information is arcane.
    We have made a major effort to effect a cultural change. 
First, by changing the way we, the Commission, deal with 
corporations, deal with investors, and deal with regulators. We 
try to use plain English.
    We have placed a great premium on that. Interestingly 
enough, it is the lawyers of America who say, ``hey, wait a 
second. This is not right.'' They say it is not right because 
they view themselves as the arbiters of an arcane language. 
They are the only ones that can use ``investor speak''.
    Mr. Rogers.  No.
    Mr. Levitt.  You are not a lawyer, Mr. Chairman, are you?
    Mr. Rogers.  Used to be.
    Mr. Levitt.  Oh, my. I take it all back.
    Going through the prospectus, however, it seemed to us that 
our Division of Investment Management has done a simply 
extraordinary job of developing a profile, a shortened 
prospectus, that includes all of the key information that 
investors need to know to make a judgment as to whether this 
investment is appropriate.
    Now, that profile does not deny the investor the right of 
using the full prospectus. The investor will still get the full 
prospectus.
    Does it mean that the investor might not look at the full 
prospectus? Possibly. I think it is a great tool to give 
investors more information than they have had before and to 
really help them. I am very sanguine about it.
    Mr. Rogers.  So, will the investor get both the technical 
full prospectus?
    Mr. Levitt.  Yes.
    Mr. Rogers.  Plus the plain English restatement of the 
prospectus?
    Mr. Levitt.  Yes.
    Mr. Rogers.  So, it should not be said that by using the 
plain English only, that fraud could be perpetrated because the 
plain English version would not be as precise as the so-called 
arcane language would make it?
    Mr. Levitt.  If a mutual fund was offering their fund to 
the public and an investor wrote in to request information, the 
mutual fund might send them the profile prospectus alone. Then 
if the investor decides he wishes to buy the fund, he would get 
this whole prospectus.
    So, any investor in the fund will have all of the 
information that he has today, plus greater clarity. We have 
reorganized the full prospectus so that it is clearer than it 
was before.
    Mr. Rogers.  Well, I congratulate you on that. I think that 
is a major step forward. It is a little bit untested at this 
point. We will have to keep an eye out to be sure that using 
plain English does not promote scamster successes or fraud.
    Lawyers would say that it may be difficult to read, but it 
is also very, very precise. Precision is important for many 
scams against fraud. If you say to us that the investor will 
have access to both, the so-called plain English version plus 
the lawyer's version, then I would feel a bit more sedate about 
it. Am I correct?
    Mr. Levitt.  Yes, sir.

                           closing statements

    Mr. Rogers.  Thank you very much, Mr. Chairman, for your 
answers and for your candor here today. You have been very 
helpful to us.
    We want to work with you. You have got a tiger by the tail. 
You have got a sky rocketing sky rocket here in the market. 
Plus you, coincidentally, are into the information age. All of 
a sudden, the world market is one as we have never seen before, 
which means you have to anticipate what is happening in Asia as 
in Russia.
    So, you have got a really tough job; much more tough than 
the Chairmen of the past have had to deal with. So, we 
congratulate you and wish you well. We are here to help.
    Mr. Levitt.  Thank you very much, Mr. Chairman.
    You have been a great help to us. I greatly appreciate your 
support.
    Mr. Rogers.  Well, you have done a wonderful job, Mr. 
Chairman.
    Mr. Levitt.  Thank you, sir.
    Mr. Rogers.  Thank you very much.
    [The following questions were responded to for the record 
by the SEC.]


[Pages 332 - 341--The official Committee record contains additional material here.]



                                         Wednesday, March 25, 1998.

                   FEDERAL COMMUNICATIONS COMMISSION

                               WITNESSES

WILLIAM E. KENNARD, CHAIRMAN
ANDREW S. FISHEL, MANAGING DIRECTOR

                            Opening Remarks

    Mr. Rogers. The committee will come to order.
    We are pleased to welcome William Kennard, appearing before 
the committee today for the first time as Chairman of the 
Federal Communications Commission. I think you have attended 
hearings before, but not in this capacity.
    Mr. Kennard. Yes, sir.
    Mr. Rogers. You have taken on a very challenging duty and 
we look forward to working with you to help carry out the FCC's 
mission. We are in the midst of a revolution, obviously, in 
telecommunications technology and we will be counting on you to 
help lead the way.
    Today, we will discuss your 1999 budget request. You are 
seeking $213 million, an increase of $26.5 million over the 
1998 enacted level. It has now been more than two years since 
we passed the landmark Telecom Act. We will want to hear today 
about how FCC resources are being used to deregulate, encourage 
competition, and support public access to telecommunications.
    Before recognizing you for your statement, we are pleased 
to have with us this morning the chairman of the full 
committee, who has to cover 13 subcommittees, and I would like 
to accommodate him on his time schedule and would recognize 
Chairman Livingston at this time.
    Mr. Livingston. Thank you very much, Mr. Chairman, and 
Chairman Kennard, welcome to the subcommittee. I am glad to 
have a chance to express my best wishes to you for a long and 
successful tenure in office.
    Mr. Kennard. Thank you very much.
    Mr. Livingston. I know that you will be working very 
closely with Mr. Rogers and the members of this subcommittee, 
but we want to offer our assistance, as well.
    I am here really just to express a concern that I think is 
shared by Chairman Rogers, and he will express his thoughts for 
himself shortly, but there has been a lot of notoriety given to 
a proposal floating around about whether or not you all 
unilaterally might regulate the media and require them to 
provide free time on the airwaves for public officials, for 
candidates.
    I just want to say it is a very serious issue. I do not 
know how the Congress would come down on that issue. I do not 
want to prejudge that. I think that such a monumental issue of 
significance ought to be thoroughly debated and vetted through 
the normal legislative processes and it is not one that ought 
to be simply pushed through by regulatory mandate. I would hope 
that you all would forswear any action along those lines and 
allow the Congress to discuss and debate the issue and act as 
Members legislatively choose.
    Should the FCC not do that and require it by regulation, I 
can almost guarantee that there would be a backlash inCongress, 
the likes of which would not be pleasant to the Federal Communications 
Commission under any circumstances. We want a good working relationship 
and we encourage it and I just do hope that you might not go down that 
trail.
    But at any rate, I will let you respond to Mr. Rogers as 
the issue comes up. Again, I just want to reiterate my welcome 
to you. I do not mean to greet you with a baptism of fire, but 
simply tell you that we offer our hands in friendship and look 
forward to working with you.
    Mr. Kennard. Thank you very much, Mr. Chairman.
    Mr. Livingston. Thank you. Thank you, Mr. Chairman.
    Mr. Rogers. Thank you, Mr. Chairman. We appreciate your 
being here. We want you to stay as long as you think that you 
can.
    Mr. Chairman, if you would like to proceed with your 
opening statement, we will make your written statement part of 
the record. If you would like to summarize, we would appreciate 
that.
    Mr. Kennard. Thank you very much.
    Mr. Rogers. And you may introduce whomever you would like.

                opening statement from chairman kennard

    Mr. Kennard. Thank you, Mr. Chairman. I am here with Andy 
Fishel, who is the Managing Director of the Federal 
Communications Commission. I very much appreciate this 
opportunity to review with you the fiscal year 1999 budget 
estimates for the FCC and I am especially pleased to be here in 
my first appearance before the subcommittee as chairman.
    I would like to summarize just a few of the major points 
that are set forth in my written statement. First, as I look 
ahead over the next several months, I believe it is very 
important that the Commission and the Congress work together. 
We are in the midst of implementing the most significant 
rewrite of the laws governing the telecommunications sector in 
history and it is very important that we have an open dialogue 
and communicate closely and I pledge that I will do that.
    As I look ahead over the next several months, I see three 
essential issues that we are going to have to grapple with to 
ensure that the Telecommunications Act of 1996 is a success. 
One is to implement the universal service mandates of the 
Telecommunications Act. Second is to continue to foster 
competition in the communications marketplace wherever 
possible, and that means in all sectors of the marketplace. And 
third, is to facilitate the transition from analog to digital 
technologies, which is really transforming these markets.
    Perhaps the most important transition that we are seeing 
today is the transition from analog to digital television, and 
the FCC stands ready to make sure that this is a smooth 
transition so the American public gets the benefits of digital 
technology as soon as possible.
    On universal service, I will say a couple of things. First, 
there are some people who argue that universal service is 
fundamentally inconsistent with competitive markets. I do not 
share that view. I believe that we can have competition and 
universal service. We are going to have to work hard to make 
that happen.
    I commit to doing that, and I want this Committee to know 
that I am committed to ensuring that we will implement 
universal service in a way that does not jeopardize the 
affordability of telephone service or jeopardize our pro-
competitive goals, both in the Act and at the FCC. We will do 
so in continuing to deliver universal service to high-cost and 
low-income consumers. We will also implement the law's mandate 
that we provide universal service support for schools, 
libraries, and rural health care facilities.
    We have due shortly to the Congress a report which was 
mandated in connection with our last appropriations bill. The 
report is due April 10 and I assure you that we will meet that 
deadline and we will give you a comprehensive report.
    Now, on competition, as you can see from a chart that I 
submitted with my written testimony, we are seeing competition 
develop faster in some markets than in others. I think this is 
natural. I think that it would not be wise for us to expect 
that competition would encompass the nation in one great wave. 
We are seeing more competition in long distance than in 
residential local service, for example. We are seeing more 
competition in wireless than we see in wireline. And I think 
that we just have to continue to work diligently to promote 
competition wherever possible, and I pledge to do that.
    One way that we can do that is to ensure that the process 
that you have put in place in the Act to allow the Bell 
Operating Companies to get into in-region long distance works 
well. I see that as one of the big challenges that the FCC has 
in the coming years and I want to make sure that that process 
works well.
    My vision for that process is to ensure that it is an open 
process. We are trying hard at the FCC to demystify the Section 
271 process to make sure that all of the stakeholders in this 
debate, including, most importantly, the American public, 
understand that the process is working for them.
    On digital television, we need to resolve some very key 
issues to facilitate the transition from analog to digital 
transmission. We have to lay the groundwork with must-carry 
rules, which we are working on. We need to continue to clarify 
the public interest obligations for this new medium. And we 
have to do all of this in an environment where there is a lot 
of change and uncertainty in these marketplaces. But I am 
confident if we work together, we can make this happen 
successfully.
    I would like to say a few words about the FCC's pending 
relocation to the Portals office complex in Southwest 
Washington, D.C. As you know, Chairman Rogers, we have talked 
about the issues involved in this move and I have asked you for 
your guidance on these issues. It is a difficult issue, one 
that has been pending for really ten years now. It is not a 
problem of your making, obviously. It is not a problem of my 
making. But it is one that we need to work on and solve 
together because it is of vital importance to the agency and 
the public.
    As I have stated in my written testimony, in order for the 
FCC to make this move, we need the support of this Subcommittee 
to provide the funding that we need to cover the additional 
rent to make the move possible. I do not believe that it would 
be prudent for the FCC to move to this Portals complex without 
having the support of the Congress in our appropriations. That 
would require the agency to furlough employees, to lay off over 
100 employees, and that, in my view, would not be wise or 
prudent for us to do.
    We are working with GSA to try to improve the relationship 
between the FCC and the GSA and to resolve some of the security 
issues and some of the other outstanding issues. I am confident 
that we can do that and we can work this out, but we do need a 
commitment from this subcommittee that the funds will be there 
for us to make this move.
    Whether or not we move to the Portals, the FCC will 
continue to move forward. For example, we have a number of 
streamlining and deregulatory initiatives that are in the 
works. One of the things that I am very excited about as 
Chairman is to see technology change the FCC. We have 
implemented electronic filing in some of our services. It is my 
goal to implement electronic filing for all of the services 
that we regulate so that people around the country can have 
quick access to FCC databases.
    Already, we are seeing this transform the way that the 
public interacts with the FCC. We have a web site that gets 
227,000 hits per day. This is really a revolutionary change in 
the way people can interact with the agency, people around the 
country and around the world.
    We are also implementing our National Call Center, which 
has been very successful. One of the great frustrations that 
people have in dealing with government is they often have a 
simple question and they call a government agency and they have 
to talk to five or six people before they get the person who 
can really answer their question. Well, with the FCC's call 
center, we have one toll-free number that you can call. We have 
FCC employees who have a state-of-the-art database where they 
can answer any question and immediately connect callers to the 
person who can give them the answers that they need.
    To sum up, Mr. Chairman, we need your support for our 
fiscal year 1999 budget request to complete the implementation 
of the Telecommunications Act and the goals that I have 
outlined. We have already produced some important tangible 
results in implementing the Act. There is much left to be done, 
but again, I believe if we work together and with the support 
of the Congress, we have and will have much to be proud of.
    This concludes my oral statement, Mr. Chairman, and I would 
be happy to answer any questions that you may have.
    [The statement of Mr. Kennard follows:]


[Pages 347 - 372--The official Committee record contains additional material here.]



                 free air time for political candidates

    Mr. Rogers. Thank you very much, Mr. Chairman, for your 
statement.
    You and I talked the other day. You have got one of the 
hottest seats in government these days, mainly because of the 
rapid, almost mercurial change in telecommunications and 
electronics and all of that, and it will take a super-human 
effort for you and your colleagues to stay on top and out in 
front of the parade that has already formed. I think the job 
that you have and the rest of us have, too, in this regard is 
to be able to keep ahead of the parade and try to help lead the 
way.
    Let me start off quickly by following up on Chairman 
Livingston's questions about so-called free air time. Has the 
Administration asked the FCC to do anything with regard to this 
question?
    Mr. Kennard. Well, we have gotten requests from many, many 
quarters to deal with this question. Some 80 Members of 
Congress have asked us to have a proceeding in this area. Many 
members of the public have filed petitions and asked us to work 
on this. The President of the United States talked about this 
in his State of the Union message. So yes, we have received 
requests and interest from many, many quarters on this.
    Mr. Rogers. Has the Administration, though, other than 
through the public media, such as State of the Union, asked you 
in any other private or semi-private fashion to act on this?
    Mr. Kennard. During the confirmation process, I talked to 
many, many people, both in the Congress and the Administration, 
and many people gave me advice, some solicited, some 
unsolicited, and I probably have talked to many people, 
including people in the Administration, who have expressed an 
interest in ensuring that, as we define the public interest 
obligations of broadcasters in a digital world, we include a 
discussion of how broadcasters can improve the political 
dialogue in this country. We received a letter from the 
President of the United States urging us to do this, as well.
    Mr. Rogers. Of course, we all understand that the FCC is an 
independent agency, independent of the Congress, of the 
Administration, of anybody else. You are a freestanding agency 
that takes orders from no one. That is clear, is it not?
    Mr. Kennard. Of course.
    Mr. Rogers. What do you feel the FCC's proper role is in 
compelling broadcasters to provide free air time for political 
advertising? Do you think the FCC has the authority or power to 
order that to occur without congressional approval?
    Mr. Kennard. I do think that the FCC would have 
jurisdiction to do this on its own, but I also understand that 
this is an issue of great importance and great controversy. It 
is not my intention to act unilaterally in this area. I think 
it is important that we have a proceeding so that we can openly 
debate this, including the important jurisdictional questions, 
but I am not prepared to move forward unilaterally without 
extensive consultation with the Congress.
    As I shared with you the other day, Mr. Chairman, I think 
that this is an issue of such importance that it would involve 
extensive consultation with Congress before we made the 
ultimate step of actually writing the rule. That would not be 
my intention.
    Mr. Rogers. Before we mark this bill up for 1999, we are 
going to need from you a letter or other written communications 
to the effect that you will not proceed with a rulemaking on 
your own or else the Congress will have to take preemptive 
action here, I think. What do you think?
    Mr. Kennard. I think that if we could--I would certainly 
like to work with you on something that would satisfy your 
concerns in this regard but also allow the FCC to have this 
debate, because obviously they are questions of great 
importance.
    Mr. Rogers. You and I talked about this somewhat the other 
day. You had a thought that you were pursuing. Is that 
something you would like to discuss today?
    Mr. Kennard. I certainly can, Mr. Chairman. I believe that 
the FCC could proceed as a next step to have a Notice of 
Inquiry proceeding, which would be a broad-ranging inquiry 
which would not propose specific rules but would get the issues 
on the table for a public debate. I truly believe that if we 
can get these issues debated and take them out of the abstract 
to the more concrete so that people could understand more 
specifically what is within the realm of the possible, then I 
think that we could significantly advance this debate.
    That would be, I think, probably the most productive next 
step that we could take. But as you know and as I shared with 
you the other day, a Notice of Inquiry proceeding would not 
propose specific rules, but rather it would allow all of the 
interested parties, the many Members of Congress who are 
interested in this, the many members of the public, the 
broadcast communities, to come forward and put their thoughts 
on the record.
    Mr. Rogers. So this would not be a rulemaking procedure?
    Mr. Kennard. Correct.
    Mr. Rogers. Whatever takes place during the Notice of 
Inquiry hearing that you are talking about would be 
educational-instructive only?
    Mr. Kennard. Yes. A Notice of Inquiry is contemplated by 
the Administrative Procedure Act and it is a first step. If we 
were going to go to rules, we would have to issue a Notice of 
Proposed Rulemaking and specifically propose rules. A Notice of 
Inquiry is, as you noted, an inquiry. It is more educational in 
nature. It would help inform the debate and take it to the next 
step.
    Mr. Rogers. So even if you had the Notice of Inquiry 
procedure, in order to then, presumably, start an actual 
rulemaking procedure, you would have to start completely 
afresh, correct?
    Mr. Kennard. Yes, with the benefit of the record that we 
developed in the inquiry proceeding.
    Mr. Rogers. So the Notice of Inquiry hearing would, in that 
respect, then, aid if a later rulemaking should take place?
    Mr. Kennard. That is correct. It would also aid the 
Congress. If the Congress is interested in further exploring 
these issues, we as the expert agency would have assisted in 
that effort by developing a useful record. And I would propose 
in the inquiry proceeding that it include legislative 
recommendations that might be useful in this area, as well.
    Mr. Rogers. I do not know. In my experience here, I found 
that it is not hard to get members of Congress to debate on 
their own on such things without your prompting. The Chairman, 
the big chairman----
    [Laughter.]
    Mr. Rogers [continuing]. Has said that the Congress feels 
this is their ballgame, that you do not have the authority or 
jurisdiction to proceed with any procedure that would result in 
the FCC requiring broadcasters to give free time to political 
candidates. That view is shared by this member. I am sure we 
would get differing points of view from across the spectrum and 
the Congress, perhaps even on this subcommittee. We will find 
out, I guess.
    But it would be the intent of the chair to find out from 
you in writing before we mark the bill up whether or not you 
intend to proceed in any fashion that could result in a rule 
that would require free air time. We would need that before we 
marked up. Otherwise, the chair will be proceeding with the 
proposition of prohibiting that. So I would hope that we can 
come to some understanding.
    Mr. Kennard. That is understood, Mr. Chairman, and I look 
forward to working with you on something that would be mutually 
acceptable.
    [The information follows:]


[Pages 376 - 377--The official Committee record contains additional material here.]



    Mr. Rogers. Do you have any questions?
    Mr. Livingston. Thank you, Mr. Chairman.
    Thank you, Mr. Chairman.
    Mr. Kennard. Thank you.
    Mr. Rogers. Thank you, Mr. Chairman.
    Mr. Mollohan.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Welcome to the hearing.
    Mr. Kennard. Thank you.
    Mr. Mollohan. During the chairman's questions about the 
issue of free airtime, what was your response when he asked the 
question about statutory authority? Do you feel you have 
statutory authority?
    Mr. Kennard. I do. I think that the Communications Act has 
traditionally given the FCC a role in defining the public 
interest responsibilities and obligations of broadcasters, 
including in the content area. The real question here is 
whether the Act is so specific in the area of political 
broadcasting that it has essentially preempted the FCC from 
taking any action. My view of the law is that it has not. In 
fact, there have been instances historically where the FCC has 
promulgated rules in the political broadcasting area that are 
consistent with but not specifically required by the statute 
and the Commission has been upheld in the courts on this.
    Mr. Mollohan. In the political section of the operative 
statute there are enumerations as to what you can and cannot 
do, is that correct, and this is not one of them that is 
enumerated?
    Mr. Kennard. That is right. It is not inconsistent with 
what is enumerated, but it is not specifically contemplated.
    Mr. Mollohan. And the issue of whether you can go beyond 
what is contemplated has been addressed in the court?
    Mr. Kennard. Yes, in other contexts.
    Mr. Mollohan. What is an example of that?
    Mr. Kennard. There are rules, for example, that--there is a 
rule called the political editorializing rule. When a broadcast 
station editorializes against a candidate during an election, 
that candidate has a right under our FCC rules to come on the 
air and give a response.
    Mr. Mollohan. And that is regulatory and not statutory?
    Mr. Kennard. That is regulatory, that is correct. We also 
have----
    Mr. Mollohan. What is the example that would take you the 
closest to having authority to regulate free air time? Do you 
understand my question?
    Mr. Kennard. Yes, I do.
    Mr. Mollohan. What is the broadest example of that?
    Mr. Kennard. Well, the Congress directed the FCC in 
statutory amendments to the Act in the early 1970s to allow 
broadcasters to provide political time at the lowest unit rate 
and gave the FCC authority to administer that statutory 
provision, and over the years, the FCC has come up with a 
series of rules to clarify and define what lowest unit charge 
means in the marketplace.
    As you know, Congressman, since that time, the nature of 
campaigns and political broadcasting has changed dramatically. 
The cost of campaigns is much more today. The way that 
broadcast stations sell time to candidates is very different. 
Broadcast stations used to have rate cards where it was very 
easy to determine what the lowest unit charge is for any given 
station. That is different now. It is computerized. They do it 
in a different fashion. That has created confusion and 
difficulty and actually spawned lots of lawsuits, where 
candidates actually have sued television stations to try to 
determine whether they got the lowest unit charge or not.
    So as campaigns change, as the broadcast industry changes, 
I think it is incumbent on the FCC to make sure that the agency 
in administering these laws is keeping pace. The way I 
interpret the statute is that it gives the FCC some latitude to 
ensure that that happens.
    Mr. Mollohan. My question was a little different, I think, 
at least as I understand your answer. My question was, what is 
the example that you can cite that gives you the broadest power 
beyond those authorities that are enumerated in the political 
section of the statute.
    Mr. Kennard. I do not know if I could give you a specific 
example. I would cite the fundamental obligation of the FCC, 
which is to ensure that broadcasters operate in the public 
interest, and the courts consistently have interpreted that to 
be a broad mandate.
    Mr. Mollohan. In spite of your interpretation and whatever 
the courts have said, you are still respectful of Congressional 
interest in this area and you do not intend to proceed with a 
rulemaking beyond the fact-gathering stage, which is 
preliminary to publishing proposed rules, is that correct?
    Mr. Kennard. That is accurate, yes.
    Mr. Mollohan. Regardless of what our individual attitudes 
might be on the ultimate question, I do think that is a wise 
course because there is significant Congressional interest in 
the area which has been expressed and which I think ought to be 
respected.

                 schools and libraries (e-rate) program

    Chairman Kennard, as you know, many schools and libraries 
across this nation are excited about the E-rate program. Access 
to the information superhighway is critical for students. I am 
sure you will agree. What efforts are being made by the FCC to 
make certain that the E-rate program stays on track?
    Mr. Kennard. The FCC is very committed to making sure that 
the E-rate program works for the country. It is part ofthe 
Communications Act. We have been working very, very hard to make sure 
that it is administered properly and quickly. The efforts of the 
corporation that was established to administer the schools and 
libraries mechanism, the so-called E-rate, has really done a terrific 
job. This was an entity set up in September 1997. Already, they have 
accepted over 40,000 applications from every State in the country. So 
it is really a monumental accomplishment thus far and I am committed to 
making sure that it works successfully.
    Mr. Mollohan. Can you explain to us GAO's objections and 
how you are dealing with those objections?
    Mr. Kennard. Certainly. The GAO issued a report about a 
month ago now, if memory serves, which questioned the FCC's 
ability to establish an independent corporation to administer 
this without express statutory direction. We have been in 
communication with Members of Congress in both houses to try to 
get a better understanding of their specific concerns about the 
administration of the program.
    My bottom line is that it is really important that the 
program continue. I think it is pretty clear that we are going 
to have to make some mid-course adjustments to keep it on track 
and to resolve the concerns of various members.
    I do not agree with the GAO report. I think that there are 
two key sections in the Act that do give us authority to have 
set up this administrative structure the way we did, and, in 
fact, there are other examples where the FCC has used similar 
statutory provisions to set up universal service funding 
mechanisms like this. But we are going to work to make sure 
that Congress is comfortable with the structure we have set up 
so we can move forward.
    Mr. Mollohan. Senator Rockefeller is extremely interested 
in this and has been working hard on the Senate side.
    Mr. Kennard. Yes.
    Mr. Mollohan. I think he has formed a partnership with 
Chairman Stevens in a compromise. Are you familiar with that 
initiative?
    Mr. Kennard. Yes. I have been working with both of them on 
that.
    Mr. Mollohan. Can you please describe that compromise?
    Mr. Kennard. Well, it is sort of a work in progress right 
now, as far as I can understand. The amendment that I have seen 
would require the FCC to provide some basic information about 
how the program is administered, basically what it is going to 
cost, and to make sure that it is administered in a way that is 
efficient and effective.
    Mr. Mollohan. And additional costs are not borne by 
residential users, is that correct?
    Mr. Kennard. Correct.
    Mr. Mollohan. Do you know enough about this agreement to 
talk about that and how it is going to ensure that we do not 
have rate increases for residential users?
    Mr. Kennard. There is a lot of misunderstanding about this 
particular point because the mechanism was established so that 
it would never create rate increases for residential consumers.
    Mr. Mollohan. As originally conceived.
    Mr. Kennard. As originally conceived. Long distance rates 
have been declining over the last 10 or 12 years and they 
continue to decline. So any consumer who is concerned about 
this need only look at the bottom line on their phone bill and 
they will see that, overall, rates for long distance calling 
have declined dramatically, some 60 percent in the last dozen 
years, which is pretty remarkable, mainly as a result of 
competition.
    In addition, the FCC in the last year adopted reductions to 
access charges which should be passed along to consumers and 
further reduce rates. So these reductions are more than 
adequate to compensate for any additional universal service 
charges.
    Mr. Mollohan. I see. Do you support the compromise?
    Mr. Kennard. I cannot say, because I do not know enough 
about the latest version. I heard last night there was still--
--
    Mr. Mollohan. It is in the supplemental, is it not?
    Mr. Kennard. I believe it is. Yes, I think it changed. Yes.
    Mr. Mollohan. Thank you, Mr. Chairman.
    Mr. Rogers. Mr. Kolbe.

                       relocation to the portals

    Mr. Kolbe. Thank you very much, Mr. Chairman.
    We welcome you to the subcommittee. I have just a couple of 
specific questions that relate to my own jurisdiction and 
concern as Chairman of another one of the subcommittees of 
Appropriations and that is the Treasury, Postal Service, and 
General Government, which includes GSA. So my questions have to 
do with the projected move of the Federal Communications 
Commission to the so-called Portals II location.
    In the past, this subcommittee has been reluctant to give 
the FCC the money it needs to move to Portals II, a move which, 
as you know, and I think the subcommittee knows, was directed 
by the Federal Court and it went all the way through the 
appeals process. They said that we had a contract, that we had 
to honor it, and now a report the GAO has completed just less 
than a month ago, said is in the best interests of the 
taxpayers that we complete this move.
    But we have had an impasse, I think personally led by the 
FCC and some of the private sector communications lawyers that 
work before you, that has helped you delay this effort. The 
result is now that we are going to pay $14 million this year 
for an empty building. In fact, in 1999, the FCC may be the 
only Federal agency not paying GSA the legally required full 
rent.
    You have said in a letter that you do intend to go ahead 
with this move and you refer to the GAO report. GSA has begun 
to advance moving funds to the Federal Communications 
Commission, but the FCC has to pay back those relocation funds 
and this subcommittee has to authorize that. Otherwise, GSA, 
which funds all the building operations for the government, 
will not be made whole and that comes out of the subcommittee 
and that means that some courthouse project in some member's 
district is not going to be built because we are going to be 
short the money that is needed.
    Frankly, I think the situation makes the government look a 
little bit foolish. The GAO has reported that the FCC estimates 
there will be about half-a-million dollars in annual savings 
from consolidating at Portals, and no matter what happens, your 
rent is going to increase. They cannot renew the lease at the 
location that you are in because it violates basic life safety 
standards. So you have to move anyhow, and even if you did not 
and you upgraded that building somehow while you stayed in it, 
the rents would go up substantially, so you are going to need 
higher rents anyhow. I hope that this subcommittee will keep 
that in mind.
    The question that I have for you is that your budget this 
year includes an increase in the amount of funds that the FCC 
would pay the General Services Administration for the space 
that it occupies. Is that increase a result of the planned move 
and do you fully support both the increase in the budget and 
the move?
    Mr. Kennard. Yes. As I have stated a number of times, 
Congressman, I believe the FCC needs to make this move. I have 
reviewed the history of the efforts of the FCC to try to 
consolidate its operations in one headquarters facility and it 
is a long and, frankly, embarrassing history. For ten years, 
this agency has been trying to make this move. The Portals 
complex offers us the best near-term opportunity to make this 
happen. If this move does not happen, then we are unfortunately 
going to be embroiled in another multi-year effort to try to 
find another building and move, and I do not think that that 
makes any sense.
    But I also do not think it makes any sense for the FCC to 
move into a building when it does not have money to pay its 
rent. That would require the FCC to fire employees. I am fully 
committed to streamlining and downsizing this agency, but we 
should do it in a programmatic way and not in a way just to try 
to pay rent.
    So I am fully committed to this move, but I want to be very 
clear that I do not think the move makes any sense if we cannot 
get the support of the Congress to give us the rent and the 
moving expenses to make it happen.
    Mr. Kolbe. I appreciate hearing you say that and I hope 
that you will continue to, in your personal discussions with 
members of the subcommittee, continue to make that point and 
lobby as hard as you can, because frankly, I think there have 
been some mixed signals in the past. I think there has been 
some quiet, behind-the-scenes efforts made to try to not make 
this happen, and even though it means a huge drain fiscally for 
GSA and for the government. What is your current schedule for 
moving?
    Mr. Kennard. As I understand it, the earliest we could move 
would be the latter part of September of this year. But for 
that to happen, we need a commitment from the Congress that the 
money is going to be there so that we can move quickly and do 
what is necessary to make this happen.
    Mr. Rogers. Would the gentleman yield on that point?
    Mr. Kolbe. Certainly.
    Mr. Rogers. The Chairman has an opinion about this. 
Apparently, as I gather, GSA entered this contract, this lease 
arrangement at the Portals, without much consultation with FCC. 
Is that generally correct?
    Mr. Kennard. Yes, Mr. Chairman. I think it is fair to say, 
and I have reviewed this history and participated in some of 
this history, I think it is fair to say that the relationship 
between the GSA and the FCC has been a dysfunctional one. There 
has not been a good degree of communication and coordination. I 
do not think the GSA should have signed the lease agreement 
when it did without taking some very fundamental concerns that 
the FCC had into account. I could sit here all day and talk 
about all the mistakes that have been made in the GSA-FCC 
relationship, but it would not change anything. I think we need 
to move ahead.
    Mr. Rogers. There is still some baggage to be handled here, 
I think. In fact, the deal between GSA and Portals on this 
thing is under investigation at the moment by the Congress, is 
it not?
    Mr. Kennard. Yes.
    Mr. Rogers. In relationship to possibly some underhanded 
methods, is that correct?
    Mr. Kennard. That is correct.
    Mr. Rogers. Can you enlighten us any at all on that?
    Mr. Kennard. Mr. Chairman, I do not know much about that 
investigation, and frankly, I do not want to know much about 
it. My concern is running my agency and making sure that I have 
a place for the employees where they can be safe and they can 
do their job for the public.
    The prospect of having this agency go through many more 
years of uncertainty about where it is going to move is going 
to make my job as a manager much harder and any subsequent 
Chairman's job much harder. So I think we just need to clarify 
the Portals situation.
    Mr. Rogers. But the question that we face here is, how can 
we move on this when there is an investigation ongoing which 
could lead to no telling what. I mean, there is an 
investigation as to whether or not there was a pay-off, for 
example, involved in the initiation of this contract. That is 
weighty stuff.
    Mr. Kennard. I cannot disagree with that comment, Mr. 
Chairman, but the GAO did look at the lease arrangement overall 
and concluded that it is in the best interests of the 
government to move.
    Mr. Rogers. That is assuming that the GSA contract, the 
lease, was legitimately obtained. If the investigation, for 
example, concludes, proves, or whatever that Portals is getting 
an exorbitantly high rent under this GSA contract, and assuming 
that that was illegitimately obtained, then the taxpayers will 
be paying higher rent because of that criminality, is that not 
correct?
    Mr. Kennard. I believe the GAO has concluded that the rent 
is not unreasonable, and----
    Mr. Rogers. I do not want to know GAO's opinion. I want to 
know your opinion. The question is, suppose the investigation 
proves that GSA negotiated with Portals an exorbitantly high 
rental payment because of fraud or what have you. Should the 
taxpayers pick up the bill for that by paying that higher rent?
    Mr. Kennard. No, obviously not, Mr. Chairman. But I do not 
think that it is appropriate to hold the 2,000 employees 
hostage to this investigation.
    Mr. Rogers. Go ahead and pay the ransom? Are you saying to 
go ahead and pay the ransom?
    Mr. Kennard. No, I am not suggesting that, Mr. Chairman. 
What I suggest is this. I would hope that this investigation is 
brought to a very quick conclusion----
    Mr. Rogers. Amen.
    Mr. Kennard [continuing]. So that we can lay issues to rest 
if they can be laid to rest and this agency can go ahead and do 
its business.
    Mr. Rogers. I am sorry to take your time.
    Mr. Kolbe. Mr. Chairman, reclaiming my time, if I might, 
this has been the subject of a fairly extensive hearing before 
the Federal Court of Claims. They determined that the effort to 
cancel the lease contract in 1992, a lease contract that was 
first offered in 1989, then on December 20, 1991, Portals II 
ownership was notified that they were the successful offeror. 
It was in February 1992 that the GSA tried to cancel the space 
request. That became the subject of the hearing in front of the 
U.S. Court of Claims. They have upheld it and it has gone to 
the Court of Appeals, and have upheld the claim of the owners.
    Now, if some investigation by Congress shows that there was 
something here that has not turned up in any kind of court 
hearing, then that could be the subject, obviously, of either a 
criminal prosecution by the Justice Department or some kind of 
a civil claim that the GSA would have against the owners of 
Portals II for part of the rent.
    But nonetheless, we now have a court decision that we need 
to move forward. We are legally bound to pay the rent to 
Portals, so it is going to come out of somebody's pocket 
anyhow. The point is that we need to move ahead with this, I 
think, as quickly as possible, and I hope this subcommittee 
will do that.
    I wanted just to follow up with a couple more questions.
    Mr. Rogers. Before you leave that, if you are moving to 
something else----
    Mr. Kolbe. No, on this issue, though, on this issue.
    Mr. Rogers. If you will yield a minute on that issue--
    Mr. Kolbe. Can I just finish the question I had? It is on 
this issue.
    Mr. Rogers. Sure.
    Mr. Kolbe. The GAO report says that you told them that you 
no longer believe it is necessary to consolidate into a single 
building, though you want to consolidate. Is that still your 
position?
    Mr. Kennard. I understand, Mr. Chairman, that that was in 
response to the question of whether in the event that the lease 
were to be canceled, what would we want to do next, and I am 
told that we did respond that we would not consolidate in one 
building if the lease were canceled, if it was cost-effective 
not to do so.
    Mr. Kolbe. Have you received the relocation funds from GSA?
    Mr. Kennard. I understand that we have received some, but 
not all, of the funds that are necessary at this point.
    Mr. Kolbe. I think we were told yesterday the last amount, 
or second amount, anyhow, has been released to you. Can you 
tell me, for the record if you cannot give it to me today, tell 
me how much you have received from GSA in relocation funds as 
of this date?
    Mr. Kennard. Certainly. We are expecting $24 million. We 
have received $17 million to date.
    Mr. Kolbe. You have received $17 million as of this date. I 
think my understanding is GSA is waiting to see what your 
actual costs are.
    Mr. Rogers. Will the gentleman yield?
    Mr. Kolbe. Yes, of course.
    Mr. Rogers. I think we can settle this pretty quickly. This 
subcommittee is not about to pay ransom. We are not about to 
pay a high premium for a fraudulently-obtained contract from 
GSA or ABC or CBS. I do not care who it is. Until this 
investigation concludes there was no hanky-panky involved in 
the GSA contract with the Portals, it is going to ride clean.
    The allegations are, of course, that a political 
contribution led to GSA's giving Portals an exorbitantly high 
rental contract. That is the allegation that is being 
investigated. I am not about to commit myself, certainly--the 
Members have their own say about this--I am not about to say 
that we are going to pay the taxpayers' monies for that 
exorbitantly high rent until we can rest assured that it was 
reached at arms-length and not through some inside deal, which 
the indications are that it was.
    I understand, Mr. Kolbe, your predicament on your 
subcommittee. You handle the GSA matters and you have the 
legitimate case to make. But until we get this resolved on the 
criminality and the investigation of this underhanded deal, we 
are not about to pay it. I mean, you can move if you want to.
    Mr. Kolbe. Mr. Chairman, let me just say again that you 
have the Federal Court of Claims decision in this and you----
    Mr. Rogers. The Court of Claims has nothing to do with the 
criminal investigation and the gentleman knows that.
    Mr. Kolbe. And we have an appeals court that made this 
decision.
    Mr. Rogers. It is your time. I yield back.
    Mr. Kolbe. If that is going to be the case with this 
subcommittee, that we are not going to pay that rent, it means 
the taxpayers are going to be out the money and the GSA is out 
both the relocation money, apparently--
    Mr. Rogers. If the gentleman will yield, as I have said, 
the FCC is free to move. If they feel like they want to move, I 
am not standing in the way.
    Mr. Mollohan. Will the gentleman yield?
    Mr. Kolbe. I certainly will yield to the gentleman.
    Mr. Mollohan. I do understand that the GAO has looked at 
this issue.
    Mr. Kolbe. Yes. They have looked at it and concluded that 
this is in the best interests of the taxpayers.
    Mr. Mollohan. And they have looked at some of the 
impropriety issues that the chairman is referencing?
    Mr. Kolbe. That is correct.
    Mr. Mollohan. Also I understand that our colleague, Mr. 
Tauzin, has decided to investigate that.
    Mr. Kolbe. That is correct.
    Mr. Mollohan. I do not want to get into the impropriety 
issue because, I think there still remains a question as to 
what extent GSA has proceeded in a way that has incurred costs. 
I do think it is an issue that needs to be sorted through, and 
a determination made as to what agency is responsible for 
excess expenditures. So short of the wrongdoing issues here, 
however that turns out, I do still think that the GSA has made 
mistakes in this process and we have to look at who is 
responsible for paying the costs. This is a large amount of 
money. I understand we have a vacant building for which we are 
paying a million dollars a month in rent.
    Short of the Chairman's concern which he stated, I am sure 
he has concerns beyond that about who should be responsible for 
any bad decision making.
    Mr. Kolbe. Let me just conclude by saying that----
    Mr. Mollohan. I thank the gentleman.
    Mr. Kolbe. Let me just conclude, Mr. Chairman, by saying 
that it seems unfortunate to me that we are going to decide in 
the name of protecting I am not sure what here that we are 
going to stick the American taxpayer with the cost of an empty 
building, which is exactly what is going to happen if we do not 
go ahead with this move.
    The issue of whether or not there should be a claim against 
the owners of that building because the rent is too high or a 
criminal claim because the contract was entered into 
inappropriately is an issue that ought to be settled 
separately, and I am sure there are plenty of mistakes to go 
around on both sides with the FCC and the GSA and the way this 
was handled, but that goes back to 1986 when this process 
began. As the Chairman correctly pointed out, the lack of 
communication between the two sides in the discussion of this 
led to the offering in 1990, the contract in 1991 or later 
1990, and then the attempt to cancel it in 1992.
    We are, nonetheless, now stuck with that building and using 
that building should be our number one priority. Making use of 
that building ought to be our number one priority right now, 
and we should resolve the other issues, I believe, separately.
    Mr. Rogers. Before we proceed here, I would like to insert 
this because it is so relevant to our conversation here. The 
GSA, my information is the GSA on its own entered into this 
agreement with Portals without consultation with the FCC. There 
is no dirt on both hands here. The FCC had nothing to do with 
the GSA entering into the contract with Portals. Now the 
Commerce Committee of the House is investigating whether or not 
that arrangement between GSA, a governmental agency, and 
Portals was reached underhandedly, not at arms-length. GSA is 
under investigation, as well as Portals, and it looks pretty 
shady.
    We will wait to see what the facts are, but while that is 
ongoing, I am not about to recommend that our subcommittee fund 
these exorbitantly high, underhandedly reached, perhaps, rental 
payments. Now, I am not going to prohibit you from doing that. 
If you want to move in there and pay those rents out of 
unobligated funds, perhaps, or reprogram money, thatis up to 
you. I am not going to stand in your way. But I am not going to 
recommend that we pay the ransom at this stage in time.
    Mr. Kennard. May I respond, Mr. Chairman?
    Mr. Rogers. Please, yes.
    Mr. Kennard. I think, for the record, I should make clear 
that the FCC objected to the lease that was entered into by the 
GSA. It was entered into over our objections at the time----
    Mr. Rogers. Say that again?
    Mr. Kennard. The GSA entered into this lease agreement over 
the objections of the FCC. The FCC is in the awkward position 
of being represented by GSA in these negotiations with the 
Portals developer, but unfortunately, there has not been good 
communication between these two agencies and my view is that 
many of our concerns have not been taken into account.
    This leaves us in a very awkward position of not having the 
money to make this move, but in a position where GSA can, in 
effect, order us to make this move. We have expended to date 
about $6 million to prepare for the move. We are now facing the 
difficult dilemma of whether we spend additional money, not 
knowing whether this move is going to happen or not.
    So two things. One is I think it is important to realize 
that the FCC is sort of becoming a scapegoat in this whole 
problem, and second, that we just urge those who have the power 
to make the decision here, namely the Congress and the GSA, to 
please work quickly to resolve whatever needs to be resolved so 
that we can get some clarity into where this agency is going to 
be housed.
    Mr. Rogers. What was your objection to the GSA when they 
negotiated this lease?
    Mr. Kennard. I think there were numerous objections. 
Principally, the one that I recall was the matter of 
accommodating our space needs at the time. They entered into a 
lease for a building that was not large enough for us. Is that 
right, Andy? Oh, yes. And the other is we objected to the date 
that the rent would start, which as you know has become an 
issue of some controversy.
    Mr. Rogers. I am told that on August 12, 1994, the FCC sent 
a letter to GSA requesting that they not proceed to sign a 
lease. They did not know that GSA had already signed the lease, 
apparently. Is that not correct?
    Mr. Kennard. That is correct.
    Mr. Rogers. So when the letter was sent on August 12, 1994, 
requesting that they not proceed to sign a lease, apparently 
GSA had already signed the lease, is that right?
    Mr. Kennard. Yes. I remember that date very clearly. That 
is correct.
    Mr. Rogers. And then on August 12, the same date, they 
signed the lease and agreed to use ``vigorous efforts'' to 
cause the FCC to be the initial occupant, including assigning 
FCC to space in the building, is that correct?
    Mr. Kennard. That is correct.
    Mr. Rogers. Why would they have proceeded over your, not 
your passivity to this but over your active objections to 
signing the lease? Why would they----
    Mr. Kennard. I cannot answer that question, Mr. Chairman.
    Mr. Rogers. To your knowledge, has that ever happened 
before?
    Mr. Kennard. I have never been involved in a situation like 
this, Mr. Chairman. I think you would have to ask GSA that 
question. I believe that lease was entered into before Mr. 
Haney, the Portals developer who is the subject of the 
investigation, was an investor in the Portals project. So I 
think that the lease agreement did pre-date that situation, for 
what it is worth.
    Mr. Rogers. The lease agreement did what?
    Mr. Kennard. Pre-date.
    Mr. Rogers. Oh, pre-date.
    Mr. Kennard. Pre-date Mr. Haney's participation.
    Mr. Rogers. I am sure we will come back to this.
    Mr. Kolbe. Would the gentleman just yield for one moment?
    Mr. Rogers. Yes.
    Mr. Skaggs. Mr. Chairman, I have to chair a meeting 
elsewhere and I realize that we want to fully develop this 
issue.
    Mr. Rogers. I have a conflict here, too. Mr. Regula, 
Chairman of this subcommittee, has a conflict, as well.
    Mr. Regula. I have my colleagues in the chair, so I am 
okay.
    Mr. Rogers. All right.

                staffing level of cable services bureau

    Mr. Skaggs. Thank you, Mr. Chairman. I will not take much 
time.
    As I understand it, the current regulatory arrangement for 
cable television goes out of effect in about a year. I am 
wondering if you would explain how your proposed staffing level 
dealing with the cable TV regulatory scheme comports or not 
with at least the current state of the law, which would see 
deregulation occur at that time. You are still asking for 
almost as many people for 1999 as you asked for in 1998.
    Mr. Kennard. Yes, but not in the Cable Bureau. The Cable 
Bureau, when it was originally formed after the 1992 Cable Act, 
was authorized at approximately 240 employees. It has been cut 
in half since that time. It is about 120 employees today.
    We still do at this time have a lot of work to do in that 
Bureau. We are still receiving complaints that need to be 
resolved and there are a lot of fairly important policy 
rulemakings that that Bureau has handled. They just worked on 
the V-chip, for example. We have to deal with a very important 
question, to redefine the must-carry obligations of 
broadcasters in the digital era.
    So to answer your question----
    Mr. Skaggs. But the staffing level does not presume any 
particular state of statutory affairs a year from now, on the 
regulation-deregulation issue?
    Mr. Kennard. That is correct. This Bureau still has a lot 
of work to do. We are still getting complaints. We still have 
jurisdiction to handle those complaints until March of 1999 
when the cable rules are sunsetted, if they are sunsetted at 
that time.

              universal service--rural and high cost areas

    Mr. Skaggs. You mentioned in your opening that you see no 
inherent conflict between the mission of universal service and 
the mission of competition. Interpreting that in my own way, I 
assume that means because you see it as practicable to have a 
consistent set of universal service obligations imposed on new 
entrants so that, in the telephone industry in particular, the 
local net people are not at a disadvantage in their 
obligations. Is that a fair reading?
    Mr. Kennard. Yes, I think that is fair, Congressman. The 
challenge that we face is taking a system of universal service 
subsidies which are implicit and contained in various cross-
subsidies in the current system, and making them explicit so 
that new entrants, new competitors can provide service and get 
universal service support as the incumbents have for years.
    Mr. Skaggs. It is easier said than drafted, I suspect.
    Mr. Kennard. Yes, it is a big challenge.
    Mr. Skaggs. One facet of that that concerns me is I think 
we tend to think of universal service from its origins in the 
1930s, in particular with rural electrification and wiring 
rural parts of the country. At least in my part of the 
country--and I know we are not unique in this--we have a lot of 
rural demand now stemming from relatively well-to-do people who 
want to have their 20 or 30 acres in the Colorado mountains; a 
phenomenon which is more than a little different in terms of 
its public policy objective than the way we think of universal 
service in high cost, low income areas.
    Is there value or legitimacy in to trying to make that 
distinction in any new regulatory scheme? It just strikes me as 
inappropriate for a poor, urban residential telephone consumer 
to have to bear part of the cross-subsidization, if you will, 
of a rich ranchette owner in the foothills.
    Mr. Kennard. This is a question that has swirled around 
universal service almost since its inception, and it is a very 
difficult one to resolve. A couple of points. One is, it is 
important to note that most of universal service is paid for at 
the State level; about 75 percent of universal subsidy money is 
paid by the State jurisdictions. So we at the Federal level do 
not have direct control over how those programs are 
administered.
    But we can, through our jurisdiction over the interstate 
telephone networks, use whatever incentives we can to get the 
States to use universal service funding in the most explicit 
and efficient way.
    One of the things that we are doing is working with the 
States now to come up with models to figure out how much 
universal service costs the country, because no one really 
knows exactly because it has been an implicit, sort of hidden 
subsidy. In that process, it is my hope that we can target 
universal service to those areas that are most needful of the 
subsidy, particularly the most rural, high cost areas so that 
the subsidy money that flows to universal service is used in 
the most efficient way.
    Mr. Skaggs. The most rural, high cost areas, at least in 
Colorado now, that are not served are rural, high income areas.
    Mr. Kennard. Some of them are, that is right. It has been 
the policy of the Congress and the FCC for decades now that 
universal service includes a subsidy for those people.If we are 
to change that, that would involve a very, very significant change in 
the policy.
    What we are trying to do at the FCC is to target the 
subsidy so that at least it is going to places that truly have 
the most need for the most high cost support, which may include 
wealthy ranchers in Montana and what-not.
    Mr. Skaggs. I think it is time to reexamine what we are 
really trying to accomplish there. If you are saying that has 
got to be made in this forum and not in yours, I accept the 
advice. But it is distorted social policy to be looking at it 
just in terms of the cost of service in some of these areas.
    Thank you, Mr. Chairman.
    Mr. Rogers. Mr. Regula.

             universal service--additional carrier charges

    Mr. Regula. Thank you, Mr. Chairman.
    Mr. Kennard, I am getting a lot of contact from 
constituents who see a universal service charge on their bill, 
and when they call they are told that this is mandated by 
Congress and/or the FCC. I find no evidence in the 
Telecommunications Act that says that it has to be levied. I 
think it is a cop-out on the part of the phone companies to 
blame either the Congress or the FCC.
    What is the basis for their charge? What legal basis do 
they have to put on these access fees?
    Mr. Kennard. The Telecommunications Act of 1996 did have as 
its major premise making these subsidies explicit. And some 
carriers have chosen to recover the cost by actually putting a 
line item on the bill that says national access charge.
    Mr. Regula. I have a copy of a bill where that is 
evidenced.
    Mr. Kennard. My view is that, first, consumers do have a 
right to know what they are being asked to pay for. That is 
fundamental.
    Mr. Regula. And why. Why they are being asked.
    Mr. Kennard. Yes, that is right.
    Mr. Regula. In other words, who makes that decision.
    Mr. Kennard. But the second point is that consumers should 
also know that overall, costs of long distance service have 
continued to decline. So the carriers, unfortunately, are 
disclosing that there are new universal service charges, but 
they are not disclosing the full story, which is the bottom 
line of your bill is lower. You are able to make more calls for 
less cost than you ever have been able to make in history.
    I would urge the carriers to make the fullest disclosures. 
If they are going to disclose half the truth, they ought to 
disclose the full truth.
    Mr. Regula. But are they mandated? They are saying to the 
customer, we have to do this because of Congressional action, 
which I have no evidence of, or because of FCC requirements?
    Mr. Kennard. No.
    Mr. Regula. So they're really distorting the facts when 
they get these inquiries.
    Mr. Kennard. Yes. They have chosen to recover the costs in 
this way. This was not mandated by the FCC or the Congress.
    Mr. Regula. The other part of this is that there seems to 
be a great disparity as to what is being levied. We have had 
constituents who are getting from 4 percent, up to 52 percent 
charge on their bill as the universal service fee. I do not 
know how they arrive at these charges. It seems they do not 
indicate any basis other than just they do it. Is that a 
problem?
    Mr. Kennard. This is a problem, and we have been in 
discussions with some of the long distance carriers about how 
they are recovering these costs because it is creating an awful 
lot of confusion. It may be that the FCC or the Congress will 
have to reassert some regulatory oversight over the way that 
these charges are disclosed. It is my hope that we will not 
have to do that, but if it continues to be a significant 
problem we might have to entertain that.
    Mr. Regula. So you are saying the company is relatively 
free to charge whatever they feel they can get away with?
    Mr. Kennard. Well, in the long distance marketplace, 
because it is fairly competitive now, the FCC has not imposed a 
lot of regulatory oversight over the way these charges are 
recovered and the carriers are pretty free to recover them in 
any reasonable manner. But if they are misleading customers 
about these charges, then we might have to take some further 
action.
    Mr. Regula. But the bottom line is that the carrier is 
making the decisions, both as to levying the fee and as to the 
amount; is that correct?
    Mr. Kennard. That is correct.
    Mr. Regula. So where does a customer complain?
    Mr. Kennard. The best advice I have for customers is that, 
in the long distance marketplace at least, you have some 
choice. Most of us have been disturbed at dinner time by people 
calling from the long distance industry asking to sell the 
latest package of services. That is a good thing, because you 
can shop around these days for long distance services and get a 
pretty good deal.
    So the best advice to consumers is, shop around, because 
rates are declining and you can get a good deal. And second, 
understand that overall you are paying less today than you were 
a year ago, and certainly a lot less than you were paying five 
years ago. Unfortunately, many consumers see only the line item 
and this sets them off. But if they got the full picture, I 
think they would be quite satisfied that rates have been 
declining and will continue to do so.
    Mr. Regula. Yes, you can negotiate your long distance 
service, but where you are on the standard phone service you 
have to pretty much use the company that has your area, 
franchise.
    Mr. Kennard. Yes, and that is a big challenge for us to 
introduce more competition in local phone service. We are 
working hard to do that through a number of policies and tools 
that you gave us in the 1996 Act.
    Mr. Regula. Thank you, Mr. Chairman. Appreciate getting 
that information.
    Mr. Rogers. Thank you, Mr. Chairman. Appreciate your being 
with us today.
    Mr. Dixon.
    Mr. Dixon. Thank you very much, Mr. Chairman. You indicated 
in your opening statement that the Chairman of the Commission 
had a significant challenge before him.
    Mr. Chairman, if I could just get your attention just for 
30 seconds here? As I said, you indicated that the Chairman had 
a significant challenge before him. He certainly does. He is 
well prepared by training and experience. But the reason I 
wanted to get your attention is because Mr. Kennard is a third-
generation Californian, and is from Los Angeles.
    Mr. Rogers. Did he go to UCLA?
    Mr. Dixon. No, he did not. He went to Stanford and they 
maybe in the Final Four, Mr. Chairman.
    Mr. Rogers. Like UCLA would have been. [Laughter.]
    Mr. Dixon. Notwithstanding Mr. Cunningham's statement 
yesterday that California is 50th--and I quote him--in 
literacy. Those were his exact words, that California is 50th 
in literacy. Certainly Mr. Kennard is an outstanding 
representative of California. We in Los Angeles in particular 
are very proud of him.
    Mr. Kennard. Thank you.
    Mr. Dixon. Mr. Kennard, perhaps you realized before you 
came in today that one of the significant challenges you have 
is being in the middle of two distinguished cardinals of the 
Appropriations Committee and their differences about the 
Portals building. And certainly, the authority to and the 
wisdom of establishing a policy through your commission versus 
what the Congress sees as their role in establishing a policy 
as it relates to free television for campaigns. So you do have 
significant challenges before you.

               appeal process for public safety spectrum

    My questions are really parochial; they deal with Southern 
California. The first one I realize that you cannot comment on, 
as an appeal process is ongoing.
    But as I understand the facts, the South Bay Police 
agencies have made a request for certain spectrum space and 
they were denied. In the interim, Ms. Harman placed in a piece 
of legislation, the Balanced Budget Act, language that became 
law dedicating certain spectrum space to public safety 
agencies. Thereafter, it is my understanding--it could be 
entirely wrong--that an award was made by a division of the 
FCC, the commercial division, to a commercial company.
    All I am asking you is just two questions. One, is after 
the Commission has decided this case on appeal, if it does not 
include the history of what occurred and any correctional 
measures that have been taken to avoid that kind of 
impropriety, if it did occur, would you communicate to the 
committee what your finding was?
    Secondly, could you tell me today how soon you think that 
appeal process will be completed and the Commission will give a 
decision?
    Mr. Kennard. Certainly, Congressman. First, thank you for 
your remarks. I will certainly ensure that once the Commission 
reaches a decision that you and your office are briefed on the 
matter. I am familiar with the matter. I understand that it has 
been pending for quite some time too long in my view. I have 
directed my staff to do everything that they can to make sure 
that we get this done in the next 30 to 60 days.

                         area code portability

    Mr. Dixon. Another parochial concern that we have and we 
have briefly discussed, the PUC in California is entertaining 
splitting up geographic jurisdictions once again to develop 
area codes. Obviously, it is a great inconvenience to people in 
the commercial area, and indeed costly.
    One of the suggestions that several cities have made to me 
was that if there was a dedication of an area code to a 
specific unit--in this case, cellular phones--that in fact 
there would not have to be another division of the area code.
    When we talked earlier I thought your impression was that 
the Commission had not given an exemption to any State or city. 
But I went back and looked at a Times article, which is not 
necessarily always correct, and I am told by this article, that 
in 1992 an exemption was given to the city of New York. I 
understand the rationale is that it is discriminatory.
    I guess I would just like you to amplify on that. Is it 
correct that the Commission did give an exemption? And is it 
appropriate or fair now to change that decision which may cause 
hardship to other communities that are having such a difficult 
time.
    Mr. Kennard. Congressman, I do not know what the Commission 
did in 1992. I do know that in the 1996 Act Congress made clear 
that the administration of telephone numbers and area codes 
should be done in a way that is competitively neutral and does 
not discriminate against any carrier. And that is a particular 
challenge because we have so many new services in the 
marketplace now, with wireless, and faxes, and pagers, and 
what-not. We do not want to have a regime where any one 
provider or type of provider is discriminated against.
    We are working on two things. One is rules on number 
portability which will hopefully ensure that there is no 
discrimination in the use of numbers. And second, we are trying 
to come up with some national standard on the pooling of 
numbers so that these numbers--that no one hordes these numbers 
and that they are more available.
    But I continue to believe that not only the 1996 Act, but 
just common sense would dictate that we should ensure that no 
competitor is somehow singled out or discriminated against in 
the administration of numbers.
    Mr. Dixon. Would you have your staff go back and look to 
see if there was a decision in 1992 and what its rationale in 
fact was?
    Mr. Kennard. Absolutely.
    Mr. Dixon. And what factors caused a change in the opinion 
of the Commission?
    Mr. Kennard. We will certainly do that.
    [Clerk's note.--The response to questions from Mr. Dixon 
concerning New York wireless-only overlay have been included 
with other questions for the record and follow at the end of 
the transcript.]
    Mr. Dixon. Now this hording of numbers, as I understand it 
through only cursory reading, deals with the switches and their 
inability to make distinctions in groups of less than 10,000?
    Mr. Kennard. Yes.
    Mr. Dixon. Is that because the technology is not available, 
or that people in these businesses do not want to buy the more 
sophisticated equipment?
    Mr. Kennard. I cannot answer that question, Congressman. I 
do know that just anecdotally I have been told by some industry 
groups that have talked to me, that there are more efficient 
ways to use numbers on a basis less than 10,000. The wireless 
industry, for example, likes to tout the fact that they use 
numbers more efficiently.
    So we will look at the technical issues here and work with 
you and see if there are ways that we can at least stave off 
this area code exhaust problem so it is not as much of a 
problem as it has been.

                          cable tv competition

    Mr. Dixon. Finally, Mr. Chairman, in the area of 
competition in cable TV. How do you respond to the argument 
that is put forth by the cable TV industry that they entered 
into what they thought was going to be a competitive 
environment, and in fact they geared up for that environment, 
but others, in particular the phone companies, have not engaged 
in competition, and now it would appear that they are being 
penalized because they prepared to engage in competition and 
found that there was none? I have heard that argument. I am not 
advocating it, I am just wondering what the answer to that is.
    Mr. Kennard. I think the premise of your question is 
certainly correct, that long term, the best solution to the 
cable rate problem is more competition. All of us expected in 
1996 when the Act was passed that there would be more 
competition to cable. That the telephone companies would--at 
the time they were gearing up to provide more competition and 
it just has not materialized. I know there are a lot of reasons 
for it, but the bottom line is that it has not arrived.
    So the one thing we have got to do is do whatever we can to 
promote competition to cable, and we are working to do that. We 
have sent some recommendations up here to Congress on how we 
believe some legislative changes could make it easier for 
competitors to get into the marketplace and compete against 
cable.
    Second, I think it is important for us to have a really 
good understanding of why rates are going up, because we hear 
very conflicting things about this. The cable industry tells us 
that the rate increases are the result of higher programming 
costs. Some of the programmers tell us that it is because the 
cable industry is taking monopoly profits. The consumer groups 
are telling us that the cable industryshould be passing along 
more increased revenues to--they should not be passing these 
programming costs directly through to consumers is the point.
    So I have asked the Cable Bureau to work with the cable 
industry to try to get some fundamental answers to why these 
rates are going up, and I certainly hope that the cable 
industry will be cooperative with the FCC so that we can 
develop a good and useful record for you in the Congress if you 
want to address this issue.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. Mr. Forbes.
    Mr. Forbes. Thank you, Mr. Chairman.
    And Chairman Kennard, thank you very much for being here 
today. I appreciate your extensive remarks and comments. I 
think they have been very, very helpful.
    I would like to pick up on what you were just talking about 
because I think you--and I appreciate the sensitivity that the 
chairman has in regard to this issue. There are certainly a lot 
of things on the plate at the FCC. We have seen in my part of 
New York, for example--and I will be a little parochial 
myself--where, as a free market person who embraces all of the 
competitive efforts that you have alluded to here, I have been 
very frustrated by what I think is--and I hope it is not true, 
but the playing out of the 1996 Telecom Act. I note your 
remarks that you have admonished those who think that it has 
been a failure, to revisit their position.
    I do not want to come to that conclusion, but on my part of 
Long Island we have seen, for example in the cable industry, 
where there is an absolute monopoly now. I know that is 
something that we were hoping that the 1996 bill would deal 
with and competition would break that up. A monopoly not just 
on providing service, but when you look at the fact that in 
this, Cablevision of Long Island also has an ownership of 
Madison Square Garden. They have an ownership of several 
packages that are provided on cable TV. And it just seems that 
one company is having an unbelievable possessive approach to 
the marketplace, and running counter to everything that was 
intended under the 1996 Act.
    I do know that there is limited ability for FCC because of 
the amendments to the 1992 Cable Act, to step in. As I 
understand it, the FCC can only really step in when local 
authorities and cable entities cannot come to an agreement 
basically; is that----
    Mr. Kennard. Yes, we would lose our jurisdiction in March 
of 1999 over rate increases on the enhanced tiers. The local 
authorities would still have some role in policing rates at the 
basic tier level. But we would only handle appeals from those--
--
    Mr. Forbes. We have seen, frankly, almost on a consistent 
basis where local authorities are not able to renew with cable 
companies because there is just an outright refusal by the 
cable company to negotiate. So that is a problem, and I know 
that largely that is dealt with on the State level.
    But I am just wondering, are there opportunities or 
occasions when the FCC would even consider--and I know this is 
somewhat dramatic, but consider referring to the antitrust 
division at Justice some of what we think might be taking place 
across the country? I do not think it is just on Long Island. 
There are, frankly, questions of antitrust here in some 
instances where they are buying up whole portions of the 
industry and creating a problem.
    Obviously, it is a broader question than I would expect you 
to deal with here today, but I do think that I would appreciate 
the FCC's continued sensitivity, at least until the expiration 
of your authority in 1999 on the cable end as it deals with 
some of those issues.

                             ACCESS CHARGES

    You talked about the increased competition on the long 
distance end, which I think we have all seen personally and 
professionally I suspect. Competition on the local end, I think 
is certainly an area that I know that the FCC has been 
concerned about. I know there was an order in May of 1997 to 
try to reform access charges and universal service charges.
    I think it is fair to say, at least from my perspective, 
that access charges, if they are not at cost, serve as a way to 
keep others out of the local telephone industry except for the 
incumbents. Is the FCC doing more than just hoping that the 
marketplace and competition will deal with this question, and 
that in fact the FCC--I have got to believe, looking across the 
country you must see numerous instances where the competition 
on the local side is being thwarted because of the access 
charge question. Could you speak to that?
    Mr. Kennard. Certainly. The FCC, in the May order that you 
referred to, did order some fairly significant reductions in 
access charges. The question is whether that order went far 
enough. The FCC set in place in that order a process for 
further reductions in access charges based on the hope and 
expectation that as competition is introduced in the 
marketplace access charges would be driven closer to cost.
    By the way, there is a huge debate in these industries as 
to how you define costs in this context. But ultimately, the 
best way to resolve the access charge issue is through more 
competition, because that is the best way to drive those costs 
down.
    Mr. Forbes. If I may, Mr. Chairman, how do you get 
competition if you cannot get in the game in the first place 
because access charges really make it very difficult for you as 
a new competitor to do that?
    Mr. Kennard. That is the nub of the problem. As I said in 
my opening statement, we have to do everything we can to 
promote competition in these markets. Really, as I survey the 
landscape in communications, there are two areas where we have 
incumbent companies who have monopoly power. It is in cable 
television and it is in local phone service.
    We cannot look for the silver bullet here. We have got to 
promote new entry any way we can, through wireless services, 
for example, through eliminating regulatory barriers for long 
distance companies to get into these markets. That is the best 
way to deregulate and to get access charges down.
    Now if this does not happen, we may have to entertain a 
more regulatory solution.
    Mr. Forbes. Can I follow up on that? When the local 
companies are filing Form 271 to get into long distance--and I 
assume that a lot of them are filing multiple applications, 
probably making your folks crazy because of the paperwork--is 
there an attempt in the review of those forms to deal with the 
access issue in judging those applications as well?
    Mr. Kennard. Not directly, no. The Section 271 process sets 
forth a fairly specific set of issues that the FCC must look at 
to determine whether the Bell operating company should be 
allowed into long distance, and access charges is not expressly 
one of the things we look at, but it is sort of implicit in a 
lot of the pro-competitive checklist requirements. Because if 
you allow new entrants to get into the local loop and to be 
able to provide service and use the incumbent's network at an 
appropriate cost, then, again, you should be introducing a 
regime where access charges should come down.
    Mr. Forbes. It seems to me that is one of the biggest 
stumbling blocks we have in effectively realizing where the 
1996 Telecommunications Act wanted to take us, which is to 
provide a balanced playing field so that--and you know this 
certainly far better than most of us--but a balanced playing 
field so that the long distance companies have to open up that 
marketplace to the local providers, and the local providers 
have to do likewise.
    I can't help but, to be honest with you, think that there 
seems to be a real tilting of the scales in one direction now. 
People are getting long distance access, but on local telephone 
service it has really been far slower than we wanted, and I 
acknowledge that this is a slower process than anyone would 
hope for, anyway. I just hope, Mr. Chairman, that you and your 
regulators take a long hard look at this problem because I 
think it could ultimately lead to the unraveling, in a large 
sense, of the 1996 telecommunications bill.
    We go home and I hear from my constituents who are really 
upset that, yes, costs have gone down for long distance 
service, but they are frustrated because they were waiting for 
this great competition that we all talked about over the last 
several years to reveal itself. They are not seeing it on the 
cable front, a 78 percent increase in local service on Long 
Island alone. They are not seeing it on local telephone 
service. And I think there is a growing frustration.
    I came into this Congress, frankly, very much committed to 
what we were doing in the 1996 bill and feeling great criticism 
for the 1992 act because it went so far the other way and it 
thwarted investment in cable and telephone service in providing 
that competition.
    So to the extent that your able staff and yourself, sir, 
can, please focus on this--and I know you have been focusing to 
a degree on this. It is, frankly, something that I am watching 
very closely, and I suspect other Members of Congress are, too, 
because the last thing we want to do is go back to our chairman 
and ask that we revisit the 1996 act. I want to give it time to 
work, but we are very, very frustrated that local service is 
being thwarted, both in cable and telephone.
    Mr. Kennard. I appreciate those remarks.
    Mr. Forbes. Thank you for being here today.
    Thank you, Mr. Chairman. I have other questions, if I may, 
for the record.
    Mr. Rogers. Sure.
    [The information follows:]


[Pages 398 - 404--The official Committee record contains additional material here.]



    Mr. Rogers. Mr. Latham.

           universal service contributions and disbursements

    Mr. Latham. Thank you, Mr. Chairman.
    Just for clarification for my own benefit, on the universal 
service charges, they are not required, but if they are 
charged, does the company have to put that on the phone bill? 
Do they have to show the changes?
    Mr. Kennard. No, they have discretion to show it on the 
phone bill, but it is nothing that was mandated by the Congress 
or the FCC.
    Mr. Latham. Is it true that the funds derived from the 
charges cannot go to another Government entity?
    Mr. Kennard. I am not sure I follow your question. There is 
a mechanism for collecting universal service contributions, and 
they are collected by--traditionally, they have been collected 
by a corporation that was established by the FCC in the mid-
1980s which distributes the funding. But the statute is silent 
as to whether the money can go to a Government authority or 
not.
    Mr. Latham. Well, the reason I ask, you know, I am from 
Iowa, and we have a State fiber optic system.
    Mr. Kennard. Oh, yes, I am familiar with this.
    Mr. Latham. Which hooks up all the schools in Iowa, and all 
the libraries, but apparently they are not able to access these 
funds. I am not saying whether they should or not.
    Mr. Kennard. Right.
    Mr. Latham. But I am more concerned about what I tell my 
constituents if they are paying these charges and Iowa has no 
way of getting any benefit.
    Mr. Kennard. You have a very innovative commission there. I 
am familiar with what is happening in Iowa, the technology 
commission. And they had come to the FCC and asked that the 
Commission allow them to take universal service funding 
directly as opposed to through schools and libraries. And that 
is something that we are looking at actively now.
    In fact, someone just handed me a letter that we sent you 
on this just yesterday or the day before, it looks like.
    Mr. Latham. In anticipation of this. [Laughter.]
    Mr. Kennard. Yes.
    Mr. Latham. Good job.
    Mr. Kennard. No, I am familiar with the problem, and we put 
their request out for public notice, and we will be addressing 
that soon.
    Mr. Latham. Again, I mean, to me it gets back to the 
question of the constituents who are screaming about these 
charges. Currently, they are not able to get any benefits out 
of it. Iowa taxpayers have spent a tremendous amount of money.
    Now, philosophically and personally, I don't think the 
State of Iowa ought to be in the phone business. I think it is 
wrong to begin with. But since we already are, I guess it is 
something that we obviously need to address.

                           year 2000 funding

    One question I have asked at almost every hearing this 
year, what about the year 2000 problem? Are you prepared?
    Mr. Kennard. We have been working on it. We desperately 
need funding in order to make sure that the program works. We 
have asked in our budget for about $5.3 million to make sure 
that we can solve this problem and we don't put the 
telecommunications networks at risk in the year 2000.
    Mr. Latham. What would happen if you didn't make it by the 
year 2000? What would happen?
    Mr. Kennard. Well, we have, as you know, an extensive 
licensing system where we have to keep track of all of the 
people in the country who use the electromagnetic spectrum for 
paging and television and radio and cellular phones. And it 
would be devastating if our computer database were to fail and 
we were not able to track who has licenses and where they are 
in the system. So it is really crucial that we address this 
issue.
    The bright side of year 2000 issues for the FCC is that as 
we automate our systems and allow electronic filing in our 
licensing process, we are solving the year 2000 problem. So not 
only are we solving that problem, but we are doing it in a way 
that makes the agency run more efficiently and works better for 
the public. So it is really a win-win.
    Mr. Latham. And you can assure the committee that with the 
$5.3 million you will not have any problems in the year 2000?
    Mr. Kennard. Yes. If we get support for the $5.3 million 
and if we are able to carry over approximately $3.4 million in 
regulatory fees, it will be sufficient.

                 free air time for political candidates

    Mr. Latham. I know it has been brought up before, but I 
just cannot help but mention the real concern I have as far as 
free time for candidates. Sioux City, Iowa, is the major media 
market in my district. Sioux City also borders with two States. 
South Dakota is right there. Nebraska is right there. If they 
had to give free time to candidates in all three States, which 
is their market, they wouldn't have time for anything else. 
They wouldn't be able to sell any advertising and survive.
    I know it has been addressed, but----
    Mr. Kennard. Congressman, that is why I think it is 
important that we have a proceeding that addresses the various 
proposals on how to solve this problem, because I think you 
will find that many people who have thought about this issue 
have come up with some very innovative ways to decrease the 
demand that candidates have to pay so much money for television 
time, but in a way that does not require broadcasters to give 
away all their time. Most of the proposals contemplate only 
about 1 percent of total ad revenues per year. So it is a very 
modest proposal that has been advanced.
    Mr. Latham. What would you say to a station in Sioux City 
that had three States to cover? Would it be subject to 
regulations based on the total station revenue, or would it be 
based on the individual market it serves in each of the three 
States--actually, four States, some in Minnesota, it serves?
    Mr. Kennard. Well, my own personal view is that we should 
require broadcasters to provide some time close to the election 
for candidates to get access. Most radio stations and 
television stations today have candidate forums and candidates 
debates. So many of them are doing some of this work already.
    It is important that candidates have some access to 
communicate with their public, and the proposals that I have 
seen, which I find interesting, don't require broadcasters to 
give away a lot of revenue to make this happen. So I think it 
is important we just get a proceeding going where we can move 
from the abstract concepts to the more concrete so that people 
can have a better understanding of what we are talking about.
    Mr. Latham. I would suggest there is a big difference 
between doing candidate forums and giving free commercial time. 
There is a public service as part of the one, and I am not sure 
that by dramatically reducing the income from small stations 
that are going to be in tremendous stress with the mandates 
that are going to be placed on them in the very near future as 
far as the digital situation, a lot of them are going to be out 
of business, anyway.
    Thank you, Mr. Chairman.
    Mr. Rogers. Thank you.

                                portals

    Again, I want to go back to the Portals, if you don't mind 
for a little bit here, this tar baby that we all have our hands 
stuck on. What is the rate per square foot that you are being 
asked to pay down there?
    Mr. Kennard. If you would permit me, Mr. Chairman, I would 
like to defer to my Managing Director, who has these figures.
    Mr. Fishel. The rate per square foot at the Portals 
building?
    Mr. Rogers. Yes.
    Mr. Fishel. It would be close to $45 a square foot.
    Mr. Rogers. What are you paying where you are?
    Mr. Fishel. We are in a number of buildings, but the 
average rate is $25 a square foot.
    Mr. Rogers. So you are going to double your rate per square 
foot.
    Mr. Fishel. Just about.
    Mr. Rogers. Now, how does that--how much per square foot is 
Portals, $48?
    Mr. Fishel. $45 is what we were told we would be charged.
    Mr. Rogers. How does that compare with the going rate 
around town for comparable space?
    Mr. Fishel. The only experience we have, Mr. Chairman, is 
our existing buildings where we are paying, on average, $25 a 
square foot.
    Mr. Rogers. You don't have any information about what the 
going rate is around town?
    Mr. Fishel. We are only in the Dupont Circle area, and so 
the only experience we have is renting space in that area.
    Mr. Rogers. Well, the $45 a square foot is a pretty high 
rate of rent, is it not?
    Mr. Fishel. It certainly sounds that way to us.
    Mr. Rogers. Yes. In fact, it sounds like it is terribly 
high.
    Now, you will have fewer square footage in the building 
than you have now; correct?
    Mr. Kennard. That is correct. Right now we have 604,000 
square feet, and we would be going down to 535,000 square feet 
in the Portals.
    Mr. Rogers. And how much more rent would you be paying at 
Portals than you pay now?
    Mr. Kennard. It is about a $9 million a year increase at 
the Portals.
    Mr. Rogers. And you are getting less space.
    Mr. Kennard. That is correct.
    Mr. Rogers. And you objected to GSA signing a lease as far 
back as 1991.
    Mr. Kennard. That is correct. I think, Mr. Chairman, it is 
appropriate to state that there has been a difficulty in 
communications between the FCC and the GSA, and I am hoping 
that we can solve some of those problems and have a better 
communication than we have had in the past, and hopefully they 
would take some of our needs into account.
    Mr. Rogers. Now, have the folks from the Justice Department 
talked to you about the investigation that they are doing into 
this matter?
    Mr. Kennard. Not me personally, no, sir.
    Mr. Rogers. Have they talked to personnel at FCC or 
previous personnel at FCC?
    Mr. Kennard. I only know what I read in the press about 
this, Mr. Chairman, and I have read press accounts that they 
have been talking to some former FCC officials.
    Mr. Rogers. Who were around at the time this took place 
that are not there now.
    Mr. Kennard. I beg your pardon?
    Mr. Rogers. People who were there at that time who are no 
longer there.
    Mr. Kennard. That is correct. And they have requested 
documents from the FCC that cover the issues that they are 
looking at.
    Mr. Rogers. Now, who else besides Justice is investigating 
the matter, do you know?
    Mr. Kennard. Yes. I understand that the Oversight and 
Investigations Committee in the House is looking at this under 
the leadership of Chairman Barton.
    Mr. Rogers. And is not Chairman Tauzin at the Commerce 
Subcommittee also looking into the matter?
    Mr. Kennard. I know he has a great interest in this, but to 
my knowledge, he is not conducting his own investigation.
    Mr. Rogers. Do you know what the focus of either one of 
those investigations is?
    Mr. Kennard. Again, as far as I know, based on what I have 
read and based on the documents that we were requested to 
provide, they are looking into the very question that you had 
raised earlier, which was how this lease was entered into and 
whether there were some improprieties.
    Mr. Rogers. Yes. Have you an opinion?
    Mr. Kennard. Not on that, Mr. Chairman, no. My only opinion 
about this whole matter is that it needs to be resolved 
quickly--I think it can be resolved quickly--so that the agency 
is not held hostage to this matter.
    Mr. Rogers. Well, it is not fair to ask you if you have an 
opinion, but it is strange, isn't it, the way this came about, 
GSA's deal with the Portals? It is a strange thing, is it not?
    Mr. Kennard. Well, I will tell you what I think is strange, 
and that is the difficulty from my perspective of going out and 
leasing a building for an agency and not being able to make a 
lot of the basic decisions yourself.
    Now, GSA is our leasing agent, and they are charged by the 
Congress with doing this. But I think part of the frustration 
arises from the fact that we have an agency, and that it is my 
responsibility to sort of chart its direction and ensure that 
its employees are well housed and taken care of. But so many 
fundamental decisions I can't make directly. I have to go 
through GSA, and that has been awkward for me and my 
predecessors.
    Mr. Rogers. Well, what I want you to do is to prepare for 
us a timeline of significant events in this whole story, going 
back to whenever it first began, that is, the proposed move and 
all of the significant events that took place down to the 
present time. I think the chronology of those things would be 
helpful to us to understand how we got where we are.
    Mr. Kennard. We can certainly do that.
    Mr. Rogers. And who may be at fault here. I don't want to 
let it rest that there was miscommunications. I don't think it 
was that. The FCC was communicating in very strong language as 
early as December 1991 that you did not want this lease. Right?
    Mr. Kennard. We had problems with the lease. I want to be 
clear that we were not telling the GSA--``do not move to the 
Portals.'' It has been my position and, I know, the position of 
my immediate predecessor, that if the basic needs of the agency 
are met, we can and we should move to the Portals.
    Mr. Rogers. But in December 1991, GSA was proposing the 
move to the Portals, and you, the FCC, protested saying it 
didn't appear the Portals could be finished in time for the 
proposed move and that there was not adequate space there under 
what they were talking about. Right or wrong?
    Mr. Kennard. Yes, that was an issue, the adequacy of the 
space, as I recall.
    Mr. Rogers. GSA at that time refused to cancel the award of 
the lease to Portals. Then FCC requested GSA to seek an 
amendment for more space. Is that right?
    Mr. Kennard. Yes.
    Mr. Rogers. And GSA had agreed to do that. And then they 
refused to request the additional amendment. Right?
    Mr. Kennard. Well, Mr. Chairman, all these dates were well 
before my time at the agency, and certainly as Chairman.
    Mr. Rogers. These are according to the record. Right?
    Mr. Kennard. Right.
    Mr. Rogers. I understand. Is that right what I asked, what 
I summarized there?
    Mr. Kennard. Yes, Mr. Chairman. Based on the information I 
have, that is correct.
    Mr. Rogers. So FCC continued to object to that lease being 
made. Correct?
    Mr. Kennard. Yes, Mr. Chairman.
    Mr. Chairman, if I might?
    Mr. Rogers. Yes.
    Mr. Kennard. There are a lot of events in this 10-year-old 
history where there have been disagreements and tension between 
the FCC and the GSA, and certainly the timeline will reflect 
that. But I think the important thing is that we are where we 
are today and we need to move forward and make some basic 
decisions whether we are going to move or not.
    Mr. Rogers. I understand that. But what I am getting at 
here is if, in fact, the Criminal Division of the Justice 
Department concludes and proceeds on some action, presumably 
some criminal action, that GSA and the Portals developer 
illegally entered into a fraudulent contract, a lease, which is 
exorbitantly high or should not have been done for some other 
reason, I am not about to recommend to the Congress that we pay 
the bill on a criminal act. You wouldn't want that to happen, 
would you?
    Mr. Kennard. Well, Mr. Chairman, I am sure that there would 
be recourse against the individuals who were committing 
criminal acts, and there might be some recourse against the 
developer as well.
    But I don't think that the FCC should be penalized for the 
misconduct of any individuals.
    Mr. Rogers. Well, neither should the taxpayers.
    Mr. Kennard. Well, I am sure that there would be recourse.
    Mr. Rogers. You are caught in an impossible place here. I 
fully appreciate the predicament that you are in and the 
obligations that you have. We also have our obligations, and we 
can't reward criminals with taxpayer dollars. So we are going 
to have to hope that the appropriate investigating agencies do 
their work quickly so that we can discharge our obligations and 
that you can discharge yours. So it is an unfortunate 
circumstance that we are all in. So we will proceed to the best 
of our ability to relieve you of your pain. I feel your pain. 
[Laughter.]
    But I have seen a chronology of the events, a rough 
chronology of what happened. And repeatedly over these years, 
FCC has protested to GSA not to enter this lease, and GSA 
proceeds headstrong, still is, and is going to extraordinary 
lengths to secure your move into that building, even to this 
day, agreeing to pay your rent and advance their own monies, 
and if you can't get appropriations you wouldn't have to pay it 
back, agreeing to all sorts of concessions and monies and 
advances for the FCC to get them in that building. To me it is 
strange. To me it stinks. It smells to high heaven.
    So we are going to get to the bottom of it. I don't know 
whether it is GSA or the developer, whose name I don't even 
know. We will get to the bottom of it. In the meantime, we 
cannot pay ransom with taxpayer dollars, and I sympathize with 
you.
    Now, you will give us the chronology.
    Mr. Kennard. Yes, Mr. Chairman.
    Mr. Rogers. And I would like that to be filed with the 
record.
    Mr. Kennard. Okay.
    [The information follows:]
    [Clerk's note.--The response to the request from Mr. Rogers 
concerning the Portals chronology has been included with other 
questions for the record and follows at the end of the 
transcript.]

                                 calea

    Mr. Rogers. Now let me quickly run through a couple of 
other things. CALEA.
    Mr. Kennard. Yes.
    Mr. Rogers. This has been a matter of great interest and 
concern by this subcommittee because we also fund the FBI and 
all of the Justice Department, so we have jurisdiction over a 
lot of players here. But just to summarize, over 3 years ago, 
on behalf of law enforcement and to ensure public safety, the 
Congress passed and the President signed the Communications 
Assistance for Law Enforcement Act, intending to preserve law 
enforcement's ability to intercept communications pursuant to 
court order in view of the change to the digital system and 
other advances.
    Both the Attorney General and Director Freeh have told us 
of the absolute vital importance to public safety that 
telecommunications carriers upgrade their systems pursuant to 
the law. We responded by providing funding and the legislative 
provisions to establish a funding mechanism to pay for the 
costs of that.
    We also tried to move that process along of defining law 
enforcement requirements in the new age by including 
legislative provisions that addressed disclosure capability and 
capacity needs.
    I think both sides are at fault here. The FBI I think has 
been perhaps too demanding, and I think the phonecompanies have 
been wanting more money than we had been prepared to pay.
    So we have tried to midwife the process of getting those 
two interests together because the public interest is paramount 
here, and that is the ability to catch criminals. So we have 
convened meetings of industry and law enforcement to facilitate 
resolution of the outstanding issues with the Attorney General, 
with Director Freeh, with the heads of the big phone companies 
and the like. We have required progress reports. You can almost 
reach out and touch the solution at times. Then it falls away 
from you. And you reach out and grab it again, and it falls 
away. It has been frustrating for several years now.
    Unfortunately, apparently negotiations between the industry 
and law enforcement have reached another impasse, and it looks 
like it is not going to happen agreeably. And I understand 
Justice intends to file a petition with the FCC this week 
turning the whole matter over to you to rule on the standard 
that is to be required under the law.
    Are you aware that you are going to be receiving such a 
petition?
    Mr. Kennard. Well, Mr. Chairman, this is a petition that I 
am not looking forward to getting. I was hearing as early as 
March 13th that a petition would be filed with us, and it 
wasn't filed on March 13th, and my hopes went up that maybe the 
parties were working to a solution again.
    Of course, if it is filed, we will do our job under the 
statute and try to work out a solution. But I am hopeful that 
that will not be necessary.
    Just so you are aware, Mr. Chairman, in October of last 
year, we initiated a proceeding under CALEA which we have sort 
of put on hold, hoping that the parties would work this out. 
But, of course, if they cannot, we will have to step in.
    Mr. Rogers. Well, I am with you. I keep praying and hoping 
that they can work it out amongst themselves, and we have tried 
to nurture that process. In fact, when the Attorney General 
testified before us here early March, I guess, or thereabouts, 
we made her at that time agree that if it could not be worked 
out agreeably that she would file a petition with you by March 
13th. And consequently they began negotiating again. And then 
she informed me shortly before that deadline, as I recollect, 
that they needed an additional 10 days. And I reluctantly 
agreed that we would lay off, giving them additional time, 
because apparently they were making some progress. And then--
like you, I had my hopes up, too--but apparently it broke down.
    So the question is: How expeditiously can we expect 
something to be resolved? And you understand the crunch of time 
here. The Attorney General and the FBI Director told us in the 
hearing the other day that they are already being harmed in 
their criminal prosecutions by the impasse. So I know this is--
I may be getting too inside the operations of the FCC here. I 
don't intend that. But can we get an expeditious review?
    Mr. Kennard. Well, we will certainly do our best. I had a 
briefing on CALEA in the last couple of days, and it is a 
difficult problem to solve and will require that the FCC throw 
a lot of resources at it, a lot of technical resources, in 
particular engineers. We will do the best we can.
    I will have to get back to you with a precise timetable, 
because I do not know offhand how long it will take to resolve. 
But I do know it is a difficult problem.
    Mr. Rogers. I would appreciate it if you could give us some 
guidance about the timetable.
    Mr. Kennard. Okay.
    Mr. Rogers. That could impact us and our deliberations here 
on the amount of money that we are having to deal with.
    Mr. Kennard. Okay. I would be happy to do that.
    [Clerk's note.--The response to Mr. Rogers' request 
concerning the FCC handling of the CALEA petition has been 
included with other questions for the record and follows at the 
end of the transcript.]
    Mr. Rogers. Well, I appreciate that very much, and I 
sympathize with you on the matter. I tried to help you, but I 
couldn't do it.
    Mr. Kennard. I know you worked hard, Mr. Chairman.

                           year 2000 funding

    Mr. Rogers. Now, Year 2000, you are asking an increase of 
$5.8 million. How much of that increase would go toward mission 
critical systems?
    Mr. Kennard. If you will permit me, Mr. Chairman, I would 
like Mr. Fishel to address that question.
    Mr. Fishel. Mr. Chairman, the request for the additional 
money for Year 2000 goes both for administrative systems, 
licensing systems, as well as the additional software and 
hardware for those systems to run. All of those are critical.
    Just to give you an example, administrative systems are 
those that are financial systems that the agency uses to keep 
track of money, paying employees, paying its bills. It is also 
the type of systems that are used to keep track of the votes 
that are actually taken and documents filed with the 
Commission. And so all of them, if they don't get made 
compliant by Year 2000, in time they will cause a key aspect of 
the agency's operation to be disrupted.
    Mr. Rogers. I guess what I am trying to drive at is we want 
to help you with the Year 2000. But I don't want you using that 
as a way to get better equipment without calling it that. Do 
you follow me?
    Mr. Fishel. Yes, I certainly understand, Mr. Chairman. What 
has happened to us--and we have explained this in briefings 
with staff--is that as we redesigned the systems to be Year 
2000 compliant, we are making use of most recent software that 
is not compatible with our older, slower, small-memory 
equipment. In order to make those solutions work, we do in 
those cases, where we are replacing systems, need to buy new 
hardware and new software in order for those systems to run. 
And if we didn't do that, we would actually have a solution 
that we could not implement.
    Mr. Rogers. Are you saying that in order to get the 
software that would cure the Year 2000 compliant problem, you 
have to get other software and hardware that would not work 
without----
    Mr. Fishel. Yes, Mr. Chairman. As we redesigned the 
existing systems to make them work more efficiently, they are 
being designed with the current versions of software, and those 
versions of software do not run on our older computers. So to 
make the system run, we do need to replace some equipment as 
well.
    Mr. Rogers. Are you saying that you are not redesigning 
entire systems rather than simply making existing systems Year 
2000 compliant?
    Mr. Fishel. In some cases we are simply making existing 
systems Year 2000 compliant. In other cases, we are, in fact, 
using this as an opportunity to reengineer and redesign how we 
do business. And in those cases, we are, in fact, developing 
new software to track the new processes.
    Mr. Rogers. Well, what I am getting at here, or tryingto 
get at--and I am not doing a very good job of it--we are going to be 
short of money here again this year. We are still under the budget caps 
that were agreed last year, and we are having to prioritize everything. 
And I want you to do the same. I want you to prioritize your needs, and 
we will try to take care of your high priorities. But I don't want to, 
under the guise of Year 2000 computer compliance, spend money that 
would otherwise be low priority. So I want your assurance that to 
comply with Year 2000 you have to have this kind of money for Year 2000 
compliance, whatever it takes to do that.
    Mr. Fishel. We will be happy to provide the committee with 
the various systems that are being redesigned and the impact of 
not redesigning them by 2000, and we can work with the 
committee to decide which ones we defer.
    Mr. Rogers. Good. That is what I want to hear.
    [Clerk's note.--The response to the request from Mr. Rogers 
concerning prioritization of Year 2000 Funding has been 
included with other questions for the record and follow at the 
end of the transcript.]

                          National Call Center

    Now, the National Call Center, you are asking for almost a 
$1 million increase for the National Call Center.
    Mr. Kennard. Yes.
    Mr. Rogers. And you are going to relocate 20 FTEs to that 
activity. Correct?
    Mr. Kennard. Correct.
    Mr. Rogers. As I understand it, $700,000 of the total is 
requested for a reconfiguration of space. Isn't that a lot of 
money to reconfigure for just 20 people?
    Mr. Kennard. Well, Mr. Chairman, that includes all of the 
technology that the Call Center would require, including all of 
the electrical cabling of the workstations. So it is not just 
housing of the employees. It is also making sure that they have 
a space that has the technology that runs the Call Center.
    Mr. Rogers. Well, apparently, according to your 
justifications, reconfiguration of space is $700,000, and then 
on top of that are systems furniture for 20 workstations, 
$135,000, and equipment $125,000, and then training $15,000.
    Mr. Kennard. Right.
    Mr. Rogers. What is the $700,000 reconfiguration of space? 
That is not equipment.
    Mr. Kennard. You will have to address that.
    Mr. Fishel. In order to properly house the unit in a way 
that allows the staff to interact while they are on the 
telephone and have access to the information that they need to 
actually answer the questions, we have a very particular design 
that we use to allow them to access all the information and 
access other members of the Call Center staff. And we have made 
use of this design and have it already in our Gettysburg 
office, and this is to replicate that type of physical 
configuration for them.
    Mr. Rogers. Now, would this alleviate the additional flow 
of calls that you expect?
    Mr. Kennard. What it does, Mr. Chairman, is it allows us to 
consolidate in one location all of the people who are providing 
information to the public, and to do so in a much more 
efficient way. Since the Call Center came into being a few 
years ago, we have saved $3 million in salaries and benefits 
because we have been able to more efficiently use resources in 
our public information and outreach effort.
    Mr. Rogers. But, apparently, part of the increase would go 
to begin a similar satellite capacity here in Washington, would 
it not?
    Mr. Kennard. Yes, that is right.
    Mr. Rogers. Why is that?
    Mr. Kennard. Because it is cheaper to do it that way, 
because if we weren't to have a satellite office in Washington, 
we would have to relocate employees up to the Gettysburg 
facility, and that is more expensive than transferring 
employees who are already in Washington.
    Mr. Rogers. Now, will there be additional requirements in 
the future to complete the Washington satellite facility?
    Mr. Kennard. Not that I am aware of. I think we have asked 
for everything that we need. Is that right, Andy? Well, subject 
to call volume in the future, but we think that this will serve 
our immediate needs, yes.

                            FCC Streamlining

    Mr. Rogers. Now, in your testimony, you mentioned your 
progress in both streamlining the FCC and in deregulating 
telecom, and yet for 1999, the third year after the act, we 
still have seen no decrease in your staffing. Why hasn't 
deregulation translated into fewer regulators?
    Mr. Kennard. Well, the short answer is that in the 1996 Act 
Congress directed us to undertake a number of rulemakings, some 
80 rulemakings, many of which are still in process, either on 
reconsideration or in various stages of litigation.
    And, in addition, much of the work of the FCC is changing 
in character. As markets become more competitive, for example, 
we have to deal with many more consumer complaints. This has 
placed considerable stress on some parts of the agency, which 
in a monopoly environment were not used.
    Mr. Rogers. I think I can submit for the record the 
remaining questions that I have.
    Mr. Kennard. Okay.
    Mr. Rogers. Is there anything you would like to add to your 
testimony?

                             Budget Request

    Mr. Kennard. No, Mr. Chairman, but I do thank you for your 
time and attention. It is clear that you have taken our budget 
request quite seriously, and I appreciate that.
    Mr. Rogers. Thank you very much, and we will work with you. 
This is not the only chance for us to communicate.
    Mr. Kennard. Sure.
    Mr. Rogers. And we hope that you will.
    Again, we are working on a tight string this year, I don't 
have to tell you, so we are asking you to prioritize your 
request. And if we can't give you the entirety of what you have 
asked, we want your participation in telling us the most 
important things as we go through the process.
    Mr. Kennard. We will do that, Mr. Chairman, and please feel 
free to call on me at any time or my staff for any additional 
information you need.
    Mr. Rogers. I shall do that. Thank you very much.
    Mr. Kennard. Thank you.
    [Clerk's note.--The response to Mr. Rogers concerning 
prioritization of the FY 1999 Budget request has been included 
with other questions for the record at the end of the 
transcript.]
    [The following questions were submitted for the record.]


[Pages 416 - 442--The official Committee record contains additional material here.]



                                          Wednesday, April 1, 1998.

                EQUAL EMPLOYMENT OPPORTUNITY COMMISSION

                                WITNESS

PAUL M. IGASAKI, ACTING CHAIRMAN
    Mr. Rogers. The committee will come to order.
    We are pleased to welcome Paul Igasaki, the Acting Chairman 
of the Equal Employment Opportunity Commission. Today, we will 
be discussing the 1999 budget request for the EEOC. You are 
seeking $279 million, an increase of $37 million over the 1998 
enacted level. EEOC is responsible for enforcement of Federal 
laws that prohibit employment discrimination based on race, 
sex, religion, national origin, age, or disability. We will 
want to hear today about the progress you are making in the 
efficient processing and resolution of discrimination charges.
    We also want to discuss the impacts of the program 
increases that you are requesting. It will be difficult to find 
any additional resources within the amounts that are likely to 
be available to this subcommittee. We are still operating under 
the budget caps of last year and those are constraints that we 
do not have ways to avoid. So I would like your help in 
identifying the top priority items in your request and working 
with you to come up with ways to maximize your effectiveness 
within our funding limitations.
    We realize that the request that has been made on the 
budget, every cent of it, I am sure, is justified. Our problem 
is trying to fit that into everybody else's request who 
likewise feel they are justified, as well, and if we gave 
everybody all they wanted, there would be none left. It would 
be worse than that.
    Chairman Igasaki, we will insert your full written 
statement in the record, and if you would like to proceed with 
an oral summary, we would welcome that.
    Mr. Igasaki. Thank you, Mr. Chairman. I am pleased to 
testify before you today in support of the EEOC's fiscal year 
1999 budget request of $279 million. In my testimony today, I 
hope to provide you with a fuller understanding of why the 
funding we are requesting is so vital to improving the 
Commission's ability to provide faster, more reliable service 
to employers, charging parties, and the general public. I will 
summarize my remarks, as I have formally submitted a more 
comprehensive statement.
    As you know, I assumed the role of chairman of the EEOC on 
an acting basis on January 2 of this year, having served as 
Vice Chairman since October of 1994. During my years at the 
Commission, we have embarked upon a course of profound change. 
We began the process of examining the Commission's operations 
with an eye clearly focused toward getting the maximum benefit 
from our limited resources.
    Through our public process of self-evaluation, including 
broad stakeholder input, the Commission identified, adopted, 
and implemented a series of reforms designed to improve the 
agency's overall effectiveness. Today, I am proud to announce, 
as a result of these efforts, the Commission is becoming a more 
efficient agency.
    For example, our inventory of private sector charges 
awaiting resolution has been reduced by more than 40 percent 
due to new charge handling procedures implemented in June 1995, 
from 111,345 charges to 65,658 charges. We have reduced the 
average time it takes to process our charges. We have 
introduced voluntary mediation to our existing investigation, 
conciliation, and settlement processes, giving individuals a 
promising additional option for the timely resolution of 
employment discrimination complaints.
    All of our field offices are expanding their education, 
technical assistance, and outreach activities to better educate 
those covered by Federal equal employment opportunity laws and 
to promote voluntary compliance.
    The development of potential violation cases for both 
administrative resolution and litigation is being enhanced 
through greater interaction between EEOC investigators and 
attorneys throughout the investigative process, and we are 
making every attempt, despite serious underfunding, to 
modernize our outdated and overburdened information systems, to 
build an adequate telecommunications infrastructure capable of 
facilitating enhanced caseload management.
    The challenge faced by the Commission is to continue to 
build upon recent successes. Although we are heartened and 
proud of our initial reforms, we also recognize that we have a 
long way to go to fully realize our enforcement and customer 
service goals. With the additional funding proposed in this 
budget, we can accomplish a watershed reduction in the agency's 
charge inventory, be able to resolve many more cases with 
voluntary mediation, and to significantly improve our 
technological capabilities and enhance our overall customer 
service in the future.
    I believe that we can all agree the budget levels for the 
Commission have not kept pace with increased enforcement and 
education responsibilities which have been given to us over the 
past several years. We at the Commission understand the 
tremendous pressure the committee faces as it constructs a 
balanced budget. We, therefore, are grateful that this 
committee, as well as our oversight committee, has worked 
diligently to sustain EEOC funding and to provide increases 
when possible.
    Everyone at the Commission is particularly encouraged that 
discussions regarding EEOC's fiscal year budget request are 
being approached in a constructive and cooperative manner. I 
believe that this process is due in part to the perception that 
the Commission is acting responsibly and prudently in making 
the best use of funds and that it has demonstrated that it is 
capable of further improving on performance.
    Such progress, however, will be difficult to sustain if the 
Commission continues to confront steadily decreasing staffing 
levels and steadily increasing workloads. EEOC has a heavy 
workload that is labor intensive. The intake, counseling, 
investigation, and resolution of charges of discrimination, the 
principal part of the agency's work, must be performed by 
individual staff people.
    However, despite the significant increases in enforcement 
responsibilities and charge filings, EEOC's funding has 
resulted in steadily decreasing staff levels. In fiscal year 
1980, EEOC was staffed at 3,390 full-time equivalents. During 
fiscal year 1998, the level had fallen to 2,586 FTEs, a 
decrease of more than 25 percent.
    Let me place this in context. During the same period, the 
Americans with Disabilities Act alone increased our caseload by 
about 25 percent and charges in other areas increased 
significantly, as well. This situation seriously constrains 
EEOC's ability to devise and implement responsive programs and 
provide timely and quality service to our constituents, 
charging parties, employers, and the general public.
    The requested $37 million would support, among other 
things, an additional 253 positions at the Commission. Because 
our funding levels have been only able to support a decreasing 
number of staff, the Commission's field office have been left 
with uneven staffing patterns and inadequatelevels of personnel 
to handle the volume of work being received. For example, we are now 
operating with almost 100 fewer investigators than were available just 
four years ago. These additional positions, therefore, will be filled 
primarily by hiring field personnel who will work on further decreasing 
the Commission's charge inventory, clearly the most important priority 
we live with year in and year out.
    Another portion of the increase, $13 million, will be 
devoted to an expanded mediation program, using both internal 
and external mediators to resolve complaints. The program being 
proposed would allow the Commission to significantly increase 
the number of charges resolved through voluntary mediation and 
thus avoid lengthy investigations and costly of litigation. To 
develop a credible and high-quality mediation program, funding 
at the proposed level will be needed.
    Our plans also call for $9.6 million to be used for 
enhanced technology. It cannot be stressed enough how important 
it is for the Commission to have the technological tools to 
support our work. As we inch along in our efforts to improve 
our systems, we continually fall further behind in advancement 
in today's technological market. We have yet to provide all our 
field offices with the ability to communicate with each office 
through local area networks.
    Equally important are our efforts to integrate all the 
Commission's information systems to allow for centralized 
tracking, consolidation, and management oversight of all data 
related to the processing of charges of employment 
discrimination. This includes the ability to track a charge 
from the point of initial inquiry to the investigation, 
litigation, and the compliance monitoring stages.
    The proposed increase will greatly advance our efforts to 
build a solid and comprehensive information telecommunications 
infrastructure. This, in turn, will enable the Commission to 
work more effectively and consistently with employers of all 
sizes.
    Finally, the fiscal year 1999 request includes a small 
amount to support voluntary compliance through more coordinated 
and targeted education and outreach activities. This level of 
support will also enhance the agency's ability to expand its 
education and outreach efforts, particularly to underserved 
constituencies and small businesses. These activities are 
critical to the Commission's work, to promoting an 
understanding of the rights and responsibilities imbued by this 
nation's equal employment opportunity laws.
    We have worked diligently to bring a coordinated, balanced, 
and comprehensive focus to our vast enforcement 
responsibilities. Our efforts, while far from complete, are 
being met with praise, even by those who have traditionally 
been critical of the agency. The Commission is making progress, 
and with additional resources, we will be in a far better 
position to face the critical challenges ahead.
    I look forward to working with you on the EEOC's budget and 
would be happy to answer any questions.
    [The statement of Mr. Igasaki follows:]


[Pages 447 - 453--The official Committee record contains additional material here.]



                     alternative dispute resolution

    Mr. Rogers. Thank you, Mr. Chairman. I appreciate your nice 
statement.
    Thirty-five percent of the increase you seek for 1999 is 
for the expanded use of alternative dispute resolution, ADR, 
which I understand involves bringing in a neutral mediator to 
work with both the employee and the employer to arrive at a 
voluntary resolution of a discrimination charge, is that 
accurate?
    Mr. Igasaki. That is correct.
    Mr. Rogers. Are there other aspects to ADR besides 
mediation?
    Mr. Igasaki. Well, currently, that is the mode that we have 
chosen to operate under, so that is the approach. I would say 
that our traditional resolution processes involve a host of 
efforts other than litigation. We are required to do 
conciliation before litigation is even considered and we press 
that more firmly now than ever before. We also look at the 
possibility of pursuing settlement opportunities at any other 
stage in the process. But for our own ADR processes, mediation 
other than increased settlement efforts is the primary mode.
    Mr. Rogers. Your current caseload is what, roughly?
    Mr. Igasaki. The current overall volume of charges is about 
65,000.
    Mr. Rogers. And is that a static number, or is it 
increasing or decreasing?
    Mr. Igasaki. Well, it has been decreasing. In this quarter, 
it has bumped up slightly. But as I was mentioning, it is a 
seasonal thing. So we expect it will continue to go down, 
although at a slower rate than we have been able to bring it 
down so far.
    Mr. Rogers. You have been working on bringing it down. Tell 
us how you have done that in terms of settling easy cases, and 
I say ``easy'' in quotes.
    Mr. Igasaki. Right. Basically, by going to the priority 
charge system, which I proposed to the Commission in 1995, we 
are basically asking our staff people to make decisions early 
on in the cases, as early as possible, based on the facts of 
the case. By prioritizing the cases and urging our staff to 
make quicker decisions, we are seeing the overall caseload go 
down generally.
    In terms of the dramatic cuts that we have been able to do 
so far, part of that is because previously under the so-called 
full enforcement program that was in existence prior to now, 
basically, the investigators felt that they had to investigate 
every possible issue that might be involved in the case. So 
those cases that were stockpiled were the ones that we focused 
on first, so those reductions were the most dramatic in the 
early ones.
    Mr. Rogers. Those--excuse me. Go ahead.
    Mr. Igasaki. Those cases have largely been eliminated from 
the system. At the same time, it is our feeling that some of 
the cases in the so-called B category requiring further 
investigation are cases that we probably could close, too. So 
we are urging people to look at those and we are also urging 
our staff to be more and more confident in making strong, early 
decisions.
    Mr. Rogers. Would I summarize it accurately if I say that 
in reducing the huge number of cases that you are waiting to 
decide, that you have already worked off the easiest ones to 
work off of the caseload and from here on out it is going to be 
a lot harder to reduce the caseload than it has been?
    Mr. Igasaki. I would say that, generally speaking, that is 
correct. I am still pretty confident that we can go a ways and 
still continue to decrease that amount, but I think you are 
correct in saying it will be more difficult.
    Mr. Rogers. You have been using ADR on a limited basis up 
until now.
    Mr. Igasaki. Yes.
    Mr. Rogers. I am told that the number of charges resolved 
this way was only 67 cases in 1996----
    Mr. Igasaki. That is correct.
    Mr. Rogers [continuing]. And that grew to 841 in 1997 and 
you estimate, I am told, that you have 1,111 in 1998.
    Mr. Igasaki. That is correct.
    Mr. Rogers. That you will do that many in 1998?
    Mr. Igasaki. Yes, that is our expectation, maybe even a 
little higher than that.
    Mr. Rogers. Then you propose with your increases that you 
would jump that to 8,000-plus next year, correct?
    Mr. Igasaki. That is our hope, yes.
    Mr. Rogers. That is a dramatic increase.
    Mr. Igasaki. Yes, it is. But as you know, Mr. Chairman, the 
size of the increase in terms of the financial increase that is 
being asked for here will allow for a substantial number of 
cases to be handled through contracts outside. In addition, a 
sizeable number will be handled by a substantially enhanced 
professional mediator pool from within the agency, two things 
that we have not had.
    Mr. Rogers. Do you see the ADR as a way to reduce your 
caseload?
    Mr. Igasaki. Well, I would say I do not see it as a panacea 
for caseload reduction. I think, given the amount of resources 
that we are talking about, it would clearly be a reduction. But 
if you look at the overall picture, our hope is to make an 
offer of potential ADR in some 15,000 cases with an influx of 
cases of, say, 8,000 a year. It takes care of a significant 
portion of the workload. It is not the only way we are going to 
be able to keep the backlog down.
    Mr. Rogers. How many cases do you resolve a year, on 
average?
    Mr. Igasaki. On average, I think it was like 100,000 last 
year, 106,000.
    Mr. Rogers. When was that, last year?
    Mr. Igasaki. Last year.
    Mr. Rogers. Nineteen-ninety-seven?
    Mr. Igasaki. Yes.
    Mr. Rogers. A hundred and six?
    Mr. Igasaki. Yes.
    Mr. Rogers. How many of those 106 were resolved by 
mediation or some other form of processing other than the 
regular process?
    Mr. Igasaki. In terms of actual ADR, I think we are only 
talking about those 800, 823.
    Mr. Rogers. And all the others were resolved the normal 
way?
    Mr. Igasaki. The normal way, though most of those would be 
done either through dismissals based on the facts or 
settlements.
    Mr. Rogers. If you do not mind, if you would file with the 
record, and maybe you have it so you can file now, would you 
file with us a table showing how all the cases were resolved, 
by category.
    Mr. Igasaki. Okay.
    Mr. Rogers. Could you file a table showing the number of 
cases for 1997 and how they were disposed of, ADR, whatever?
    Mr. Igasaki. We can do that.
    [The information follows:]


[Page 457--The official Committee record contains additional material here.]



    Mr. Rogers. What has been the reaction from employees and 
employers on the ADR process?
    Mr. Igasaki. I think for those people who have gone through 
the system, the results have been very positive. For example, 
one employer sampled it through a number of cases and is now 
requesting, in every case where the charging party will agree, 
that cases be sent to ADR automatically. I think the employees 
feel very strongly about it. Most of the charging parties do, 
as well. I think that one of the advantages of ADR is that the 
satisfaction level of the immediate parties is always pretty 
high.
    Mr. Rogers. And then you have been very limited in the 
number of cases that you could send to this process because you 
do not have staff to handle it----
    Mr. Igasaki. That is correct.
    Mr. Rogers [continuing]. Or money for contract mediators to 
handle it, either, do you?
    Mr. Igasaki. That is correct.
    Mr. Rogers. What about pro bono mediators?
    Mr. Igasaki. We have been using them and we have had some 
help from the ABA, particularly, in coming up with those. But 
one of the difficulties, both in terms of contract mediators, 
professional mediators, and volunteer mediators is availability 
of outside mediators varies substantially from one part of the 
country to another.
    For example, if you go to a big city like New York or Los 
Angeles, you see very large pools of both private mediators we 
might contract with as well as a large Bar Association. For 
example, in California, the Bar requires a certain amount of 
mediation of just general cases. So the familiarity of the Bar 
with mediation is very high. In other parts of the country, 
there is less familiarity with mediation in administrative 
settings, so it is more difficult to get that level of 
volunteers. So it varies from office to office.
    Mr. Rogers. Now, in 1999, you want to terminate the use of 
pro bono mediators, correct?
    Mr. Igasaki. Well, I think we want to move away from that 
as a primary mode. I think it is something that we would use as 
a supplement to our existing program. I do not think we would 
back away from it entirely.
    Mr. Rogers. But you would use $13 million for a combination 
of staff, ADR staff and contract mediators, correct?
    Mr. Igasaki. That is correct. Part of the reason for that 
is that right now, in our mediation program, the efficacy of 
the mediation option depends so much on the local circumstance 
that we would like to be able to say we are offering mediation 
across the country. To do that, we do need an internal and an 
external paid source of mediators.
    Mr. Rogers. How does the demand for mediation compare with 
the level of effort you are proposing for next year?
    Mr. Igasaki. You mean in what proportion of----
    Mr. Rogers. Yes. Are you currently able to offer mediation 
as an option for all of your charges?
    Mr. Igasaki. No, clearly not.
    Mr. Rogers. You are asking money to hire 67 new mediators 
in 1999, correct?
    Mr. Igasaki. That is correct.
    Mr. Rogers. Do you foresee any difficulty in recruiting and 
hiring that many qualified people in one year?
    Mr. Igasaki. Well, I think that in terms of people who are 
pre-trained, that would be difficult, but I think what we are 
willing to do is to provide training for those people. So I 
think we can do that. We are looking at this as hiring a 
professional mediator pool, as a professional legal pool. That 
is something I think is the wave of the future, really, around 
the country.
    Mr. Rogers. It is not realistic, though, is it, to expect 
that all of these 67 people will be on board from day one of 
the fiscal year?
    Mr. Igasaki. No, although----
    Mr. Rogers. You will hire them during the year.
    Mr. Igasaki. You are right. You are correct. In the same 
sense, it is unrealistic for us to propose that from the 
immediate first day where we had the contract mediators in 
place, either. We have to set up both the hiring process for 
the employees and the bidding process for the contractors to be 
able to move ahead.
    Mr. Rogers. You say that more than 8,000 cases would be 
resolved by mediation. How would you manage and monitor that 
volume of casework?
    Mr. Igasaki. It would depend on what our resources are. For 
one thing, if we are able to have the overall information 
technology to monitor all the cases, we would be able to 
monitor them both through our district offices and through 
Washington. But even if we do not have the funds available for 
the technological ability to do that electronically, we would 
have staff in Washington specifically devoted to tracking the 
ADR cases and how they are going. In addition, each of our 
district offices would have internal staff dedicated to 
following the progress of each case.
    I think, especially when we are talking about outside 
mediators, whether they are contract mediators or volunteer 
mediators, it is especially important for us to be able to 
monitor the success rate and customer satisfaction. For 
example, if our mediators are being fair and objective, whether 
they are exhibiting the necessary knowledge of EEO law, as 
well. That is something we will do through internal staff.
    In terms of the extent that those programs are within the 
agency, it gives us the capability to have a fallback that we 
can control, as well, if there is a difficulty in finding 
significant or enough external mediators.
    Mr. Rogers. Your request for funding for your automation 
upgrades; is that critical to monitoring and bringing on the 
new mediation effort that you want to do in 1999?
    Mr. Igasaki. I think it is very important to it. I think we 
would pursue it whether we got that funding or not. It is just 
that our ability to report as quickly and comprehensively as I 
would like to would be affected.
    Mr. Rogers. It would not, though, affect your ability to 
handle the caseload that you expect?
    Mr. Igasaki. It would have some effect, but I think we can 
still handle that caseload.
    Mr. Rogers. Would your eligibility requirements for 
mediators change with the new funding in 1999?
    Mr. Igasaki. They probably would, because right now, we 
have not set up a specific professional category of mediators. 
It is a fairly new program. We are still feeling our way. I 
think we really would be much clearer about the standards we 
are looking for, and that would be true both with volunteer 
mediators as well as contracting or staff mediators.
    Mr. Rogers. As I mentioned briefly earlier, as we go 
through this process this year and when we find out what 
ourspending capabilities are when we get the budget resolution passed, 
as we go through the process, we want to stay in touch with you and 
find out your priorities as they relate to the dollars that we have so 
that we can hopefully fund your highest priorities. We may not be able 
to fund everything you would like to have, but we want to focus it 
where you think it would be best used and we will talk with you as we 
go along.
    One of the great defenders of this agency sits on our 
subcommittee and he is a great resource for all of us and 
especially for EEOC. Mr. Dixon?
    Mr. Dixon. Thank you, Mr. Chairman.
    I too am interested in the mediation process. What are the 
qualifications for the mediation process?
    Mr. Igasaki. Do you mean for the mediators?
    Mr. Dixon. Yes.
    Mr. Igasaki. Right now, we are basically looking for people 
of analytical ability to understand the cases before them and 
basic knowledge of EEO law, whether they come in with it or we 
provide that training. But the most important thing is someone 
who has the skills to perform the mediator role; one, to be 
objective; two, to be able to help the parties get past the 
things that are separating them. That is basically what we are 
looking for in mediators.
    The thing that I think has been historically difficult is 
to assume that one profession necessarily provides that 
background. So, for example, with attorneys that we bring in as 
mediators, a lot of them will have the EEO information, the 
understanding of the law, but not necessarily the strengths--
some of them do, some of them do not, and as a lawyer, I can 
say that--at bringing people together. In places like 
California, where there is mandated mediation in the court 
process, I think it is a much more available skill than some 
other places.
    Mr. Dixon. I guess I am asking you will external mediators 
have to have some kind of certification or belong to some kind 
of mediation association or society?
    Mr. Igasaki. I think that is certainly something that we 
would look for. I think that there may be, if we are going to 
use external mediators, some places where it is going to be 
very hard for us to get people if we set that up as a standard. 
So we may need, in addition, to allow for some training 
opportunities and look for filling the gaps between what 
someone might have who does not have that mediation experience.
    Mr. Dixon. Tell me, how does the process work? Is everyone 
offered the availability of mediation?
    Mr. Igasaki. Well, not at this time. As I told the 
oversight committee, the biggest bar to mediation is not a 
substantive bar but simply that we do not have enough mediators 
or enough opportunities to mediate. So right now, we look for 
cases that look like they may be amenable to mediation and we 
offer it in those cases. This is a very small percentage right 
now.
    Later on, if we do have the resources to go forward, it is 
our hope that we will offer it to all cases, except we would 
want to avoid cases, for example, where it is clearly not a 
meritorious case. The situation where an employer feels they 
are just being strong-armed into a settlement to end their 
investment in the process. And also, those cases where we 
believe the public interest requires an ongoing EEOC interest 
in the case. Where two individuals may not be sufficiently 
representative of all the interests involved in the case. Those 
are the two things we would filter out.
    Mr. Dixon. Do the parties have an opportunity to reject a 
particular mediator?
    Mr. Igasaki. Yes, although one of the things I think that 
is, is a power balance question. A large company that really 
knows the system well and has a lot of caseload will know who 
to reject or not to reject. An individual charging party, 
hopefully their first charge, probably will not have much to go 
on, but nevertheless----
    Mr. Rogers. That is what I was getting at.
    Mr. Igasaki. Yes. And that is a difficulty, and one of the 
things that we have built into our process, given that balance. 
Many times a company may be sending in its general counsel to 
handle the case and you will have a worker who, hopefully, 
depending on their job, may have no familiarity with the 
process and the law. While we cannot have our mediator 
providing unobjective advice to someone in the system, we have 
allowed for, if someone has a concern about checking a point, 
that they can put a hold on the process and step away and speak 
with an EEOC counselor who can be more direct in answering 
their questions. We are trying to make sure that there is 
balance provided in the process.
    Mr. Dixon. I think that is a serious impediment to 
mediation, that the person filing a complaint is new to the 
process and an individual or an organization who employs a lot 
of people goes through this process all the time and so they 
become familiar with the style and the attitudes of the people 
that are mediating.
    Mr. Igasaki. I think that is one of the reasons it is 
important for us to have very objective mediators and people 
who have enough knowledge of EEO law. For example, if one of 
the parties--hopefully, everyone is being honest in the 
system--but if one of the parties is not and presents a 
position that states ``you are never going to get that kind of 
result in court,'' it is important that the mediator be able to 
say, ``well, it is not so clear that that is the case,'' or be 
able to add enough information so that if something is grossly 
out of step with reality there would be some opportunity for 
the person to get some advice so that the parties could have a 
balanced picture.

                             use of testers

    Mr. Dixon. I was very pleased to see that Speaker Gingrich 
is supporting your increase, and, in fact, has provided 
testimony on March 3 about it. But in that testimony, he raised 
the issue that he would hope the money would be spent to 
diminish the backlog and not spent to create more cases, and, 
in fact, he made reference to the tester system and 
Commissioner charges. Can you tell us how you use both testers 
and Commissioner charges?
    Mr. Igasaki. Well, Commissioner charges, as you know, are 
something that was created in the 1964 Civil Rights Act and 
they give us the capability, as any law enforcement agency, I 
believe, should have, to be able to move on information that 
demonstrates a likelihood of a violation existing.
    In most cases, they are situations where someone has come 
forward with information to us but that, for one reason or 
another, does not file a formal charge or their charge fails. 
We may find out, for example, that a particular employer has a 
policy, let us say race coding, or a policy in violation of ADA 
in terms of questions being asked on a routine basis. When we 
know something like that, as a law enforcement agency, we feel 
the need to do something, and that is where the Commissioner 
charges are most necessary.
    In terms of testing and Commissioner charges, the area 
where I think this is most important is the area of hiring 
discrimination. In the world of employment law, the vast 
majority of cases coming into us do not involve hiring. This is 
natural because someone who does not get a job does not know 
why they did not get the job. We do not want everyone who does 
not get a job to file a charge with us.
    On the other hand, hiring discrimination may be the area 
where we can have the most impact on discrimination. We now 
spend most of our resources on charges dealing with terms and 
conditions of employment and dismissals, which are important 
areas, but with 80 or 90 percent of our resources pointed in 
that direction, we are really spending a lot of our efforts at 
companies that at least hire minorities, the disabled, and 
women--those companies where it is almost like a disincentive 
to hire people who might file charges.
    Hiring discrimination is something we have been always 
striving to eliminate, because our statutory mandate is to 
enforce the discrimination laws, not simply to do what comes 
through the door. With that in mind, we have been trying to 
find various ways of dealing with and learning about hiring--
how hiring discrimination occurs.
    We have been very cautious with testing. It is an area 
which a number of organizations have used effectively. We feel 
it has some promise in terms of teaching us something about how 
hiring discrimination occurs. So what we have done is we issued 
bids and we brought two organizations in that do employment 
testing, both for publicizing things, in some cases, even at 
the request of companies, to finding out how discrimination is 
going on. They contracted with us to teach us what they know 
and from that we hope to know whether we can do more with 
testing.
    Actually, the EEOC's experience with testing began under 
Chairman Kemp when the Commission authorized the EEOC to accept 
testing evidence in cases, and we still do that. So, for 
example, if someone comes before us with tester evidence of 
discrimination, we will pursue it. What we are now doing is 
investigating what are some other ways that testers might be 
utilized. But as I said, this is a pilot program.
    Mr. Dixon. What percentage of your cases are generated 
through the tester program and Commissioner charges?
    Mr. Igasaki. Well, in terms of testing, I do not know that 
any case that has proceeded all the way to litigation has come 
from the testing program so far. I think as far as Commissioner 
charges, it could be anything from 20 to 40 cases a year. I 
think 40 is roughly right.
    Mr. Dixon. A minuscule number.
    Mr. Igasaki. Fairly small in comparison to 100,000.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. Thank you.
    As Mr. Dixon noted, the Speaker and, I think, Mr. Fawell, 
the authorizing chairman, both have said that their support for 
increased funding is conditioned upon termination of the 
testers program. What do you say about that?
    Mr. Igasaki. Well, as I said, in terms of--I am not sure 
that, at least with my discussion with Mr. Fawell, his support 
was necessarily conditioned upon termination. He did want to 
find out what we are planning to do with it and was very 
concerned about its continuation. I think Speaker Gingrich 
expressed those same concerns. But I think he also said that he 
might be open to looking at testing, where we would pursue it 
only in cases where there was probable cause.
    I think it is likely that if we did anything with testing 
beyond just the responsive thing, which we are already 
committed to, it would be something that would be fairly 
cautious and based on what we learn. We actually, at this 
point, have no plans to move forward with anything from these 
pilot programs. They truly are an experiment. So it is 
something we are going through now to see whether it is 
appropriate for us.
    We may find that we agree that it is something not to be 
pursued using EEOC funds, but we did want to go through the 
pilot program. We do want to see what the results bring us and 
we would hope that the Congress, as well, will be interested in 
learning what we learned through this pilot program. It may be 
more useful and more safe as a reliable method than some might 
think. So, in other words, we do not have any plans to use any 
additional funds to do it, but we would like to have the 
opportunity to have that evidence reviewed.
    Mr. Rogers. I have a copy of the letter here dated March 23 
of this year to Chairman Livingston and myself from Speaker 
Gingrich, Chairman Bill Goodling, and Chairman Fawell, which 
does, in fact, state that they are supporting the increases 
that you seek.
    Mr. Igasaki. Yes.
    Mr. Rogers. Quote, ``provided it institutes reforms that 
ensure the money is targeted for helping actual victims of 
discrimination.'' And then they set out six reforms in the 
letter that they said if made by the Commission that would 
justify your receiving the full 15 percent increase, and one of 
the six criteria is ``an agreement by the EEOC not to use its 
scarce resources for employment testers.'' Then they go on to 
say, ``We ask you to approve the $37 million increase for EEOC 
with these conditions. Please contact the authorizing committee 
to develop in a timely fashion appropriate accompanying 
language to ensure that the Commission implements the above 
reforms as a condition of receiving the money.'' What is your 
reaction to that?
    Mr. Igasaki. I had not seen that letter. I based my 
reaction on what I heard at the hearing and my discussion with 
Chairman Fawell afterward. I certainly would like to look at 
all those conditions to see whether we can work something out 
in that regard.
    I think as far as the 1999 money is involved, it would not 
be our anticipation that--certainly with any of the increase, 
that nothing would be utilized for testers. As you can see from 
the package, none of it would be devoted to testing. It is very 
possible, especially since we would be just reviewing the 
results of the 1998 pilot project, that nothing would be 
expended in fiscal year 1999 on testing at that time.
    Since we have committed ourselves as a Commission, 
involving the support of both Republican and Democratic members 
of the Commission, to move forward with this pilot project, I 
feel that without their vote, I cannot say that we are going to 
terminate that project without further evidence.
    Mr. Rogers. You would prefer us to say that?
    Mr. Igasaki. I would prefer that we had the opportunity to 
see the results of the pilot project and that perhaps we could 
have a dialogue about whether it is something that we should 
not do or whether we should do.
    Mr. Rogers. Mr. Dixon.
    Mr. Dixon. Mr. Chairman, would you go into a little more 
detail on the testing? I am not really clear at this point when 
testing is used. In the Speaker's remarks, he indicates that 
testing undermines the credibility of EEOC. So start from the 
beginning of when testing is, in your view, appropriate and 
when it would be used.
    Mr. Igasaki. As I said, it is a pilot, so we have not 
worked out a protocol on this. Based on my understanding of how 
it has been done from the organizations we have contracted 
with, essentially, testing is utilized to ascertain whether 
initial information or an initial sense that there is some 
discrimination going on is the case.
    Mr. Dixon. So it is generated from the Commission's desire 
rather than a complainant walking in?
    Mr. Igasaki. It could be from a complainant, as well. The 
reason for doing it is a sense that in this situation, we do 
not have enough information to know whether there is an act of 
discrimination going on. There is however, enough to suspect, 
enough to expend some resources on.
    The concept of sending the testers in would be to establish 
whether it is or is not. Now, the contractors have told us, 
more often than not, that the testers actually demonstrate that 
there is not a discriminatory situation going on, as opposed to 
that there is, so they may be focusing on one company. Whereas 
currently we may then proceed to a Commissioner's charge, if we 
had testing available, we might be able to say, well, there is 
no basis for that based on this testing experiment.
    Basically, the idea is to have trained people going in who 
present a package of traits, and this would be basically 
reserved for entry-level jobs where there is not a lot of 
complexities involved, and see how they are treated 
differently. If they are treated differently for the traits 
that we are looking at, we probably would send in an additional 
team of testers to make sure that it was not just something as 
a matter of chance.
    Information will be brought in by these testers, who would 
be trained to be objective and really would not know more than 
what they are supposed to go in and offer in return to that 
agency. The parties would then examine the differentials in 
treatment to determine if there is reason to believe something 
else is going on.
    Now, if all of that were to be sustained, there are a 
variety of things that could be looked at in terms of tester 
results. One could be to contact the company and say, look what 
we found. You should remedy this.
    Another thing would be to look at whether it is pervasive 
to a given industry and whether we might want to talk about 
working with the leadership of that industry to make some 
reforms.
    Or it could be where significant enough results are brought 
in that litigation or investigation could result from that, as 
well. We have not committed to any of those, necessarily. That 
is why we are looking at it.
    Mr. Dixon. If I could pursue this for just a second. Mr. 
Chairman, is it a case where a company advertises for a 
certified welder and welder A goes in and has a certification, 
but has a club foot and he is turned down because they have 
just filled the job. Now, he has no way of knowing otherwise 
whether the job has been filled or not.
    And two weeks later, a tester goes in, or maybe on the same 
day. He has the same certification but does not have a club 
foot and they say, ``We have been looking for somebody for this 
job for a long period of time. We are glad you are here.'' Now, 
the club foot person would not have any way of knowing that he 
was potentially discriminated against because he just goes 
away.
    Mr. Igasaki. Right.
    Mr. Dixon. Is that, in fact, a situation where you might 
use a tester?
    Mr. Igasaki. It might well be. I assume we are talking 
about the club foot as potentially a disability in this 
context. I am not sure whether it would be or not in this 
context, but assuming it would be, that would be an area where 
we might want to----
    Mr. Dixon. The reason I use that example, is that the 
tester may go in and decide that he was turned down because the 
welder has to walk on a high wire or a two-inch board to get to 
the welding spot and there may not have been discrimination 
there, although it is a welder who did not meet the physical 
qualifications for the job.
    Mr. Igasaki. Right. Well, some of this gets into 
complexities of the ADA, basically. We would not leave our 
testers to make those decisions. If we were concerned about a 
disability situation, we would send people in with the traits 
relevant to get that resolved. If we saw that there was an 
apparent example of discrimination, we would look further. We 
would not necessarily assume that simply because one person was 
treated differently in a situation, we have the result. We 
would use it to go to the next level of inquiry. In a situation 
like that, we may want to send in several teams of testers to 
maintain a consistency and make sure that we are getting an 
accurate result.
    Mr. Dixon. The Speaker's statement also makes reference to 
an appellate court, the D.C. Circuit, that has made some ruling 
about the use of testers.
    Mr. Igasaki. I am not familiar with that case.
    Mr. Dixon. The Speaker's statement says, ``Finally, the 
courts are also divided as to whether the concept of employment 
testers is even lawful.The D.C. Circuit Court of Appeals ruled 
that employment testers lack standing to bring claims of 
discrimination.''
    Mr. Igasaki. Well, it may be. I am not familiar with that 
case, but I at least know that there are some courts that give 
standing to testers and approve testers. And as I said, the 
other thing is that we may not even use these things for 
litigation.
    Mr. Dixon. The reason I raised it is that we do not have a 
case in front of us, but the Speaker says that the tester lacks 
standing. However, it would not be the tester that would be 
filing the complaint in the case. I can see where a tester 
would lack standing to bring a filing. That is a professional 
person that is filing discrimination cases, and that would not 
be the case----
    Mr. Igasaki. Not generally. I think that what Chairman 
Kemp's Commission had said is that they would look at testers 
as having standing before the Commission. That was asked, and 
we will be guided by whatever the courts will tell us. But this 
pilot project is not about going that route. That is something 
that was decided upon previously by previous Commission.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. How many instances of testers did you have in 
1997, do you know?
    Mr. Igasaki. I think there may have been a couple of cases 
that have come through, but not supporting litigation. We have 
not litigated any cases, as far as I know, involving the 
testers.
    Mr. Rogers. On how many occasions were testers used in 
1997?
    Mr. Igasaki. By the EEOC, none.
    Mr. Rogers. I am sorry?
    Mr. Igasaki. By the EEOC, none.
    Mr. Rogers. Who else would they be used by?
    Mr. Igasaki. Well, several nonprofit organizations have 
utilized testers, and as I said, under the rules established by 
the Commission since 1990, if an organization comes before us 
and wants to file a charge based on evidence gathered by 
testers, we will process it.
    Mr. Rogers. And how many of those did you entertain?
    Mr. Igasaki. Well, I think there may have been a few. I am 
not sure of the exact number. I can find that out. But there 
have been a few cases that come into the system that--
    Mr. Rogers. A few, meaning a dozen or so?
    Mr. Igasaki. Oh, less than that.
    Mr. Dixon. Well, the complainants themselves may use a 
tester, right? They may come to you and say, I went to this job 
and I had my friend, who looked entirely different, go down the 
next day.
    Mr. Igasaki. Probably, yes.
    Mr. Rogers. But there have been no instances of Commission-
sponsored testers?
    Mr. Igasaki. That is correct.
    Mr. Rogers. But less than a dozen cases that you have 
entertained where testers were employed or used by an outside 
nonprofit-type group.
    Mr. Igasaki. There have been a few. I do not know the exact 
number. I can check on it.
    Mr. Rogers. That is the few that you said were less than a 
dozen, right?
    Mr. Igasaki. Oh, yes, far less than a dozen.
    Mr. Rogers. Who else would use testers, other than the 
situation that----
    Mr. Igasaki. I know, for example, that there are some 
companies that use testers in their own field offices, 
certainly, but beyond that, I do not think there is a lot of 
employment testing that is going on. I think there have been 
efforts to pursue it, but I am not sure where else it is 
happening.
    Actually, one of the meetings recently of State attorneys 
general, a number of States have said they had begun using 
employment testing, but I am not sure what that means because I 
do not know exactly what they have done with it.
    Mr. Rogers. You gave $200,000 in contracts to organizations 
in D.C. and Chicago----
    Mr. Igasaki. That is correct.
    Mr. Rogers [continuing]. To use testers, right?
    Mr. Igasaki. Right. Well, basically to work with us on 
testers, give us a sense of how it would operate and whatever 
we might do. For example, since one of the offices that is 
working with us is based in Chicago and one in Washington, 
D.C., they are going to help us look for places where we might 
try to do it just to see what kind of results we could bring.
    Mr. Dixon. That very well may be what the Speaker and Mr. 
Fawell were referring to with the active outreach of the 
testers program, was this $200,000 contract--is that what he 
was referring to?
    Mr. Igasaki. That would be my guess, yes.
    Mr. Rogers. What do you say about that?
    Mr. Igasaki. I just said, this is a 1998 program. We do not 
have a particular line for it in 1999, so based on what we will 
be looking at in terms of the 1999 budget currently, we do not 
have any intent to carry it forward in 1999. What we seek to do 
is learn whether there is something that we can do, and it 
would have to be something useful in helping us deal with the 
problems.
    Mr. Rogers. But you are not going to have any line item or 
contractor or authority to go outside your Commission for 
testers in 1999?
    Mr. Igasaki. That is currently the way we are looking at 
it, yes.
    Mr. Rogers. I am trying to find a way to thread the needle 
here.
    Mr. Igasaki. One way to look at this is that when we get 
results from our testing program, we are going to take some 
time to analyze them and look at them to see what we have 
learned. Frankly, just in working as quickly as the bureaucracy 
can work, it is unlikely that would be happening in fiscal year 
1999. We would do the analyzing, but in terms of any additional 
proposals, it probably would not even be in the next fiscal 
year, and it is something that Congress wants us to slow down 
the program enough to have input and see how we have done. That 
is one way we can take care of it, to say that in 1999, we will 
assess and analyze what we have learned. I think input from all 
of us is appropriate before we move further on anything else.

            expenditures on charge processing and litigation

    Mr. Rogers. In our report language last year, we asked for 
reports preparing expenditures on charge processing to 
expenditures on litigation. We wanted to establish a way to 
identify the level of resources being used for litigation, and 
then specifically within that amount, how much for different 
aspects of litigation, including intervention?
    As you know, you cite charge processing as your 
highestpriority and we want to be able to objectively measure whether 
your ongoing activities reflect that priority. I understand that the 
best reporting you could provide shows that direct costs for charge 
processing were about three times greater than the direct costs of 
litigation, is that correct?
    Mr. Igasaki. That is correct, yes.
    Mr. Rogers. And you are working on a pilot project to 
capture those costs more accurately?
    Mr. Igasaki. We are working on a pilot project. We were 
able--the two-thirds figure does reflect the non-personnel 
costs. What the project is designed to do is assess in terms of 
the overall expenditure of time by our staff people. That 
portion of the resources is devoted to litigation as opposed to 
investigation.
    As you know, we have asked our attorney pool to spend a 
whole lot more time, training and consulting with our intake 
staff, and investigative staff. So what the pilot is designed 
to do is, for one thing, to assess how much time they are 
spending on that so that you cannot just simply say that all 
the attorneys are 100 percent litigation. So we are trying to 
assess what percentage of their time was being utilized in that 
way.
    Also, in terms of the amount of time investigators spend, 
which would be a smaller amount, supporting litigation rather 
than other field staff and headquarters staff.
    Mr. Rogers. We want to be able to evaluate the monies that 
you are spending for intervention and litigation as compared to 
charge processing. So we want you to develop that material for 
us.
    Mr. Igasaki. That pilot project is underway right now and 
we expect to have the results, at least preliminary results, by 
June sometime.

                 interventions and parallel litigation

    Mr. Rogers. And you also provided a report on the criteria 
that you used to decide whether or not to intervene in private 
lawsuits----
    Mr. Igasaki. That is correct.
    Mr. Rogers [continuing]. Or to file parallel lawsuits, and 
the task force report includes recommendations in that area. 
How do you plan to proceed on the task force recommendations?
    Mr. Igasaki. We do anywhere from four to eight 
interventions a year. Most of those are small cases. A few of 
them may be very large cases. I think that is why there is so 
much interest in the intervention area. We had a few very 
visible interventions.
    We shared the language the Commission uses to decide 
whether to intervene with the Committee and with the oversight 
committee, as well, to see whether there was any input on what 
additionally might be needed.
    The Commission is prepared--I spoke individually with my 
colleagues--to formally enact these standards, which we are 
already using, at the Commission level, and to add to them if 
there are other criteria that people think we are missing.
    Basically, the criteria as they stand now relate to the 
public interest. Is there some interest served by the EEOC 
coming in? Now, as you know, the courts have standards about 
whether we would even be allowed to intervene in that case, and 
our criteria reflect those standards, and in addition, our 
standards in terms of how to use our money.
    Mr. Rogers. You have said you intervened in seven private 
actions in 1997.
    Mr. Igasaki. Seven? Yes, that sounds right.
    Mr. Rogers. How many in 1998 so far?
    Mr. Igasaki. That, I do not know. None--zero.
    Mr. Rogers. All right. And what are the totals for parallel 
lawsuits both in 1997 and 1998 today?
    Mr. Igasaki. I do not know. We do not have it. I can get 
that for you, though.
    Mr. Rogers. File that for the record, if you would, please.
    [The information follows:]

                          ``Parallel'' Lawsuits

Fiscal year:                                       ``Parallel'' Lawsuits
    1997..........................................................     7
    1998 (first 2 quarters).......................................     4

    Mr. Rogers. And if you do not mind, provide a summary of 
those interventions and parallel lawsuits, a summary of the 
case including factual details, the rationale for your 
involvement.
    [The information follows:]


[Pages 470 - 477--The official Committee record contains additional material here.]



                               Automation

    Mr. Rogers. You are asking for a $9.6 million increase for 
automation.
    Mr. Igasaki. That is correct.
    Mr. Rogers. What is your base funding devoted to this 
function?
    Mr. Igasaki. I just looked at that figure. I think we are 
spending--currently, in fiscal year 1997, we spent $709,000 for 
software development, $1.9 million for purchasing hardware and 
software. In fiscal year 1998, we expect to spend $500,000 for 
software development and $1.2 million for our hardware and 
software purchase.
    These are actually larger figures than historically has 
been true for the agency, although they fall short of what we 
would need to set up the national network that we would like to 
do.
    Mr. Rogers. Why have you devoted so little to automation in 
the past?
    Mr. Igasaki. Well, frankly, because as I explained, most of 
the work of the agency, taking cases, and investigating those 
cases, involve human resources and those are very costly. So to 
take any of those resources to invest in technology any more 
than this would require causing an even greater crisis than we 
already have in terms of the basic bread and butter of the 
agency, which is processing complaints. It would result in 
greater backlog and problems along those lines.
    Mr. Rogers. What I am getting at is do you not think that 
maintaining an adequate annual investment in this area, would 
it be a better approach than dumping it all in one year? It 
seems like if you put a reasonable amount in every year, 
increase your base for automation over a period of time, rather 
than a crash program overnight--it would cost us less, too, I 
think, and serve your purposes better, do you agree with that?
    Mr. Igasaki. Well, I think as a general rule, that is 
correct, although the truth is that we had so little devotion 
to technological capabilities historically, that we have not 
been able to maintain that level. So even to get to a level of 
adding something additional, we have to meet certain 
capabilities.
    For example, some of the networking capabilities that we 
are talking about require certain personal computer 
capabilities in terms of how much--I am certainly no expert in 
this--those individual computers would have to have memory 
capacities beyond what our current computers would rely on. So 
we need to buy those first.
    Mr. Rogers. The point I am driving at is, you got some 
pretty good increases the last couple of years while most every 
other agency that we funded were either flat-funded or 
decreased. We gave you an increase in 1997 of $7 million and a 
$2.3 million increase in 1998. I know those are not huge 
numbers, but it would have allowed you, I think, to have begun 
to increase your automation.
    Mr. Igasaki. Well, I don't think that was it, because with 
the $2 million, while we certainly appreciate it, we ended up 
having to lose staff positions as opposed to gain them, so we 
certainly did not have any new money. Because the costs go up 
for us considerably every year $2 million really gets eaten up 
very quickly. The $7 million was larger, yes, but given the 
increase in costs and the fact that it was on top of many years 
of no increase, then it meant that, ultimately, we end up 
losing because we are filling vacancies in the field. We are 
incrementally helping our technological capabilities, but not 
enough to make a difference.
    I think that your point is very well taken, being able to 
stay ahead of the curve on technological development, and I 
would like to see us do that. I think these amounts that we are 
spending in 1997 and 1998 might be sufficient after we get to 
the point where we have been able to bill the costs. But to get 
to the point where that relatively modest increase is useful to 
us, we need to make some additional expenditures. I agree that 
this is not the best way to go, but I do not think we will ever 
get there if we try to do it nickel-and-dime year after year.
    Mr. Rogers. Mr. Dixon?

                   Fair Employment Practices Agencies

    Mr. Dixon. Just one question. I noticed that your budget 
does not have any additional money for the cases that you farm 
out to Fair Employment Practices Agencies at the State or local 
level, that it is flat-funded. Is there a reason for that? I 
mean, you do not anticipate an increase in funding?
    Mr. Igasaki. No. We have not added in this package an 
increase in the State and local budget. The concept there being 
that in working with the White House on this project, we 
focused on what we needed to enhance our capabilities. 
Certainly, I think the FEPAs could use additional monies, and 
we supplement them to a tune of $500 a case. Certainly it costs 
them anywhere from $1,500 to $2,000 additional to actually 
prosecute those cases. We fund them for some of the cases and 
it really is up to the States to determine how much extra they 
are going to put in. It varies so wildly that it is hard for us 
to say what we are getting for those investments on a national 
basis.
    California, for example, has a fairly substantial 
Department of Fair Employment and Housing. Some other States, 
South Carolina for example, only do public sector cases. There 
is another State, I am told, or there are two States that do 
not have any FEPAs at all.
    So I think there is variance in terms of that. Certainly, 
if Congress would like to fund them for additional resources, I 
think it helps the cause overall. But what we focused on here 
is the EEOC needs.
    Mr. Dixon. Let me ask it another way. You look at the 
funding for the States as a supplement to their budget rather 
than enforcement policy for you.
    Mr. Igasaki. Well, it is part of our enforcement policy, 
but given the amount of money that we are able to share with 
them, it is really only a supplement.
    Mr. Dixon. Thank you, Mr. Chairman.
    Mr. Rogers. Mr. Chairman, thank you for your testimony this 
morning. It has been a useful exchange of information, I think. 
We know much more about your request than we did before and we 
appreciate your testimony. We will do the best we can to 
accommodate your very important work. If the Speaker will give 
us enough money with which we can do our job----
    Mr. Igasaki. I hope he will.
    Mr. Rogers [continuing]. Then we will honor his obligations 
that he makes on our behalf. [Laughter.]
    Thank you.
    Mr. Igasaki. Thank you.
    [The following questions were responded to for the record 
by the EEOC:]


[Pages 481 - 482--The official Committee record contains additional material here.]













                           W I T N E S S E S

                              ----------                              
                                                                   Page
Alvarez, Aida....................................................   257
Bosley, D.B......................................................     1
Broomfield, R.C..................................................    61
Donnelly, Tony...................................................     1
Duff, J.C........................................................     1
Eakeley, D.S.....................................................   199
Erlenborn, J.N...................................................   199
Fishel, A.S......................................................   343
Hanlon, Dan......................................................    39
Hantman, A.M.....................................................    39
Heyburn, J.G., II................................................    61
Igasaki, P.M.....................................................   443
Kennard, W.E.....................................................   343
Kennedy, Hon. A.M................................................     1
Levitt, Arthur...................................................   293
McConnell, James.................................................   293
McKay, John......................................................   199
Mecham, L.R......................................................    61
Pregnall, Stuart.................................................    39
Souter, Hon. D.H.................................................     1
Suter, Bill......................................................     1
Wagner, Frank....................................................     1
Zobel, R.W.......................................................    61















                               I N D E X

                              ----------                              
The Supreme Court of the United States:
                                                                   Page
    Federalizing Crime...........................................27, 31
    Habeas Corpus and Prison Litigation Reform...................    23
    Improvements to the Supreme Court Building...................    34
    Increased Bankruptcy Filings.................................    29
    Increased Federal Jurisdiction...........................22, 24, 26
    Judicial Vacancies...........................................21, 25
    Jury Selection...............................................    14
    Jury System..................................................    32
    Opening Remarks..............................................     1
    Quality of Oral Arguments....................................    19
    Questions Submitted by Representative Taylor.................    36
    Questions Submitted by Representative Latham.................    37
    Resource Needs...............................................    13
    Splitting the Ninth Circuit Court of Appeals.................    30
    Statement of Justice Kennedy.................................     2
    Televising Court Proceedings.................................16, 24
    Use of Modern Technology.....................................    29
    Utility Systems Upgrade......................................    13
    Videotape of Oral Arguments..................................    18
    Year 2000 Computer Problem...................................    25

  Supreme Court of the United States--Care of the Building and Grounds

Architect of the Capitol:
    Biography of Alan M. Hantman.................................    48
    Closing comments.............................................    57
    Opening statement............................................    39
    Statement of Alan M. Hantman.................................    42
    Witnesses....................................................    39
Five-Year Capital Budget:
    Capital Items................................................    39
    Conduit Pathways, LAN Cabling, Site Preparation of...........    55
    Courtroom Seating Capacity...................................    56
    Disruptions and Inconveniences...............................    52
    Fiscal Year 1999 Capital Budget..............................    59
    Maintain Integrity of Original Building Design...............    53
    North and South Driveways, Renovations of....................    54
    Phases of Projects...........................................    50
    X-Ray Machines, Replacement of...............................    55
    Question by Congressman Taylor...............................    58

Courts of Appeals, District Courts, and Other Judicial Services; 
  Administrative Office of the U.S. Courts; Federal Judicial 
  Center; U.S. Court of Appeals for the Federal Circuit; U.S. 
  Court of International Trade...................................    61
    Administrative Office of the United States Courts:
        Prepared Statement of Leonidas Ralph Mecham..............    80
        Request for the Administrative Office....................   144
    Bankruptcy Filings...........................................   156
    Biographies:
        John G. Heyburn II.......................................    78
        Robert C. Broomfield.....................................    79
        Leonidas Ralph Mecham....................................    89
        Rya W. Zobel.............................................    92
    Budget Summary...............................................    99
        Administrative Office of the United States Courts........   144
        Courts of Appeals, District Courts, and Other Judicial 
          Services...............................................   131
        Federal Judicial Center..................................   147
        Payments to Judicial Trust Funds.........................   150
        Summary Tables...........................................   114
        U.S. Court of Appeals for the Federal Circuit............   127
        U.S. Court of International Trade........................   129
        U.S. Sentencing Commission...............................   152
        Violent Crime Trust Fund.................................   154
    Carryover Funds..............................................   155
    Chairman's Opening Statement.................................    62
    Computer Security............................................   191
    Conclusion...................................................   193
    Cost of Living Adjustments...................................   158
    Court of Appeals for the Federal Circuit:
        Prepared Statement of Haldane Robert Mayer...............    93
        Request of the Federal Circuit...........................   127
    Court of International Trade:
        Prepared Statement of Gregory W. Carman..................    97
        Request of the CIT.......................................   129
    Court Security...............................................   164
    Courthouse Space.............................................   186
    Defender Services............................................   165
        Ninth Circuit Costs......................................   195
    Federal Circuits Study.......................................   189
    Federal Judicial Center......................................   169
        Long Distance Learning...................................   172
        ``Federal Judicial Television Network'' Booklet..........   174
        Prepared Statement of Judge Rya W. Zobel.................    90
        Request of the FJC.......................................   147
    GSA Security Surcharge.......................................   157
    Habeas Corpus Reform.........................................   157
    Increased Federal Jurisdiction...............................   161
    Introduction.................................................    61
    Judgeships:
        Judicial Vacancies.......................................
          159, 164...............................................
        Eliminating Judgeships...................................   185
    Judiciary Economy and Efficiency Efforts.....................   171
    Jurors.......................................................   162
    Long Distance Learning.......................................   172
    Mandatory Drug Testing.......................................   188
    Methamphetamine..............................................   189
    Opening Statement of Judge John G. Heyburn II................    62
    Prepared Statement of Judge Haldane Robert Mayer.............    93
    Prepared Statement of Judge Gregory W. Carman................    97
    Prepared Statement of Judge John G. Heyburn II...............    65
    Prepared Statement of Leonidas Ralph Mechan..................    80
    Prepared Statement of Judge Rya W. Zobel.....................    90
    Questions Submitted by Congressman Dixon.....................   195
    Use of Wire Taps.............................................   192

                       Legal Services Corporation

Biographies of Witnesses.........................................   221
Chairman Rogers' Opening Statement...............................   199
Farmworkers Legal Services of North Carolina.....................   229
Funding for Domestic Violence and Children.......................   235
Interest on Lawyers Trust Accounts Programs......................   225
Legislative Requirements and Restrictions........................   231
Non-Federal Funding--All Legal Services Corporation Grantees.....   220
Opening Statement of the Legal Services Corporation..............   222
Pro Bono Activity................................................   233
Puerto Rico Legal Services Program...............................   226
Questions for the Record:
    Submitted by Congressman Charles Taylor......................   242
    Submitted by Congressman Ralph Regula........................   247
    Submitted by Congressman Michael Forbes......................   250
    Submitted by Congressman Tom Latham..........................   254
Technology-Based Delivery Mechanisms.............................   228
West Virginia Program Reductions.................................   227
Written Statement of the Legal Services Corporation..............   202
Biography of Administrator Aida Alvarez..........................   275
Disaster Loan Activity in California.............................   278
Disaster Loan Program............................................   276
Opening Statement of Hon. Aida Alvarez...........................   257
Prepared Statement of Administrator Aida Alvarez.................   260
Questions Submitted by Chairman Rogers...........................   280
Questions Submitted by Congressman Latham........................   289

                   Securities and Exchange Commission

AMEX/NASDAQ Merger Advantages and Disadvantages..................   322
Asian Market Crisis..............................................   324
Biography of Arthur Levitt.......................................   315
Circuit Breakers.................................................   323
Closing Statements...............................................   331
Computer Data Security...........................................   329
Decimal Pricing System...........................................   328
FY 1999 Budget Request...........................................   316
Impact of Technology on Fraud....................................   327
Litigation Support...............................................   326
Market Circuit Breakers..........................................   323
Opening Statement................................................   293
Proposed AMEX/NASDAQ Merger......................................   320
Questions Submitted for the Record...............................   332
Review of Enforcement Division...................................   327
SEC Automation...................................................   325
Securities Fraud.................................................   326
Staff Retention:
    Retention Allowance..........................................   316
    Retention Allowance Program..................................   318
Staff Turnover...................................................   316
Testimony of Arthur Levitt, Chairman.............................   295
    Additional Funding for Retention of Staff....................   311
    Conclusion...................................................   313
    Current Challenges Facing the SEC............................   297
    Funding Structure............................................   312
    Priorities and Allocation of Additional Resources............   305
    Role of the SEC..............................................   297
Use of Plain English.............................................   330
Witnesses........................................................   293
Year 2000 Automation Readiness...................................   319

                   Federal Communications Commission

Witnesses:
    Kennard, William E., Chairman, Federal Communications 
      Commission.................................................   343
    Fishel, Andrew S., Managing Director.........................   343
Opening Remarks:
    Chairman Rogers..............................................   343
    Chairman Kennard.............................................   343
    Mr. Livingston...............................................   343
Opening Statement from Chairman Kennard..........................   344
Materials Provided for the Hearing Record:
    Chairman's Prepared Statement................................   347
    1998 Biennial Regulatory Review..............................   363
    Chairman's Biographical Sketch...............................   372
    Questions for William Kennard, Chairman, FCC.................   398
Subjects of Discussions During Hearings:
    Access Charges...............................................   395
    Appeal Process for Public Safety Spectrum....................   392
    Area Code Portability........................................   392
    Budget Request...............................................   415
    Cable TV Competition.........................................   393
    CALEA (Communications Assistance for Law Enforcement Act)....   411
    FCC Streamlining.............................................   415
    Free Air Time for Political Candidates.....................373, 406
    National Call Center.........................................   414
    Relocation to the Portals....................................   381
    Schools and Libraries (E-Rate) Program.......................   379
    Staffing Level for Cable Services Bureau.....................   388
    Universal Service:
        Additional Carrier Charges...............................   389
        Contributions and Disbursements..........................   405
        Rural and High Cost Areas................................   388
    Year 2000 Funding..........................................406, 412
Questions and Answers for the Record:
    Questions Submitted by Chairman Rogers:
        Status of Proceeding Addressing Common Ownership of Radio 
          and Television Stations in Local Market................   416
        Cable Services Bureau Staffing Requirements..............   416
        Portals Chronology.......................................   417
        FCC's CALEA Timetable....................................   423
        Budget Request Required for Achieving Year 2000 
          Compliance in FCC's Information Technology Systems.....   424
        Critical Systems Impact Statement........................   424
        Desktop Configuration Replacement Impact Statement.......   426
        Mission Support Systems Impact Statement.................   426
        Administrative Systems Impact Statement..................   427
        Sustaining Basic Service Levels/Systems--Impact Statement   427
        FY 1999 Budget Increase Request in Priority Order........   431
    Questions Submitted by Congressman Jim Kolbe:
        Slamming.................................................   432
        Universal Service........................................   433
    Questions Submitted by Congressman Charles Taylor:
        Lutheran Church Case.....................................
          435....................................................
        FCC Treatment of Small Radio Stations....................   436
        Cellular and Television Towers...........................   436
        Section 271..............................................   437
    Questions Submitted by Congressman Julian Dixon:
        Wireless-Only Area Code Overlays.........................   440

                Equal Employment Opportunity Commission

Alternative Dispute Resolution...................................   454
Automation.......................................................   478
Charge Processing and Litigation Expenditures....................   468
Fair Employment Practices Agencies...............................   479
Igasaki, Paul M.:
    Biography....................................................   453
    Opening Statement............................................   443
    Written Statement............................................   447
Intervention and Parallel Litigation.............................   468
Questions and Answers Submitted for the Record:
    Latham, Representative Thomas................................   481
Testers..........................................................   461
Witness..........................................................   443