    [Senate Hearing 105-320]
    [From the U.S. Government Publishing Office]

                                                             S. Hrg. 105-320

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

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

                                    HEARINGS

                                    before a

                              SUBCOMMITTEE OF THE

                COMMITTEE ON APPROPRIATIONS UNITED STATES SENATE

                           ONE HUNDRED FIFTH CONGRESS

                                 FIRST SESSION

                                       on

                               H.R. 2267/S. 1022

    AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF COMMERCE, JUSTICE,
      AND STATE, THE JUDICIARY, AND RELATED AGENCIES FOR THE FISCAL YEAR
               ENDING SEPTEMBER 30, 1998, AND FOR OTHER PURPOSES

                                   __________

                            Department of Commerce
                             Department of Justice
                              Department of State
                       Federal Communications Commission
                           Nondepartmental witnesses
                       Securities and Exchange Commission
                         Small Business Administration
                                 The judiciary
                                 United Nations

                                   __________

             Printed for the use of the Committee on Appropriations

    Available via the World Wide Web: http://www.access.gpo.gov/congress/senate

                         U.S. GOVERNMENT PRINTING OFFICE
     39-831 cc                 WASHINGTON : 1998
    ___________________________________________________________________________
                For sale by the U.S. Government Printing Office
    Superintendent of Documents, Congressional Sales Office, Washington, DC
                                     20402

                               ISBN 0-16-056085-3

                          COMMITTEE ON APPROPRIATIONS

                         TED STEVENS, Alaska, Chairman
    THAD COCHRAN, Mississippi            ROBERT C. BYRD, West Virginia
    ARLEN SPECTER, Pennsylvania          DANIEL K. INOUYE, Hawaii
    PETE V. DOMENICI, New Mexico         ERNEST F. HOLLINGS, South Carolina
    CHRISTOPHER S. BOND, Missouri        PATRICK J. LEAHY, Vermont
    SLADE GORTON, Washington             DALE BUMPERS, Arkansas
    MITCH McCONNELL, Kentucky            FRANK R. LAUTENBERG, New Jersey
    CONRAD BURNS, Montana                TOM HARKIN, Iowa
    RICHARD C. SHELBY, Alabama           BARBARA A. MIKULSKI, Maryland
    JUDD GREGG, New Hampshire            HARRY REID, Nevada
    ROBERT F. BENNETT, Utah              HERB KOHL, Wisconsin
    BEN NIGHTHORSE CAMPBELL, Colorado    PATTY MURRAY, Washington
    LARRY CRAIG, Idaho                   BYRON DORGAN, North Dakota
    LAUCH FAIRCLOTH, North Carolina      BARBARA BOXER, California
    KAY BAILEY HUTCHISON, Texas
                       Steven J. Cortese, Staff Director
                     Lisa Sutherland, Deputy Staff Director
                   James H. English, Minority Staff Director
                                     ------

       Subcommittee on Commerce, Justice, and State, the Judiciary, and
                                Related Agencies

                      JUDD GREGG, New Hampshire, Chairman
    TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
    PETE V. DOMENICI, New Mexico         DANIEL K. INOUYE, Hawaii
    MITCH McCONNELL, Kentucky            DALE BUMPERS, Arkansas
    KAY BAILEY HUTCHISON, Texas          FRANK R. LAUTENBERG, New Jersey
    BEN NIGHTHORSE CAMPBELL, Colorado    BARBARA A. MIKULSKI, Maryland
                                         ROBERT C. BYRD, West Virginia
                                           (ex officio)
                               Subcommittee Staff
                                  Jim Morhard
                                 Kevin Linskey
                                   Paddy Link
                                   Dana Quam

                             Scott Gudes (Minority)
                                  Emelie East

                                C O N T E N T S

                                  ----------

                            Thursday, March 6, 1997

                                                                       Page
    Department of State: Secretary of State..........................     1

                            Tuesday, March 11, 1997

    Small Business Administration....................................    57

                           Wednesday, March 12, 1997

    Department of Justice: Office of the Attorney General............    91

                            Thursday, March 13, 1997

    Department of Commerce: Secretary of Commerce....................   151

                           Wednesday, March 19, 1997

    Securities and Exchange Commission...............................   211

                            Thursday, March 20, 1997

    United Nations...................................................   229

                            Thursday, April 10, 1997

    Department of Justice:
        Federal Bureau of Investigation..............................   247
        Immigration and Naturalization Service.......................   247
        Drug Enforcement Administration..............................   247

                           Wednesday, April 16, 1997

    Federal Communications Commission................................   347

                            Thursday, April 17, 1997

    The judiciary:
        Supreme Court of the United States...........................   383
        U.S. courts..................................................   389

                            Thursday, April 24, 1997

    Department of Commerce: National Oceanic and Atmospheric
      Administra- tion...............................................   417
    Nondepartmental witnesses........................................   465

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, MARCH 6, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:04 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Domenici, Campbell, Hollings,
    Bumpers, Lautenberg, and Mikulski.

                              DEPARTMENT OF STATE

                               Secretary of State

    STATEMENT OF HON. MADELEINE K. ALBRIGHT, SECRETARY OF
                STATE

                                opening remarks

        Senator Gregg. We'll call this hearing to order, and we
    obviously want to thank the Secretary for joining us. This is
    her first appearance before the committee as Secretary.
        Of course, we had the pleasure of having a number of
    chances to meet with the Secretary when she was Ambassador, and
    it was always a privilege and a very worthwhile event for us.
        I am going to withhold my opening statement, and I would
    hope that we could shorten our opening statements so that we
    can get on with the questions.
        There are a couple of members who have expressed an
    interest in making opening statements, but I will not make
    mine.
        Senator Hollings. I agree with the distinguished gentleman.
    We'll just withhold them and file them for the record, and hear
    the Secretary.
        Senator Gregg. The Senator from New Mexico asked for the
    opportunity to make a quick statement.
        Senator Domenici. Excuse me, Madam Secretary. I wanted to
    share with all of you a request. I have pretty good evidence
    that a number of cases are being filed in the State district
    courts regarding an immigration issue that I think is rather
    deplorable.
        And I was going to ask the chairman if he might have the
    staff investigate this and bring it to our meeting when we have
    the INS up here. Could I lay that before you in a minute here?
        Senator Gregg. Absolutely.
        Senator Domenici. Let me just tell you, we adopted a
    statute in 1990 to make it possible that an alien that's in
    America who became disabled or extremely sick and needed
    guardianship could go to court and have a court determine them
    to be in need of a guardian, and thus in need of foster care.
        That would then permit that person, that alien, to get a
    green card and become a permanent resident. There is now
    evidence that the lawyers and families have found that this
    will apply to an 18-, 19-, or even 20-year-old student who is
    here going to school.
        Before they have to go home, they file a petition saying
    that this alien is in need of a guardian and foster care.
    Believe it or not, district courts in America are determining
    that to be a fact, ex parte, with no advocacy. The courts are
    determining that by order that these aliens are entitled to a
    permanent green card.
        I believe we're either in the middle of a burgeoning fraud,
    or we're catching it in its early stages. Nonetheless, to top
    it all off, we have a situation where a lawyer filed a petition
    for one that supposedly was entitled to be a ward, and thus
    have a guardian appointed, and thus be entitled to foster care,
    and thus get a green card permanently.
        It was filed 8 days before the person arrived in America,
    then they arrived, were determined to be subject to this, and
    then they got a green card. All of this occurred 9 days before
    the person became 21 years of age, which would have
    disqualified them from the opportunity to do this.
        So I would clearly think this is something very serious,
    and I would ask that we look into it, and ask that the
    immigration people tell us about it, and do a little
    investigating before they come, so they might suggest to us how
    we might fix this.
        Senator Gregg. We'll do exactly that, Senator. I think you
    have obviously raised a very legitimate concern which is in the
    jurisdiction of this committee: one which we will pursue. The
    Immigration and Naturalization Service [INS], as you know, is
    becoming the bane of our existence. There have been a number of
    problems.
        Senator Domenici. I thank you very much.
        Senator Campbell. Do you wish to ask unanimous consent for
    opening statements?
        Senator Gregg. I would appreciate it.
        Senator Campbell. And then have the Secretary's comments,
    and go to questions?
        Senator Gregg. That's my plan, unless somebody feels moved
    to have to make an opening statement, I would appreciate it if
    we could just submit them for the record.
        Senator Campbell. I'd just like to welcome here, by the
    way, Mr. Chairman, a former resident of Denver.
        Senator Mikulski. Mr. Chairman, I, too, would like to place
    my opening statement into the record, and welcome with
    enthusiasm our Secretary of State, and look forward to working
    with you to make sure our State Department is as modern as our
    economy.
        Senator Lautenberg. I, too, Mr. Chairman, would ask that my
    statement that commends the Secretary for her wonderful work,
    for the forward position she's put forth for our country, for
    the skills she brings to the job. I would have said all of this
    in my statement, which I would like to include in the record as
    if read.
        Senator Gregg. I appreciate that.
        [The statement follows:]

               Prepared Statement of Senator Frank R. Lautenberg

        Madame Secretary, I am pleased to have the opportunity to
    join my colleagues in welcoming you to this subcommittee and to
    congratulate you publicly on your new post. I am sure we will
    be able to work together to maintain American leadership and
    diplomatic readiness as you have so correctly suggested should
    be our goals.
        I agree with those goals completely, and am glad that the
    budget you have presented supports them by restoring some of
    the cuts of recent years.
        I am glad, for example, that the State Department does not
    now anticipate any additional post closings or the need to
    reduce further the number of personnel. Without sufficient
    people and posts, the work of the Department cannot be done.
        While it is my firm belief that all of the work of the
    State Department helps the citizens of this country, I note
    also that much of the Department's work directly helps U.S.
    citizens and businesses abroad--issuing passports and visas,
    assisting U.S. citizens in distress overseas, helping U.S.
    businesses deal with a foreign culture.
        This, along with traditional diplomacy, is critical work
    that must be supported with adequate resources.

                     Secretary Albright's opening statement

        Senator Gregg. Before we go to questions, what I would like
    to do is hear from the Secretary.
        Secretary Albright. Thank you, very much, Mr. Chairman. I'm
    very glad to be with you and members of the subcommittee.
        As you have said, this is really the first time I am here
    in my new capacity. I think we were able to develop a really
    good relationship in our previous dealings, and now we have a
    chance to broaden the dialog, and I am really looking forward
    to it.
        Our ability to work together successfully matters because
    this subcommittee really does provide many of the resources by
    which American interests are protected, and American leadership
    is sustained. This matters because in our era we are deeply
    affected by events overseas.
        I have my testimony here, my statement, divided into two
    parts, basically where I can give you an overview of the types
    of issues that we are dealing with, and then get more
    specifically into the resource question and how they link up.
        Our workers and business people compete in a global
    marketplace. Our citizens travel, our students are measured
    against those from around the world, our borders are vulnerable
    to illegal immigrants, drugs, pollution, and disease.
        And our children will do better and be safer in a world
    where nations are working together to set high standards,
    contain conflict, and enforce the rule of law. It was with
    these considerations in mind that I left Washington last month
    for my first trip overseas as Secretary of State. I think that
    the message that I was giving there is important to be heard
    here also.
        In Europe I discussed a variety of issues with our key
    allies, including the North Atlantic Treaty Organization's
    [NATO] plan to invite a number of Europe's new democracies to
    begin talks about joining the alliance. Today, 4 months prior
    to the summit in Madrid, our alliance is united.
        NATO will continue its process of internal adaptation. We
    will accept new members, and keep open the door to future
    membership. We will coordinate with all of Europe's
    democracies. We will develop an enhanced relationship with the
    Ukraine, and we will strive to forge a long-term strategic
    partnership with Russia. In this way we will ensure NATO's
    continued role as a mighty instrument for peace, stability, and
    freedom throughout the continent.
        In Moscow, I emphasized to the Russian leaders that just as
    they have created a new Russia, we have created a new NATO. The
    new NATO is not arrayed against any country. It is a force for
    democracy and for integration.
        Russia's own security will be enhanced in a Europe without
    walls, with a transformed NATO as its partner. During my talks
    with President Yeltsin and Russian Foreign Minister Primakov, I
    was able to outline the concrete possibilities of such a
    partnership, and I very much welcome President Yeltsin's
    subsequent statement that he will seek to make progress during
    the summit with President Clinton in Helsinki later this month.
        In Europe, the central question we face is whether we have
    learned the right lessons from history. The same is true in
    Asia, where much depends on whether choices are based on past
    suspicion or current hope.
        The message I conveyed during my trip is that America wants
    to build a secure and peaceful future for Asia and the Pacific.
    I reaffirmed our strong security relationships with our key
    allies, Japan and the Republic of Korea, and I emphasized the
    importance of proceeding with the agreed framework that has
    frozen and will ultimately dismantle North Korea's nuclear
    weapons program.
        I discussed the President's proposal for our party peace
    talks concerning the future of the Korean Peninsula. A briefing
    on this subject in which both Koreas participated was held
    yesterday in New York. I also discussed our decision to
    contribute emergency food relief to the starving people of
    North Korea.
        During my meetings with the Chinese leaders, we reviewed a
    broad range of issues, including nonproliferation, human
    rights, trade, Taiwan, and the future of Hong Kong. My visit,
    and China's willingness to receive me, despite the death of
    Deng Xiaoping, reflects a mutual determination to maintain our
    strategic dialog.
        Our goal is to identify and build on areas of cooperation,
    while seeking through candid discussion to narrow differences.
    By so doing, we hope to develop more extensive areas of common
    ground, and thereby serve the interests of both countries and
    the world.
        Although our interests demand that we direct our attention
    frequently to Europe and Asia, we cannot and are not neglecting
    our responsibilities elsewhere. For example, we're working with
    regional leaders and the United Nations to find a political
    solution to ease the ongoing humanitarian crisis in Zaire.
        In the wake of the President's decision to certify Mexico's
    cooperation in the drug war, I am working with the Attorney
    General and Director McCaffrey to encourage further progress in
    that war, both short term and long term. And I recognize that
    there are those who disagree with the President's decision, but
    I believe it to be the right one.
        President Zedillo is fighting back against the corruption
    that has undermined the antinarcotics effort in his country.
    Our focus now must not be on unproductive efforts to allocate
    blame, but on strategies to overcome problems. In this effort,
    we will be pleased to consult with Congress, and we welcome
    congressional support.
        Finally, with regard to the Arab-Israeli peace process, we
    are working closely with the Government of Israel, the
    Palestinians, and others in the region to sustain the progress
    generated by the Hebron Agreement.
        The recent visits of Prime Minister Netanyahu and Chairman
    Arafat, and the upcoming visits of President Mubarak and King
    Hussein reflect the vital role that America plays in this
    effort. And in that role, we will continue to back those who
    believe in peace, and continue to oppose vigorously those who
    seek to disrupt peace through violence or terror.
        Mr. Chairman, the United States has important economic,
    security, political, and humanitarian interests on every
    continent, but if we are to have the resources required to
    protect those interests, we will need your help in maintaining
    our diplomatic readiness. Accordingly, I urge your strong
    support for the President's request for funding for fiscal year
    1998, beginning with State Department operations, where we are
    requesting roughly a 4-percent increase from this year's level.
        As members of this subcommittee know, although our workload
    in priority areas has increased, and overseas inflation has
    eroded our buying power, funding for our Embassies and
    consulates has been flat. We have done our best to manage this
    squeeze by streamlining operations, cutting jobs, postponing
    repairs, and closing overseas posts.
        We have also recognized that if we are going to work
    smaller, we have got to work smarter. To this end, we have
    reduced dramatically the time required for an American to
    obtain a passport.
        We have developed an improved model for overseas staffing.
    We are redesigning our worldwide logistics operations to
    provide materials and services faster, better, and cheaper.
        We're proposing a plan for the State Department to retain
    the fees we generate, and we have put in place a system to
    promote equitable sharing among Federal agencies of overseas
    costs.
        But sound management requires investment and modernization
    as well as efficiency. The small increase requested by the
    President this year will help us keep pace with inflation,
    modernize our technology, integrate environmental concerns, and
    make a small downpayment on repairs to our dilapidated
    facilities in China. Even so, we will not have the resources we
    need to improve many other substandard facilities.
        Mr. Chairman, as I have told State Department employees,
    helping to design and implement American foreign policy is not
    just another career choice. It's a service to America, as
    important and often as risky as service within our Armed
    Forces. It requires a commitment to American interests and
    ideals, and it needs to be done with excellence and spine.
        Let us not forget that we depend on our diplomats to
    negotiate the arms control agreements that keep us safe from
    the spread of nuclear weapons. We ask them to help open new
    markets, and assure fair treatment for American businesses.
        We rely on them to build relationships that enable us to
    protect our citizens from the scourge of drugs, the plague of
    crime, and the threat of terror. We expect them to see behind
    the claims of dictators and report the truths about human
    rights.
        We count on them to assist Americans who are injured, or
    otherwise need help overseas, and we require them to provide
    support to the other Federal agencies, from Defense to the FBI,
    that also promote American interests around the world.
        There is no more important part of my message to you today
    than that the people who do America's work abroad need and
    deserve the support of Congress--the representatives of our
    people here at home.
        And I also ask your support for the President's request for
    our participation in international organizations. In my
    previous capacity, Mr. Chairman, we had an opportunity last
    year to discuss the CIO account, which I hope you agree serves
    a wide range of American interests, and I will not take time to
    enumerate those now.
        The real policy question we face is not whether the United
    Nations and its agencies work for us--they do--but whether we
    can make them work better. And that is why we have repeatedly
    stressed the need for reform.
        On this subject, Mr. Chairman, I hope you will agree we've
    come a long way. We are far from satisfied, but I think that
    it's fair to say that there has been more United Nations'
    reform in the last 4 years than in the previous 40.
        During this period, the United Nation's new inspector
    general has shown growing independence in exposing inefficiency
    and waste. The United Nations has lived within a no-growth
    budget, and we believe it will continue to do so.
        U.N. staffing has declined. New peacekeeping operations are
    far less frequent and more successful. An informal moratorium
    on U.N. global conferences is being observed, and our reform
    mantra of consolidation, accountability, prioritization, and
    fiscal discipline is having an impact throughout the U.N.
    system.
        Now, this progress did not come easy. Our support for
    reform does not go down well with those whose priorities differ
    from our own. Moreover, our policy of paying assessments late,
    coupled with our arrears, has alienated both supporters and
    opponents of reform.
        Last year, we proposed a 5-year plan for paying arrears,
    with the understanding that the payments would be tied to
    specific reforms. I think in retrospect that that proposal was
    flawed. It didn't provide much leverage with U.N. members. And
    we did not come out a winner with Congress.
        The $50 million we received in arrears last year for U.N.
    peacekeeping, while welcome, was more than offset by an $85.6
    million shortfall in appropriations for the ``Contributions to
    international organizations'' account. Our goal is to get out
    of the hole, not dig it deeper still.
        That is why the President has proposed a plan this year
    that would fully clear our payable arrears, while maximizing
    prospects for achieving our other U.N. priorities.
        If this request is approved, we would have far greater
    leverage in negotiating the budgets of the international
    organizations to which we belong. And we would leave a far
    better chance of negotiating reductions in our share of these
    budgets and making further progress on reform.
        This is a win/win/win proposition. By paying our arrears,
    we would get America out of debt. By reducing future
    assessments, we would keep America out of debt. By providing
    incentives for reform, we would enable these organizations to
    do more with less.
        In the days ahead, I would like to work with you and your
    colleagues to implement the President's plan. Our continued
    leadership, within the international organizations, depends
    upon it, our principles require it, our interests demand it,
    and our budget allows it.
        Mr. Chairman, our request this year also includes funds to
    meet our current assessments to international organizations,
    and our anticipated requirements for U.N. peacekeeping.
        As we discussed before, I appreciate your desire to be
    consulted about prospective peacekeeping operations. We need
    your understanding and support so that operations will be
    effective, and so that we can pay our assessments.
        In that spirit, let me mention one possibility. Although
    progress has been made in Bosnia, we are faced now with the
    challenge of implementing the recent decision putting the city
    of Brcko under international supervision for 1 year. Police
    monitoring will be a key element, and we will be talking with
    you further about the likely expansion of the U.N. civilian
    police mission in Bosnia to handle this task.
        Mr. Chairman, I am optimistic, based on my earlier meetings
    with you, and the conversations I've had with many Senators,
    that we have a tremendous opportunity to work together. We may
    have differences on timing and tactics on some issues, but I
    see a widespread agreement on our central goals. We agree on
    the need to build a Europe, whole and free, and an Asia Pacific
    community. We agree on the need to create an ever expanding
    global economy. And we agree on the need to fight back hard
    against threats to our security and seize the opportunities for
    peace.
        And we agree, most of all, on the need for America to
    remain true to its principles, defending freedom, promoting
    human dignity, and keeping commitments.

                               prepared statement

        And so I am looking forward very much, Mr. Chairman, and
    members of the subcommittee, in working with you, not only to
    defend the principles of America now, but to lay the
    foundations for the next American century.
        I would be delighted to answer questions.
        [The statement follows:]
                  Prepared Statement of Madeleine K. Albright
        Mr. Chairman and members of the Subcommittee, it is a pleasure to
    appear before you for the first time in my new capacity. As Ambassador
    to the United Nations, I benefited greatly from our constructive
    dialogue in the past. I look forward now to continuing our relationship
    with the same candor and commitment--and to working with you on an even
    broader array of challenges facing our nation and the world.
        In his State of the Union address last month, the President said
    that ``to prepare America for the 21st Century, we must master the
    forces of change and keep American leadership strong and sure for an
    uncharted time.''
        Thanks to the President's personal engagement, the hard work of
    Secretary Christopher, and the bipartisan support of Members of
    Congress, we undertake this challenge with the wind at our backs.
    Today, our nation is respected and at peace. Our alliances are
    vigorous. Our economy is robust.
        And the ideals enshrined in the American Constitution more than 200
    years ago still inspire those who have won, and those who seek, a place
    in the constantly-expanding domain of freedom.
        All this is no accident. And its continuation is by no means
    inevitable. The preservation of peace, the growth of prosperity and the
    spread of democracy must be sustained as they were created--by American
    leadership.
        That imposes a responsibility upon all of us, for the accounts
    under the jurisdiction of this subcommittee provide many of the
    resources by which American interests are protected and American
    leadership is maintained.
        This matters because, in our era, we are all deeply affected by
    events overseas. Our workers and businesspeople compete in a global
    marketplace. Our citizens travel. Our students are measured against
    those from around the world. Our borders are vulnerable to illegal
    immigrants, drugs, pollution and disease. And our children will do
    better and be safer in a world where nations are working together to
    set high standards, contain conflict and enforce the rule of law.
        It was with these considerations in mind, Mr. Chairman, that I
    embarked last month on my first overseas trip as Secretary of State.
        In Europe, my discussions focused on preparations for the summit
    that President Clinton and the leaders of NATO will attend this July in
    Madrid. That summit will mark another milestone in the post-Cold War
    transformation of NATO by inviting a number of Europe's new democracies
    to begin talks about joining our alliance.
        Our goal is to help NATO do now for Europe's east what NATO did
    fifty years ago for Europe's west: to integrate new democracies,
    eliminate old hatreds, provide confidence in economic recovery, and
    deter conflict.
        As my visits to Rome, Bonn, Paris, London and NATO Headquarters in
    Brussels gave evidence, the alliance is united. NATO will continue its
    process of internal adaptation. We will accept new members, and keep
    open the door to future membership. We will operate in partnership with
    all of Europe's democracies. We will develop an enhanced relationship
    with Ukraine. We will strive to forge a long-term strategic partnership
    with Russia. And we will coordinate with other regional institutions,
    including a strengthened OSCE, the European Union, the Council of
    Europe and the Western European Union.
        In this way, we will ensure NATO's continued role as a mighty
    instrument for peace, stability and freedom throughout Europe.
        Such an outcome would serve the interests of every country--
    including Russia. In Moscow, I emphasized to Russian leaders that, just
    as they have created a new Russia, we have created a new NATO. The new
    NATO is not arrayed against any country; it is a force for democracy,
    and for integration. Russia's own security will be enhanced in a Europe
    without walls, with a transformed NATO as its partner.
        During my talks with President Yeltsin and Russian Foreign Minister
    Primakov, I was able to outline the concrete possibilities of such a
    partnership. I very much welcome President Yeltsin's subsequent
    statement that he will seek to make progress during his summit meetings
    with President Clinton in Helsinki later this month.
        The issue of NATO adaptation reminds us of the broader interests we
    share not only with our traditional allies in the west, but with a
    democratic Russia, Ukraine, the other New Independent States, the
    Baltics and the new democracies of Central Europe. The continued
    strengthening of democratic institutions and values throughout this
    region is vital to our future and must be a defining characteristic of
    our age.
        We should never forget that European divisions drew our people into
    two world wars and one Cold War this century. We have an obligation to
    ourselves and to our children to do all we can to sustain progress
    towards security cooperation, economic integration, political reform
    and victory over the forces of terrorism, corruption and crime.
        In Europe, the central question we face is whether we have learned
    the right lessons from history. To secure the future, old adversaries
    must become partners and old grievances must be settled peacefully.
        The same is true in Asia, where much depends on whether choices are
    based on past suspicion or current hope.
        The message I conveyed during my trip is that America will do its
    part to help those focused on building a secure and peaceful future for
    Asia and the Pacific.
        Accordingly, I reaffirmed our strong security relationships with
    our key allies--Japan and the Republic of Korea.
        In both Tokyo and Seoul, I emphasized the importance of proceeding
    with the Agreed Framework that has frozen--and will ultimately
    dismantle--North Korea's nuclear weapons program. I announced
    scheduling of the joint briefing held yesterday on the proposal for
    Four Party peace talks concerning the future of the Korean Peninsula.
    And I discussed our decision to join the Republic of Korea in
    contributing emergency food relief for the starving people of North
    Korea; a policy that reflects our values and our belief that food
    should not be used as a political weapon.
        Economic issues were also on the agenda in Japan and Korea. In both
    cases, my focus was on the implementation of agreements designed to
    assure fair access for American goods and services to local markets.
        During my meetings with Chinese leaders, we agreed that expert
    level discussions would be held later this month between our countries
    on a range of nonproliferation issues. I raised America's strong
    concerns about Chinese practices on internationally-recognized human
    rights, including the right to free expression of political and
    religious beliefs. I noted the progress that has been made on bilateral
    trade issues, including textiles and the enforcement of intellectual
    property rights, and pressed for greater market access for American
    goods.
        We also had an important discussion of Hong Kong, where the United
    States has substantial interests. I made it clear we expect China to
    ensure a smooth transition under the 1984 Joint Declaration with the
    United Kingdom and to assure Hong Kong's high degree of autonomy and
    way of life.
        Finally, we discussed Taiwan, where American policies have not
    changed.
        My visit, and China's willingness to receive me despite the death
    several days earlier of Deng Xiaoping, reflects a mutual determination
    to maintain our strategic dialogue. This dialogue is designed to
    identify and build on areas of cooperation, while seeking through
    candid discussion to narrow differences. By so doing, we hope to
    develop more extensive areas of common ground, thereby serving the
    interests of both our countries and the world.
        Although I was only in Asia for a few days, I was impressed by the
    depth of the commitment to strong and stable relations with the United
    States. This is a region characterized by dynamic economic expansion.
    But it is also a region threatened by potential turbulence. American
    engagement is an essential source of stability and, as such, is
    welcomed on all sides.
        Although our interests demand that we direct our attention
    frequently to Europe and Asia, we cannot--and are not--neglecting our
    friends elsewhere.
        In regard to the Arab-Israeli peace process, we are working closely
    with the Government of Israel, the Palestinians and others in the
    region to sustain the progress generated by the Hebron Agreement. The
    Israeli-Palestinian negotiating process is critical to the structure of
    peace we hope to build in the region, and we must keep it moving
    forward. We are encouraging the parties to take steps to build the
    confidence and trust so vital to sustaining this process.
        The recent visits of Prime Minister Netanyahu and Chairman Arafat,
    and the upcoming visits of President Mubarak and King Hussein, reflect
    the vital role that America plays in this effort. In that role, we will
    continue to back those who believe in peace, and continue to oppose
    vigorously those who seek to disrupt peace through violence or terror.
        Closer to home, we are proud to be among the community of
    democracies that has come to exist in our own hemisphere.
        Last week's visit of Chilean President Eduardo Frei was a reminder
    of the economic and political dynamism of our southern neighbors.
        The 1994 Summit of the Americas provides a valuable framework for
    progress towards durable democratic institutions, ensuring the rule of
    law and promoting higher standards of living through free trade and
    economic integration. The Administration will continue working with all
    of our democratic partners to implement this framework, and to build
    strong relationships based on shared interests and mutual respect.
        One example is our effort, together with Argentina and Brazil, to
    encourage a peaceful resolution of the border dispute between Peru and
    Ecuador.
        Another is our wide-ranging relationship with Mexico, with whom we
    share a 2,000 mile long border and a need to respond cooperatively to
    challenges that include trade, the environment, immigration, corruption
    and--most particularly--the war against illegal drugs.
        Last week, President Clinton certified Mexico's cooperation in that
    war, but with firm expectations of further progress. Along with
    Attorney General Reno and Director McCaffrey, I will be monitoring
    developments continuously. I recognize that there are those who
    disagree with the President's decision, but it was the right one.
    Corruption is deeply-rooted in Mexico and has undermined the anti-
    narcotics effort. But President Zedillo is aware of this and is
    fighting back. Our focus now must be not on unproductive efforts to
    allocate blame, but on strategies to overcome problems. In this effort,
    we will be pleased to consult with Congress, and we welcome
    Congressional support.
        Mr. Chairman, Africa, too, is a continent of importance to the
    United States. Throughout the region, there are examples of nations
    taking the right steps to enlarge private enterprise, invest in
    education, expand opportunities for women and solidify democracy.
        Despite daunting problems, the overall economic outlook in Africa
    is improving. And progress has been made in resolving ethnic and civil
    strife. The U.N. peacekeeping mission in Mozambique succeeded, and the
    mission in Angola remains on the right track. Fighting has subsided in
    Liberia. In Zaire, we are deeply engaged, with regional leaders and the
    U.N., in efforts to find a political solution to the current conflict
    and thereby prevent further humanitarian disaster.
        In South Asia, we have a strong interest in encouraging cordial and
    peaceful relations between India and Pakistan, two long time friends of
    the United States. This is the fiftieth anniversary year of
    independence for both countries, and we would like to do what we can in
    cooperation with both to reduce tensions, curb the regional arms race
    and prevent nuclear proliferation.
        The United States has important economic, security, political and
    humanitarian interests on every continent. We need to stay engaged. And
    if we are to have the resources required to do that, we will need the
    help of this Subcommittee.
        Over the past few weeks, as I visited U.S. missions abroad, I could
    see first hand the connections that exist between the resources we
    provide here in Washington, and what our diplomats are able to do for
    America overseas.
        For example, Embassy Moscow is charged with reporting on the
    complex evolution of a nation whose democratic development is critical
    to our future. Embassy Seoul has played a vital role in de-fusing
    tensions on the Korean Peninsula, while also processing more visa
    requests than any other mission. Embassy Tokyo manages one of our
    warmest relationships, but also helps to level the economic playing
    field for American companies. Our diplomatic team in Brussels is on the
    front lines of the construction of a new Europe.
        And our mission in Beijing, cramped and handicapped by grossly
    substandard facilities, is striving to defend our interests, report on
    developments, and carry out a range of vital diplomatic functions in a
    nation of 1.2 billion people.
        Mr. Chairman, I said in my confirmation hearing that America
    requires not only a first-class military, which we have, but also
    first-class diplomacy--which is threatened by the steady erosion of our
    international affairs accounts.
        The goals I have outlined today of a more stable world, in which
    America's interests are protected, cannot be achieved without diplomacy
    that is flexible in responding to crises, firm in pursuing our
    strategic priorities, and vigilant in protecting our security. If we
    want our actions to be felt globally, we must have a global presence,
    global reach, and global expertise.
        Accordingly, I am here to ask your support for the President's
    requests for funding for fiscal year 1998 for the accounts that are
    under your jurisdiction, beginning with State Department Operations.
                   tools to maintain our diplomatic readiness
        Here, our overall request is $2.175 billion, roughly a four percent
    increase from the 1997 level.
        As Members of this Subcommittee know, funds have been very tight in
    recent years. Although our workload in priority areas, and in the
    processing of passports and visas has increased, funding for our
    embassies and consulates has been flat during the past five years--and
    our buying power has been eroded by years of overseas inflation and
    exchange rate fluctuations.
        We have done our best to manage this squeeze by streamlining
    operations, cutting almost 2,500 positions, postponing needed repairs
    and closing more than 30 overseas posts.
        We have also recognized that, if we are going to work smaller, we
    have got to work smarter.
        To this end, we have reduced dramatically the time required for an
    American to obtain a passport.
        We have developed an overseas staffing model that relates personnel
    requirements to workload and our foreign policy priorities.
        We have made travel advisories and other consular information
    available over the Internet.
        We are redesigning our worldwide logistics operations to provide
    materials and services faster, better and cheaper.
        We have significantly enhanced our information management
    capabilities.
        We will actively pursue our part in a government-wide proposal for
    the retention of fees.
        And we have put in place a system to provide incentives for more
    efficient operations and promote equitable sharing among federal
    agencies of overseas costs.
        But sound management requires investment and modernization, as well
    as efficiency.
        The small increase requested by the President this year will help
    us keep pace with inflation, modernize our information technology,
    integrate environmental concerns into the mainstream of our foreign
    policy and make a small downpayment on repairs to our dilapidated
    facilities in China.
        Even so, we will not have the resources we need to improve other
    substandard facilities. The General Accounting Office has identified
    more than $260 million in deferred maintenance.
        Mr. Chairman, as I have told State Department employees, helping to
    design and implement American foreign policy is not just another career
    choice. It is a service to America as important and often as risky as
    service within our armed forces. It requires a commitment to American
    interests and ideals. And it needs to be done with excellence and
    spine.
        Let us not forget that we depend on our diplomats to negotiate and
    verify the agreements that keep us safe from the spread of nuclear
    weapons.
        We rely on them to maintain day-to-day support for the peacemakers
    over the bombthrowers in strategic areas of the world.
        We turn to them to build relationships with other nations that will
    enable us to protect our citizens from the scourge of drugs, the plague
    of crime and the threat of terror.
        We ask them to help open new markets and assure fair treatment for
    American goods and services in a fiercely competitive global
    marketplace, thereby creating good new jobs for our people here at
    home.
        We expect them to look behind the claims of dictators and despots
    and to report the truth about abuses of civil liberties and violations
    of human rights.
        We count on them to help Americans who are hurt, or fall seriously
    ill, or who are otherwise in need of a friendly voice in faraway lands.
        And we require them to provide support to other federal agencies,
    from Defense to Agriculture to Commerce to the FBI, that are also
    involved in promoting American interests around the world.
        So there is no more important a part of my message to you today
    than that the people who do America's work abroad need and deserve the
    support of Congress--the representatives of our people here at home.
            tools for leadership through international organizations
        I also ask your support for the President's request for
    Contributions to International Organizations, an account that also
    serves a wide range of American interests.
        For example, the U.N. Security Council is helping to ensure that
    Saddam Hussein never again threatens Iraq's neighbors whether
    conventionally or through weapons of mass destruction.
        U.N. peacekeeping has helped end wars and build democracy in
    countries as diverse as Namibia, El Salvador, Cambodia and Mozambique.
        U.N. mediation brought a halt to the decades-old civil war in
    Guatemala.
        The U.N. War Crimes Tribunals are striving to hold accountable the
    perpetrators of ethnic cleansing and mass rape.
        The International Atomic Energy Agency helps to ensure that nuclear
    weapons do not fall into the wrong hands.
        The World Health Organization helps to protect Americans from the
    spread of infectious disease.
        The Food and Agriculture Organization sets quality and safety
    standards that are essential to protect American consumers and that
    serve the interests of our multi-billion dollar food industry.
        The International Labor Organization promotes respect for human
    rights in the workplace, and minimizes unfair international competition
    from firms and countries that do not observe core labor standards.
        Other U.N.-related agencies help to keep air travel safe,
    facilitate international communications, and provide early warning of
    hurricanes. In our daily lives, we take these services for granted. As
    public officials, we cannot.
        The question for us is not whether the U.N. and its many agencies
    work for us, but whether we can make them work better. That is why we
    have repeatedly stressed, here on Capitol Hill, at the State Department
    and the White House, the importance of reform.
        Mr. Chairman, on this subject, we have come a long way. We are far
    from satisfied, but I think it is fair to say that there has been more
    reform at the U.N. during the past four years than in the previous
    forty.
        In 1993, the U.N. had no Inspector General and no cap on a steadily
    increasing budget paying for a gradually increasing staff. U.N.
    peacekeeping operations were expanding rapidly without adequate
    discipline or financial controls. A series of expensive global mega-
    conferences had been scheduled. And both leadership and membership
    within many international organizations had become complacent.
        Since then, much has changed. Despite limited resources, the
    Inspector General has demonstrated independence and determination in
    exposing inefficiency and waste. The U.N. has lived within a no-growth
    budget, and we believe it will continue to do so. U.N. staffing has
    declined significantly. New peacekeeping operations are far less
    frequent, better planned and more successful. An informal moratorium on
    U.N. global conferences is being observed. And our reform mantra of
    consolidation, accountability, prioritization and fiscal discipline has
    been echoed by a number of member states, including the G-7/P-8 and the
    European Union, supported by a promising new Secretary General and is
    having an impact throughout the U.N. system.
        This progress did not come easy. Our position on the U.N. budget
    for the past year, for example, has been to support more money for the
    Inspector General and more for priority peace initiatives in Central
    America, while calling for dramatic reductions elsewhere. This did not
    go down well with those whose priorities differ from our own. Moreover,
    our policy of paying our U.N. assessments late, coupled with the
    accumulation of substantial arrears, has alienated both supporters and
    opponents of reform.
        Last year, we proposed a five year plan for paying arrears, with
    the understanding that the payments would be tied to specific reforms.
    I think in retrospect that proposal was flawed. It did not provide much
    leverage with U.N. members. And we did not do very well with Congress.
    The $50 million we received in arrears for U.N. peacekeeping, while
    welcome, was more than offset by an $85.6 million shortfall in
    appropriations for fiscal year 1997 assessments in the overall CIO
    account. Clearly, if we are going to make progress, rather than lose
    ground, we need a different approach.
        The President's proposal for arrears payments in this year's
    request is for $100 million in fiscal year 1998 funds, and a $921
    million advance appropriation--that would fully clear our payable
    arrears--and would be made available in fiscal year 1999.
        If this request is approved, we would have far greater leverage in
    negotiating the budgets of the international organizations to which we
    belong. And we would have a far better chance of success than we do now
    in negotiating reductions in our share of these budgets and in gaining
    approval for proposals on reform.
        The result would be to reduce the future costs to the United States
    of participating in these organizations. By paying our arrears, we
    would get America out of debt. By reducing future assessments, we would
    keep America out of debt. By providing incentives for reform, we would
    enable these organizations to do more with less. This is a ``win-win-
    win'' proposition. The organizations would operate more efficiently, on
    a sounder fiscal footing. American leadership would be maintained. And
    long term costs to our taxpayers would go down.
        In the days ahead, I want to work with this subcommittee and others
    in Congress to find a way to implement the President's plan. Our
    continued leadership within other international organizations depends
    upon it. Our principles require it. Our interests demand it. And our
    budget allows it.
        The alternative is a climate in which our influence goes down as
    our arrears grow even higher, and our debts are used as an excuse to
    delay reform. Timing is important, because 1997 is the year when
    budgets for the next biennium are approved, and when the U.N. scale of
    assessments may be revised. If we squander the opportunity now, we will
    live with that mistake for at least two more years.
        One additional point. Negotiating a reduction in our share of U.N.
    costs is not a simple matter. We make the argument, which I believe is
    valid, that the U.N. would be better off if it were not as dependent on
    the United States for funding. We can make the case that the overall
    contribution that America makes to international security and peace far
    exceeds that of any other nation, and should be taken into account.
        Nevertheless, it is also true that Europeans currently pay a larger
    amount per capita to the U.N. than we do. If contributions to the U.N.
    were based solely on percentage share of world income, our share of
    U.N. costs would go up, not down. I believe we can win this argument,
    nevertheless, if we have the leverage that arrears repayment would
    provide. Without that leverage, quite frankly, we do not have a chance.
        Our request this year also includes $969 million for our scheduled
    payments to international organizations. Our request for contributions
    for international peacekeeping activities, at $240 million, includes
    full funding for U.S. assessed contributions to critical U.N.
    operations along the Iraq-Kuwaiti border, on the Golan Heights, and in
    Angola, to name just a few.
        Because the United States has unique capabilities and unmatched
    power, it is natural that others turn to us in time of emergency. We
    have an unlimited number of opportunities to act. But we do not have
    unlimited resources, nor unlimited responsibilities. If we are to
    protect our own interests and maintain our credibility, we have to
    weigh our commitments carefully, and be selective and disciplined in
    what we agree to do.
        Recognizing this, we have good reason to strengthen other
    instruments for responding to conflicts, particularly the United
    Nations.
        We know from history and our own experience that small wars can
    grow into big ones; that unrest provides targets of opportunity for
    aggressors, criminals and terrorists; and that unresolved conflicts can
    spark the migration of millions, draining the world's economic and
    humanitarian resources. U.N. peacekeeping is not the answer in all
    cases, but well-designed U.N. operations allow us to share the risks
    and costs of peacekeeping with others. They make it less likely that
    American military forces will face danger overseas. And they afford a
    valuable alternative when other options are either unacceptable, more
    expensive or less likely to succeed.
        As we have discussed before, I appreciate your desire to be
    consulted about prospective peacekeeping operations. In fact, we
    incorporated Congressional language on advance notification of new or
    expanded peacekeeping missions in our fiscal year 1998 budget request.
    We need your understanding and support so that operations will be
    effective and so that we can pay our assessments. In that spirit, let
    me mention a couple of situations where new developments are possible.
        Although progress has been made in Bosnia, we now face a critical
    need to implement the recent decision putting the strategic city of
    Brcko under international supervision for one year. Police monitoring
    will be a key element, and we expect to be talking with you soon about
    a proposed expansion of the U.N. civilian police mission in Bosnia to
    handle that task.
        On the other hand, the situation in Africa has become less clear.
    An early mission to Sierra Leone now seems less likely. We have and
    will continue to consult closely with you on this.
                                 usia and acda
        Let me also say a few words about the USIA and ACDA budgets covered
    by your subcommittee.
        As you know, USIA has undergone rigorous downsizing--cutting staff
    by 29 percent and its budget by 33 percent in constant dollars over the
    last four years. The consolidation of the Voice of America and Radio
    Free Europe/Radio Liberty has produced a 25 percent drop in its budget
    requirements since 1994.
        USIA's programs continue to play a critical role in our diplomacy--
    whether beaming news to China and Cuba, providing frequencies for
    threatened independent radio stations in Serbia, or sending American
    students, teachers and professionals on exchange programs. After four
    years of cuts, we are requesting a small increase, to $1.078 billion,
    covering improvements in broadcasting, exchange programs, and
    technology. This will allow USIA to be a streamlined but strong partner
    in our public diplomacy.
        Let me also mention here the National Endowment for Democracy,
    which receives funding from USIA for its important role in supporting
    democracy and free elections around the world.
        The Arms Control and Disarmament Agency has also faced four years
    of declining budgets. But its monitoring and implementation
    responsibilities have increased, in no small part due to its own
    success in helping us to gain extension of the Nuclear Nonproliferation
    Treaty and negotiating the Comprehensive Test Ban Treaty and the
    Chemical Weapons Convention.
        We can scarcely afford not to follow up on our successes with
    vigilance, even as we pursue U.S. interests such as a ban on
    antipersonnel land mines and a fissile materials cut-off agreement.
    ACDA has requested $46.2 million for its operations. This is an
    increase of $558,000--less than half the rate of inflation--to make
    sure that our objectives are met.
                                   conclusion
        Mr. Chairman, in the coming months and years, the President and I
    will be working closely with you and the members of this Subcommittee.
    Fortunately, the foundations of a bipartisan foreign policy are already
    strong.
        I think it is fair to say that we agree on the need to build a
    Europe that is whole and free, and an Asia-Pacific community based on
    shared interests and a common commitment to peace.
        We agree on the need to engage with Russia and China at a time of
    uncertain transition in both these great nations.
        We agree on the need to create an ever-expanding global economy in
    which American genius and productivity receive their due.
        We agree on the need to fight back hard against terrorism, illegal
    drugs and the spread of nuclear weapons--and to seize opportunities for
    peace.
        We agree that freedom is a parent to peace and prosperity and that
    our leadership is essential to preserve and extend it.
        And if we agree on a principled and purposeful American role in the
    world, then surely, we must agree on the need to provide the resources
    required to sustain it.
        Like military readiness, Mr. Chairman, our diplomatic readiness
    depends upon having the right people in the right places with the right
    support.
        That is why we need the funds to maintain diplomatic representation
    in almost all the nations of the world.
        That is why we need funds to train our diplomatic personnel.
        That is why we need up-to-date communications equipment and
    information technology.
        That is why we need to maintain facilities in which our staff can
    live and work safely and productively.
        And that is why we need to maintain our influence in institutions
    such as the United Nations--by meeting our commitments and paying what
    we owe.
        Mr. Chairman, members of the subcommittee, as we near the end of
    this century, we share a great responsibility: to maintain America's
    influence, power and prestige around the world. And by so doing, to lay
    the foundation for the next American century.
        Towards that end, I pledge my own best efforts, and solicit your
    wise counsel and support.
        Thank you very much.

           certification of Mexico as cooperating in Drug enforcement

        Senator Gregg. Thank you, Madam Secretary, and I appreciate
    that concise statement which covered a broad range of issues. I
    know a lot of people have questions, so I think in order to
    move the process along, we will limit the first round of
    questions to 7 minutes. The present order is myself, Senator
    Hollings, Senator Campbell--this is the order of arrival--
    Senator Domenici, Senator Mikulski, Senator Lautenberg, and
    Senator Bumpers.
        You have outlined a variety of areas. Let me first say, as
    a premise, that this committee has traditionally been a strong
    supporter of the State Department, its goals and its purposes,
    and that I expect us to continue to be a strong supporter.
        We are very interested in making sure the State Department
    personnel and their families have the support that they deserve
    for doing the job which is very important to the United States,
    both in the area of technical support and in the area of
    security. That is something that we, as a committee, will
    address, and we will address aggressively.
        There are, obviously, a lot of public policy issues, and
    you will be getting into a variety of them. But let me start
    with one that I am concerned about, which is more a topical
    issue of the time, and that is this issue--and I sent you a
    letter on it--relative to Mexico.
        Mexico is delivering to the United States 70 percent of the
    drugs that come into our country. We have seen Mexico's drug
    czar be compromised, the potential compromise of a number of
    our Drug Enforcement Agency [DEA] agents, and their informants.
        We know that there are two families in Mexico who are
    basically operating most of the major drug cartels in the
    United States, and who have replaced much of what was coming
    out of Colombia. And we know that, unfortunately, there is
    significant corruption within the police who are responsible
    for policing drugs along the border. I know from discussions
    with Senator Domenici that many of our border ranchers are
    living in fear of the threat that individuals coming across the
    border from Mexico, who are not being apprehended and who are
    threatening not only the assets of these ranches but actual
    lives of people living on these ranches.
        In this context, my question to you is, how do you expect
    certification to assist the process? We went through this once
    before, I believe, and clearly things have gone downhill. Why
    do we expect now that certification is going to improve the
    situation, and what would have been the effects of not
    certifying, in your opinion?
        Secretary Albright. Mr. Chairman, thank you very much for
    asking that question, because I think it is one that is on
    everybody's minds at the moment. First of all, let me just
    quickly say that things have not gone downhill. I think, in
    fact, despite all the problems, that there has been a lot of
    evidence that cooperation is at unprecedented levels. That is
    not to say that this has been an easy decision for my
    recommendation to the President, or for the President to make
    his decision to certify.
        But there is no doubt in our minds that President Zedillo
    understands that the drug issue, and the relationship that it
    creates between us and Mexico, poses major problems. The drug
    issue to Mexico itself is viewed as a major national security
    problem for them, as it is for us. And they have, in fact, done
    quite a lot in the last few years in order to improve the
    situation. There have been increased drug seizures, for
    instance, of heroin, by 78 percent, marijuana, by 30 percent,
    and arrests have been up more than 20 percent.
        They have eradicated record levels of illegal drug crops.
    They have doubled the discoveries of clandestine laboratories.
    They have improved on their extraditions. They have improved
    cooperation in domestic enforcement against money laundering.
    They have enacted laws authorizing asset forfeiture, and
    against money laundering. They have restricted precursor
    chemicals. They have done a great deal.
        But they also understand the magnitude of what they still
    have to do. In conversations with President Zedillo, or with
    the foreign minister, they know that they have a huge problem
    on their hands, and President Zedillo is revamping their entire
    legal system and their police system. And so they are working
    the problem, and understand how serious it is. They do,
    obviously, point to our demand issue, also, which is something
    that we all know that we have to work on.
        President Clinton believes, as do I, that had we not
    certified, we would have undermined this unprecedented level of
    cooperation. It is not a clean record here. We know that. And
    the President has asked the Attorney General, Director
    McCaffrey, and me to continue monitoring developments, and
    reporting to him.
        And we believe the level of cooperation is much better
    because we are working with them, rather than having kind of a
    blame placing activity.
        We also have to remember the following thing, that we have
    a 2,000-mile border with Mexico. We have important relations
    that are not drug related. We have questions related to
    immigration. We have issues of trade of importance to business
    people. In sum, we have a whole set of issues.
        So we hope you all understand that this was a difficult
    decision for the administration, but one that we believe to be
    right. It's important to have this increased cooperation with
    Mexico.
        Senator Gregg. I can appreciate that, looking at it from
    your side of the table. But looking at it from our side of the
    table, when we hear people like Tom Constantine, head of DEA,
    say that his agents do not have anybody in Mexico that they can
    trust to do business with, it leads one to conclude that the
    problems are so acute that certification should have been in
    serious doubt.
        I appreciate the comprehensiveness of your response.
    Senator Hollings?
        Senator Hollings. Immediately on that, let me say
    something, because I had the pleasure of meeting with the
    Secretary, and I asked who was going to succeed Pat Kennedy who
    had moved in temporarily for Dick Moose, the Under Secretary
    for Management. I know that Pat is the Assistant Secretary
    permanently for administration. I thought he'd go back to that
    post.
        Somebody interpreted my comment as something against Pat
    Kennedy. I'm 100 percent for Pat Kennedy. Rich Greene, your
    State Department chief financial officer--we worked with him
    for years. He's outstanding. But I still want to know who's
    going to replace old Moose, because we got a lot of good things
    done.
        But I did talk with the Secretary and, with respect to
    Mexico, I indicated to her just exactly what the facts were. I
    wasn't going to join in the Feinstein resolution, because
    there's an old adage in the artillery, no matter how well the
    gun is aimed, if the recoil is going to kill the gun crew, you
    don't fire it.
        I said, wait a minute, before I go on this resolution, what
    is my solution to the thing? I didn't come this afternoon and
    say I've got a particular solution, but I've certainly got a
    different approach.
        I've been listening again for the past 72 hours, since I
    had the chance to confer with you, Madam Secretary. And I
    qualify as a witness. This has been--Mexico--a case study
    operation, for me, for numerous years now.
        For example, right to the heart of it, your answer--I can
    just get a copy of Warren Christopher's answer--almost the
    same. I don't say that in a critical fashion, but Secretary
    after Secretary have come and said so.
        In the NAFTA operation, it was quite apparent that, as Pat
    Moynihan said, how can you have free trade when we can't have a
    free election. And they didn't have any labor rights, they
    didn't have a free market, they did not have a revered
    judiciary. Their law enforcement was under serious question.
    Assassinations were going on down there at the particular time.
        And we looked at Europe, and they had used the Common
    Market approach, and I wrote an article to the effect that we
    ought to try it. Later we questioned the $12 billion, and I
    said it's time we ought to have it as a Marshall plan, where we
    had steps of improvement, of freedom, of free markets, clean up
    the judiciary and otherwise, government.
        Now I come to this certification tool, and it looked to me
    at first blush, that's the sort of inappropriate tool at an
    inappropriate time, and now I believe otherwise. I believe
    you're going to have to cause a crisis down there, for the
    simple reason that what Chairman Gregg has expressed concern
    about, the truth of it is that it's not improvement.
        We've gone downhill since 1993, in the last 3 years.
    Mexico's got far less apprehensions or arrests with respect to
    drugs. There's not a single--you talk about extradition--not a
    single extradition with respect to drugs. We know now that in
    Los Angeles, the entire drug thing is supported by one drug
    cartel, a boss down there in Mexico.
        And the gangs coming up into Mexico, and that movement is
    beginning to get on the increase here in the United States,
    whereby the price of drugs is going down, of course. It's $200.
    But it's $2,000 in Oklahoma City, and these gang movements,
    supported by drugs and the serious crime in the country, all
    being drug related.
        I'm beginning to feel very--I haven't decided yet, but I'm
    about--and that's why I want to be candid with you--that the
    only thing that we can do is cause a crisis. I listened to your
    testimony, and you say cut off any chance--no, undermine the
    level of cooperation.
        And General McCaffrey just a little while ago said cut off
    any chance to work with our friends in Mexico. Incidentally,
    that's not a secure briefing. I didn't attend that. I've
    learned not to go to these secret briefings, because it's
    leaked immediately and then I'm questioned about the leaks. So
    I don't have to get questioned about them in Washington.
        But we have the same thing, the same thing, and I believe
    you folks have got plenty of things to do, and unwantonly you
    come on, the Attorney General comes on, and another--Secretary
    of the Treasury, and everything else--trying to bolster Mexico.
        As they say, the economic situation, you've let the drug
    thing take over. And in a line when General McCaffrey says we
    would cut off any chance to work with our friends--well, we've
    got the wrong friends. We've got the wrong friends.
        Here's exactly what the Dallas News says. Intelligence on
    corruption--this is this morning's--especially by drug
    traffickers has always been there, said Phil Jordan, who headed
    DEA's Dallas office from 1984 to 1994.
        But, quote, ``we were under instructions not to say
    anything negative about Mexico. It was a no-no, since NAFTA was
    a hot political football.''
        And what we are really doing is doing our best--I don't
    doubt your sincerity--but you've been up in New York. And I can
    tell you here and now, everybody comes and sincerely believes,
    and a quick look at it, and what have you to keep the economic
    thing together, we've let the drug thing just gobble us up.
        And the only way I know to get the right friends down there
    is to get rid of that PRI, and I hope maybe now that we can
    vote for certification, the wrong tool, that it will cause a
    crisis, and maybe the right friends will begin to emanate.
        Secretary Albright. Senator, if I might, I think that if
    there were a crisis there, it would harm us deeply.
        Senator Hollings. Temporarily. But this is continued harm
    that we've been suffering here.
        Secretary Albright. I think, honestly, that if one looks at
    this in terms of one's own neighborhood, which is what this is,
    if you have somebody living in a house next door to you that
    has very serious problems, and you help create a fire in that
    house, it creates problems in your own backyard.
        And I think that we have to make very clear our message,
    which we have, and keep pursuing this. This is a very serious
    problem. Nobody is saying it's not serious. And I think that
    the issue here is that it is not the only issue we have with
    the Mexicans. They are right there, by us, with many, many
    problems that we need to deal with.
        Senator Hollings. But I'm saying they have already caused a
    fire in our own backyard. And, in fact, they say one of our
    mayors--our mayors--on the border is under the cartel pay, and
    otherwise.
        So we could get into it, but there you go.
        Secretary Albright. It's a tough decision.
        Senator Hollings. I'm almost like Bob Dole: Been there,
    done that on this one. Even though I have misgivings about it,
    whether it's the right thing to do, Mr. Chairman. Thank you.
        Senator Gregg. I appreciate that. Senator Campbell.

                              International crime

        Senator Campbell. Thank you, Mr. Chairman. As long as we're
    focusing a little on international crime, I guess that's one of
    the few downsides of countries turning to democracy. The crime
    rate often seems to go up after they become democratic nations.
    And certainly we've seen that in Russia.
        I wanted to ask a couple of specific questions, but I did
    want to say that some of this international crime certainly
    touches in our own home States. I note of interest in my notes,
    one of the most notorious Russian mobsters has a Colorado
    driver's license, and an address right outside of Denver,
    according to FBI and Interpol.
        I know that some of these international criminals have
    tentacles clear across the United States. One George Hugo Reyes
    Torres, the leader of the largest drug trafficking organization
    in Ecuador, apparently has smuggled tons of cocaine just into
    our State alone.
        And so we've been dealing with a number of broader issues,
    and I know I have limited time, but I would like to ask you one
    specific question, and that is it was my understanding that
    Mexico has denied our agents the ability to carry arms in
    Mexico when they're down there. Is that true? And if so, what
    are we doing to try to make sure that those agents are
    protected?
        Secretary Albright. Well, this, Senator, is one of the
    issues that we are dealing with to try to get them to allow our
    agents to act have that kind of protection.
        But if I might return to something that you said about
    international crime, we clearly are facing a new set of
    threats. There is no question about that. They are created--I
    don't know if I would agree with you, that they are created by
    democracy, because totalitarianism creates a set of different
    threats.
        But I think the issue here----
        Senator Campbell. Different system of justice.
        Secretary Albright. Well, it is. But the issue that I think
    we need to focus on is that we need different systems of
    international cooperation in order to be able to deal with what
    are now these transnational threats, that we never had before.
        And that is why, I think, we need to have different kinds
    of relationships with countries, international organizations,
    ways of using our diplomacy to deal with what is a whole new
    set of issues. And international crime is clearly one of them,
    and a very high priority for this administration.
        Senator Campbell. There now is an interdepartment working
    group, isn't there, that the State Department is involved with,
    with the DEA and a number of other groups?
        Secretary Albright. Yes.
        Senator Campbell. Where you are supposed to try to
    coordinate some activities?
        Secretary Albright. We are trying to do all of that, and
    then also with other countries. But it's a new situation. We
    face new kinds of problems.

                 Russian disquiet with the enlargement of NATO

        Senator Campbell. Let me change topics, since I have
    limited time, Mr. Chairman, and move away from crime a little
    bit. For the last 4 or 5 years, several times, I have gone on a
    trip with other Senators and Congressmen to the North Atlantic
    Assembly, which is a parliamentary organization affiliated with
    NATO. And I noted with interest that the Russians have had a
    delegation there during the last few years as observers. And
    they are clearly very interested in increased trade and
    economic help from the West and so on.
        But when you talk about any kind of mutual security, they
    seem to get very, very wary. And I was interested in your
    statement about your recent trip to Russia. But yesterday, as I
    understood President Yeltsin's comments that were relayed on
    the news, he seems to be absolutely opposed to any eastward
    expansion of NATO.
        Would you comment on that?
        Secretary Albright. Yes; this is obviously the issue that
    we are going to be dealing with in the next months and onward.
    The Russians are not happy with the enlargement of NATO. That
    is true. They understand, however, that we are going forward
    with it.
        They will make negative comments about it. They did to me,
    and President Yeltsin did in his state of the federation
    message.
        But what is of overriding importance to them is that they
    have a good relationship with the United States. We had that
    discussion. President Yeltsin is looking forward to his meeting
    with President Clinton in Helsinki. There have been very
    important meetings of Vice President Gore with Prime Minister
    Chernomyrdin, and a whole set of issues which would indicate
    that the importance of United States-Russian relations
    overrides all that.
        To help deal with their disquiet about the enlargement of
    NATO we are working the Russians and NATO on a NATO-Russian
    charter, which would allow the Russians to do some of the
    things that you were talking about in the North Atlantic
    Assembly. The charter would allow them to have a voice, but not
    a veto, over actions within Europe itself, so that they feel a
    part of an economic and political system.
        I think the issue here is that we need to see a new Russia,
    and they need to see a new NATO. But I am not going to tell you
    that they think an enlargement of NATO is terrific for them.
    But they are seeking other relationships with NATO and with us
    that would minimize their disquiet with the enlargement of
    NATO, and that is what we're working on with them.
        Senator Campbell. Thank you. I see my time is already
    running out, but I just wanted to commend you on your efforts,
    since it is a huge task, and I wish you well.
        Secretary Albright. Thank you.
        Senator Gregg. Thank you, Senator. Senator Domenici.

                  evidence to support certification of Mexico

        Senator Domenici. Mr. Chairman, Madam Secretary, even
    though I opposed certification, I totally disagree with Senator
    Hollings. I don't believe now is the time to create a major
    crisis with Mexico, as that pertains to trying to maintain the
    stability of President Zedillo.
        I think we ought to do just the opposite, and try to
    maintain that. So I want you to carry back to the
    administration that if we can get some evidence that Mexico is
    going to do something--something as simple as extraditing some
    of the felons that are already indicted--that those of us who
    are not in favor of certification might very well support the
    President, if we can get some action that takes place.
        Now, I say this fully aware that Mexico has a terrible
    problem, that already they may have such a pervasive negative
    effect on their society from this illegal drug money that they
    may not be able to fix things.
        But I don't think we ought to be party to saying that we
    want to bring down Zedillo, or cause that kind of radical
    change to occur in Mexico, because nothing will get fixed, and
    America will have a bigger mess on its border than it has
    today.

                                U.N. arrearages

        Now, having said that, let me suggest a couple of things.
    I'm changing the subject to the United Nations and Bosnia. We
    have spoken about this. I think when so much is made of America
    being in arrears in its U.N. fees--and we are--that perhaps
    those in the administration who are saying let's pay up ought
    to remind everyone in the world that we're doing far more than
    our share of the kind of work that the United Nations ought to
    be doing.
        I am reminded that we had a briefing on how much we are
    spending in Bosnia--and that's not a U.N. effort, but let me
    make my point. It is estimated by the Secretary of Defense that
    on defense matters only, by the end of this year we will have
    spent $6.5 billion in Bosnia, and that we will probably, on the
    civilian side, spend $1.1 billion.
        Now, I only make that point because those in the United
    Nations that complain so bitterly about us failing to make our
    dues current, we ought to remind them who would take care of
    this Bosnia problem, which is more a U.N. problem than just an
    American problem. The ratio of money there is overly on the
    side of America, because we have most of the troops, most of
    the equipment, most of the advanced technology there.
        So I just raise that point with you.

                        State Department budget request

        My last observation has to do with your budget. Frankly,
    there are some who would have thought that with a new
    Secretary, and the way things were, that you would ask for
    bigger increases than you asked for--although I would remind
    everyone that overall, all the functions of foreign affairs,
    the request is for a 7.6-percent increase.
        Now, much of that is a big increase for the U.N. arrearage,
    and some things like aid to Russia, which maybe people will
    support, a brandnew initiative for about $300 million or so.
        Some of us want to help you improve the State Department
    and its functionaries overseas, and the things it does. The
    only thing I raise is that it may be hard for any function of
    Government to get a 7.6-percent increase in a discretionary
    account.
        I stop there, and perhaps you could comment on what I have
    said. It was a pleasure meeting with you yesterday.
        Senator Gregg. So said by the chairman of the Budget
    Committee.

                                Mexican progress

        Secretary Albright. Thank you very much, Chairman Domenici.
    I think we did have a real good meeting yesterday, and went
    over a lot of these issues. But let me just say, on the Mexican
    issue, exactly the kinds of points that you're raising are the
    kinds that the President has asked the Attorney General and
    Director McCaffrey and me to keep reviewing, as to what their
    arrest and extradition record is going to be, how they're
    dealing with the corruption, the money laundering.
        Those are the kinds of issues that we are going to be
    focusing on.

                                U.N. arrearages

        On the question of the money, let me say that these are
    arguments that I have made in the United Nations when I was
    there. The thing that I am often reminded of is that other
    countries also do contribute in ways beyond their U.N. dues,
    and help take care of world responsibilities where they are
    active.
        One of the reasons why we would like to have a forward
    appropriation is because there is going to be a renegotiation
    of our assessment rate at the United Nations.
        We believe that we are paying too much, and I think that
    one of the difficulties--and I think you, as politicians,
    understand this even better than I--is that it is hard to
    negotiate if you don't have leverage.
        And in New York, every time I'd go into negotiations I'd
    say I want this and this and this as reform measures, and they
    would say fine, but you have created an artificial financial
    crisis here, and where is your money.
        And even our best friends, the British, came up with a
    sound bite they've waited 200 years to say, which is
    ``representation without taxation.''
        So the issue here is that it's important for us to have the
    bona fides and up front negotiating leverage in order to lower
    our assessment, because I agree with you.

                        State Department budget request

        On the issue of our budget, let me say that for us what has
    been so difficult is that there has been a decline in the State
    Department budget, and a decline in our purchasing power,
    because the budget has been flat or decreasing. We are trying
    to reverse that trend. Your help will be very important to us.
        We are also trying very hard to do our share for a balanced
    budget. And, finally, we have put into place a lot of
    management changes, whereby we think we can do more with the
    money.
        So we are very grateful--and I'm grateful to be among
    friends here who are saying ask for more.
        Senator Domenici. I'm not sure we said that. [Laughter.]
        Secretary Albright. You did, at the beginning.
        Senator Domenici. Some might have expected you to----
        Secretary Albright. Some might have expected. Slight
    liberty here.
        But the friends part is true. I think the issue here is we
    are going to try very hard to get the resources we need, and a
    4-percent increase for us would be very important.
        Senator Gregg. I think we are going to want to get to this
    forward funding. I know the chairman of the Budget Committee,
    like myself, has serious concerns about how that sort of
    perverts the budget process, to move that out from underneath,
    essentially, the budget and the caps and create a debt that has
    to be paid later. But we will get into that. Senator
    Lautenberg?
        Senator Lautenberg. Thank you, Mr. Chairman.
        Senator Gregg. Another on the Budget Committee here.
        Senator Lautenberg. Mind you, I'm the ranking member. I
    want to give you more. [Laughter.]

                 Croatian cooperation with War Crimes Tribunal

        But anyway, it's good to see you here, and to be able to
    get a few matters straightened out. One of the things that's
    concerned me is the way war criminals escape prosecution in the
    Bosnia-Croatia-Serbia area.
        It was our understanding that these indicted war criminals
    would be turned over to the International War Crimes Tribunal,
    but they have not been. Nonetheless, last year the State
    Department gave permission, or an instruction, to the Executive
    Director of the World Bank to approve a loan to Croatia, based
    on its assessment that they were cooperating and not harboring
    persons indicted by the ICTY.
        As part of the negotiations with the Croatians at that
    time, a man named Timor Blasic, an indicted Croatian war
    criminal was arrested, and transferred over to the tribunal.
    Croatia has now received a request from the ICTY for documents
    that are essential to the trial of this individual.
        Do you believe that these documents will be turned over to
    the ICTY based on the performance to date, and do you believe
    the Croatians will cooperate by ensuring the apprehension of
    the remaining indicted war criminals who have been widely
    sighted all over the place in the region?
        Secretary Albright. Well, first of all, I thank you very
    much for your support of the War Crimes Tribunal. We have had
    those discussions, and I do think that it is a very important
    effort in terms of ultimate reconciliation in the whole region.
        And so it's an effort that I think is well worth pursuing,
    and while it's not perfect, it is making a difference.
        Let me just say on the Croatian-specific issue of these
    documents, it is our understanding that the tribunal is
    currently in negotiations with the Government of Croatia on
    this subject.
        We are going to support the tribunal fully in its request,
    and we will do whatever we can to press the Croatians on it.
        I can tell you that in conversations I have had with the
    Croatian Foreign Minister, and other people within their
    government, that they understand that we expect them to live up
    to their obligations.
        And they are very much aware of what it means for them if
    they don't cooperate. So we will continue to press them, and
    we'll help support the War Crimes Tribunal in its efforts.

          foreign assistance for cooperation with War Crimes Tribunal

        Senator Lautenberg. Yes; I believe that if we are going to
    leave that place in less than 18 months, we want to ensure as
    best we can that the killing stops, that the dishonesty stops,
    that these fiefdoms are brought into the system.
        And I don't think that we can make the case while these
    indicted war criminals wander around kind of thumbing their
    nose at the rest of the world.
        I also believe that foreign assistance, provided
    bilaterally, and through the World Bank, can be used as
    leverage to secure greater cooperation from the parties to the
    Dayton agreement in arresting and transferring the indicted war
    criminals.
        At the London conference, December 1996, the international
    community reaffirmed that the provision of economic
    reconstruction assistance is closely linked to cooperation with
    the ICTY.
        What was our position on the conclusion reached by the
    London conference?
        Secretary Albright. Our conclusion?
        Senator Lautenberg. Yes; our position on the decisions that
    they made.
        Secretary Albright. Let me say that as an administration we
    have, and I especially have, felt very strongly that
    cooperation with the War Crimes Tribunal by those nations is
    key to ultimately having, first of all, a relationship with us,
    cooperation on bilateral assistance, and, ultimately, the
    ability, for instance, in the case of Serbia, to rejoin the
    international community and get international assistance. All
    of this has depended upon their cooperation with the War Crimes
    Tribunal.
        So I think that it is absolutely essential as a part of
    Dayton that there be cooperation. So we have supported this
    kind of conditionality, if you want to put it that way.

                      U.S. support of War Crimes Tribunal

        Senator Lautenberg. I would urge you to keep the pressure
    on there, and not permit borrowing or encourage loans if we're
    not getting what we want and if parties are not living up to
    their commitments.
        You've been a strong supporter of the International
    Criminal Tribunal. I know that. But we have a problem: over 1
    year after the Dayton agreement was signed, only 7 out of 74
    indicated war criminals are in custody.
        These people are seen by journalists and the community at
    large, and nothing is being done. So what can we do, would you
    say, Madam Secretary?
        Secretary Albright. Senator, what we are doing on this is,
    first of all we are working with the War Crimes Tribunal
    itself, and providing assistance to it in kind, and are major
    supporters of it. But we are also now looking at ways to give
    greater credibility to the War Crimes Tribunal in their
    attempts to get their hands on these various people.
        So I can just assure you that it is a very high priority
    for us. And we are looking for a variety of options as to how
    to give them greater credibility.
        I am very proud that sometimes I am called the mother of
    the War Crimes Tribunal, and I really do believe that the only
    way to actually get reconciliation ultimately is through
    justice, and that is why the War Crimes Tribunal is so key.

    State Department position on importation of U.S. military weapons that
                             are considered relics

        Senator Lautenberg. Mr. Chairman, I want to ask one other
    thing here, and that relates to the State Department's role
    under the Arms Export Control Act, regulating the importation
    into the country of U.S. military weapons, that are considered
    curios or relics.
        We're talking about hundreds of thousands, perhaps millions
    of guns, that we furnished to governments during World War II,
    including M-1 carbines, one of which I carried in that theater.
    The Department of State's policy since the late 1980's has been
    to advice the BATF to keep these weapons out of the hands of
    commercial gun dealers in the United States.
        And frankly I believe the State Department is doing the
    right thing. But last year, the Senate version of the CJS--this
    subcommittee's--appropriations bill included a provision that
    would have forced the State Department to approve the
    importation of these weapons.
        Now, I strongly opposed that provision, along with the
    White House, the State Department, and the Treasury Department.
    In the end, it was dropped from the bill. Does the State
    Department still oppose the importation of these weapons?
        Secretary Albright. Well, I know that this is an issue that
    has had a lot of attention up here in the last years, and the
    State Department is charged, as you have pointed out, in
    dealing with the subject. We take this responsibility very
    seriously, and we are talking about a large volume of weapons
    which could, in fact, be converted to automatic weapons, and
    which may be attractive to criminals.
        There may be some ideas again coming out of the
    subcommittee, and we would need to look at all of them in light
    of our responsibilities.
        But we understand the problem. We understand the division
    of views on it, and we take our responsibility on this
    seriously.
        Senator Lautenberg. Your opinion is very important, and if
    you could make certain that after you've reviewed the matter
    you would let us know. Thanks very much.
        Senator Gregg. Senator Bumpers.

            benefits to the United States of certification of Mexico

        Senator Bumpers. Madam Secretary, I know that
    decertification would increase the already considerable
    hostility of Mexico toward the United States. What do we get
    out of it?
        Secretary Albright. If we decertify I think that our
    problem would be that there would be much increased hostility
    from Mexico to the United States. I think all of us who know
    history know that the relationship of Mexico and the United
    States has been troubled over the years, and that it is
    possible to very quickly get people on both sides of the border
    excited about the sins of the other.
        We have managed, I think, in the last years to have the
    best possible relations with Mexico, where we are able to
    resolve trade disputes, where we are dealing in an appropriate
    way with questions of immigration, where we deal with questions
    about environmental legislation.
        And we have developed a civilized and very good
    relationship with them. They understand that they have a major
    national security problem on their hands. They are not denying
    the problem. And President Zedillo is also not denying the
    problem.
        He is working to revamp his whole system. I think that we
    basically are denying him the ability to work through the
    problem if we create a backlash.
        And that is, again, Senator, why I said this is not an easy
    decision, but we have to see what the alternative is, and the
    breakdown in civility and relationships that it would bring.

        sincerity of President Zedillo to cooperate in Drug enforcement

        Senator Bumpers. We have no reason to believe through our
    intelligence sources, or just because of your own conversations
    with Zedillo, that he is not sincere in his efforts to
    cooperate with us, do we?
        Secretary Albright. On the contrary. He has taken some very
    tough steps. There has been a lot of criticism, and justifiably
    so, of the fact that Mr. Guttierez, their drug czar, was
    somebody that became complicit. But the bottom line is that
    Zedillo got rid of him, and he is seeking to find the best
    people. He knows he's got a major problem, and he is basically
    seeking our support in allowing him to take these very
    difficult steps.

                         budget for the United Nations

        Senator Bumpers. On a separate subject, Madam Secretary, as
    I understand it, you have a supplemental request for $1 billion
    to pay arrearages to the United Nations. And then that leaves
    you with a request for an $133 million increase. Is that
    correct?
        Secretary Albright. Well, our budget request for the United
    Nations is divided into two parts. First, we have our attempt
    to pay back the arrears, and second, we are asking for a budget
    request for the United Nations of $363 million.
        Senator Bumpers. Budget request for what?
        Secretary Albright. The United Nations.
        Senator Bumpers. For how much?
        Secretary Albright. Well, it's in several parts. We have a
    budget request for the U.N. regular budget of $320 million.
        Senator Bumpers. Then $1 billion for arrears?
        Secretary Albright. Yes.

                  percent increase of State Department budget

        Senator Bumpers. Now, how much does the State Department
    increase amount to?
        Secretary Albright. Four percent.

           U.S. treatment of Ambassadors and foreign service officers

        Senator Bumpers. Madam Secretary, I used to be one of the
    members of the peanut gallery when it came to the State
    Department, and particularly the Foreign Service. But I have
    done 180 degrees on that in the last several years.
        I can tell you that our facilities in China are
    disgraceful. Our Ambassadors and staff have a very penurious
    existence. I was talking to an Ambassador last week, and his
    wife, who came home, and I said, did you get your expenses
    paid. She said, no; I'm only permitted one trip home a year. I
    just happened to find a cheap ticket, so I could come home with
    my husband.
        I consider that outrageous. Now, we don't allow our spouses
    to travel at Government expense, but to say to the wife of an
    Ambassador, you only get one expense paid trip home a year is
    ludicrous. There ought to be at least two or three trips home.
        The Ambassadors are at the beck and call of the State
    Department, at your beck and call. You ask Ambassadors to come
    home for consultation all the time. And sometimes they are here
    for 10 or 12 days, but their spouses can't come.
        Last summer there were about six Senators in Mongolia. The
    Ambassador's wife spent--we went over to the Ambassador's house
    twice. There aren't too many four-star restaurants in
    Ulaanbaatar.
        And we went over to the Ambassador's residence twice, and
    his wife spent most of the evening in the kitchen, because they
    didn't have any help. They couldn't afford any help.
        And every place you go you find that kind of situation, and
    I think it's terrible to treat people who are true public
    servants, who are serving, sometimes at some sacrifice to
    themselves, to make them live like paupers. I don't think it's
    a good reflection on the United States, but above all, it's
    demoralizing to the Foreign Service Corps.
        Thank you, Mr. Chairman.

                   coordination of efforts to fight Terrorism

        Senator Gregg. Thank you. I would second that statement. I
    think the way we will proceed is to go to some more questions
    and see if we can't wind through all this.
        The first issue is one that I have. It's an issue that I
    have been raising, but I am still not comfortable with the
    answers that I have been getting. It goes to the issue of
    terrorism, and the management of it at the highest levels
    within the administration.
        We have four different agencies that are primarily
    responsible. We have the State Department; we have the Justice
    Department, specifically, the Federal Bureau of Investigation
    [FBI]; we have the Central Intelligence Agency [CIA]; and we
    have the Defense Department.
        While talking with the Chairman of the Joint Chiefs
    yesterday at another hearing in another subcommittee, I asked
    him the question, do you think there is adequate coordination
    between the four departments, and he felt that there was
    adequate coordination between Defense and CIA, but he did not
    feel that there was adequate coordination between State,
    Defense, and the FBI; and Defense and FBI and CIA and vice
    versa.
        The problem is that it does not appear to me, even though
    there are structures in place to do this, that there is a sense
    of urgency coming from the top to get all the parties in a
    room--and by parties, I mean the senior people, yourself, the
    Chairman of the Joint Chiefs, the Director of CIA, the Attorney
    General, and the Director of the FBI at least once or twice a
    month, and analyze how your different agencies are cooperating
    in anticipating threats.
        I'm not talking about responding to an event. I think we've
    got structures for that. I am talking about anticipating where
    the threat comes from, and how we should coordinate the effort.
        I would like to get your thoughts on whether you feel we
    are doing enough in this area of coordinating the core
    agencies, and whether or not we are doing enough in the area of
    anticipating threat, and communicating that to people who have
    responsibility for responding.
        Secretary Albright. Mr. Chairman, let me say that we are
    all very appreciative of the interest that you have taken in
    this area, because we all feel a great sense of responsibility
    ourselves, obviously, for the lives of people that are abroad.
        And I appreciate very much what Senator Bumpers was saying
    about how difficult life is for many diplomats. Everybody
    thinks it's so glamorous, but it is not so. And being exposed
    to terrorism is one part of why it's a lot less enjoyable, I
    think, being an Ambassador these days than in previous times.
        I appreciate what you are saying, and I think that it is my
    belief that there is good coordination. But I am new on this
    job, and I am going to take a closer look at it in terms of a
    regular coordinating mechanism on it.
        I am going to maintain the Office of Coordinator for
    Counterterrorism that we have in the Department. I think you're
    right, there probably needs to be a closer, structured way for
    the agencies to work together.
        We do talk all the time. There is no question about that.
    It is very high on our minds. We talk about it in a variety of
    meetings where agency heads get together. But I think perhaps
    given the nature and the immediacy of many of these threats, we
    should take a closer look at it.
        But I assure you that I see it as my highest
    responsibility, to make sure that American citizens abroad are
    not unduly exposed to terrorist threats. It is the biggest
    problem that we have, and we will work with you on that.
        Senator Gregg. Well, I would take it one step farther. I
    personally believe that the single biggest threat to Americans
    in the United States, in the continental United States, and
    including our two States that are not within our continental
    borders, that the biggest threat in the next 10 to 15 years to
    our security is not a war. It's an act of terrorism involving a
    chemical, biological, or nuclear weapon.
        And I just don't feel that we are doing enough to
    coordinate the effort to anticipate. Theoretically, and
    legally, the National Security Council has the obligation to do
    this. But it doesn't have the clout to do it. It really needs
    to be done by having, in my opinion, you and the Secretary and
    the Attorney General and the Chairman of the Joint Chiefs, and
    the Director of CIA sit in a room at least regularly enough
    until you get the systems in place to actually have it work.
        Because I don't think it's working right now. And I would
    appreciate it if you took a hard look at that.
        I do think, if I were to analyze it from my exposure to
    this, and I've tried to take an in-depth look at it, that
    probably the State Department is the weakest link in the
    exercise right now, especially in the field.
        And the amount of communication that occurs within the
    different agencies is not at the level it needs to be. It's
    there, and I know everybody is sincere about it. I don't doubt
    that for a minute, and I know everybody puts it on their agenda
    and they talk about it. I just don't think we're getting it.
        Secretary Albright. I understand that. Let me also say that
    you have pointed to a very important problem, which is the
    chemical weapons, and that is one of the prime reasons that we
    need to have your advice and consent on the chemical weapons
    convention.
        Senator Gregg. That's another subject.
        Secretary Albright. But I do think that it points to the
    fact that we do see there is a threat. There is no question.
    And I think that you have pointed out very serious problems. We
    are working on them, and I take it as a very serious point,
    obviously, in terms of my own responsibility, and I will be
    talking with you and with my colleagues.
        Senator Gregg. I want to get into a couple of other issues,
    but let me turn to Senator Hollings first.

             Senator Hollings' comments on certification of Mexico

        Senator Hollings. Right to the point again, Madam
    Secretary, and we know the certification, we have had
    certification from the very same people. We were certified, for
    example, on NAFTA, that it was going to create 200,000 jobs,
    and instead the United States lost 300,000 jobs.
        It was certified that it was going to bring about a
    wonderful increase in the balance of trade for the United
    States. It has gone from the plus of five to a minus $16
    billion.
        We said it was going to solve the immigration problem. On
    the contrary, it has exacerbated it. It was said that if we
    didn't vote for it, that Asia folks were going to move in.
    They've moved in, and now they're dumping right into the open
    market here, at predatory prices.
        We said that this is the one chance for the average Mexican
    to really improve his particular lot, and now on January 17,
    and I quote Lawrence Summers, who is more or less the daddy
    rabbit of the whole movement at that particular time, he says
    the average Mexican is far worse off today than what he was
    prior to NAFTA.
        So when the same crowd comes with the certification, and we
    hear--and the deepest respect to you, because I know if they
    had put me on as Secretary of State I'd have gotten the same
    thing, the boilerplate that they give out--here it is.
        Four years ago, the best of the best, a quote on this very
    topic from Secretary Warren Christopher: ``President Salinas
    has tripled Mexico's antidrug budget, tackled the related
    problem of corruption, taken on the drug barons, many of
    Mexico's most notorious drug traffickers are now behind bars.
    This is breakthrough to progress''--on and on and on.
        Now, I am fully aware of the demand, and some would get off
    into that, and that's a good point to be made, as it were, if
    not for U.S. demand this drug country wouldn't be being
    financed. We're the ones financing it. And I'm trying to work
    on that phase of it.
        But I did not say to bring down Zedillo, as the Senator
    from New Mexico, Senator Domenici, inferred that I said. On the
    contrary, I said let's not certify, but rather decertify, and
    it could well help President Zedillo get on the top of things
    there.
        You know, as you said, we've had a history of talking about
    the sins of each other over the many, many years. If Zedillo
    really had some authority to do all these things we're asking
    him to do, our decertification would strengthen--he'd say that
    gringo from the north--because I've heard this.
        I was down there one time with President de la Madrid, and
    man, it was hugs and kisses and we were working together fine
    and what have you. And we went all the way down to the car, and
    I forgot a jacket. Went all the way back up, and he was then
    briefing the Mexican press--and telling the press ``I told
    those gringos from the north to bug off. We told them we're not
    going to submit''--we never had any of that conversation at
    all.
        So they used us. I know a little bit about Mexican
    politics. So if you have this saying we're not going to take it
    anymore, because it's really now getting into the gang warfare,
    and it's getting into not just California and the west coast,
    but the inner cities all over this country, we've got to come
    and get a grip of ourselves, and not shill for the financial
    boys up at Wall Street, and the success of NAFTA by covering up
    the total failure of this so-called relation in drugs.
        As General McCaffrey said, he said, well, this would just
    cut off any chance to work with our friends. I'm absolutely
    convinced we've got the wrong friends, and they ought to know
    that we think they're the wrong friends.
        Now, if they're so weak that we are propping them up just
    on this one little decertification, they ought to get out.
    Because nothing's going to happen, in spite of all the
    promises.
        On the other hand, we may get something done, because I can
    tell you here and now we are on the wrong track. It is the same
    act, same scene.

                           funding request for China

        Going to China, Madam Secretary, you only asked for $3
    million. And Jim Sasser has got in this little book, ``China
    2000'', has a need for $95 million in the short term. The truth
    is that our facilities are an embarrassment.
        I was in China last year. The United States is using the
    old Pakistani facilities that we got back in the seventies. And
    Ambassador Sasser outlined a need there for some $95 million,
    if I remember correctly. And your fiscal year 1998 budget asks
    for only $3 million. That's a drop in the bucket. You can't
    start to do anything.
        It's not just the wife having to do the cooking, because I
    know Miriam, and she does good cooking; $89 to 95 million. You
    can see his little chart there.
        Secretary Albright. I've seen it. I've been there. Yes.
        Senator Hollings. You've been there. Well, then I know you
    sympathize with me. Let's you and I both get on OMB and the
    White House.
        Senator Gregg. On that point----
        Senator Hollings. Yes, sir.
        Senator Gregg. Am I incorrect in understanding that you're
    using some of the money which you plan to generate from selling
    these properties, and the priority of the first of that money
    is China?
        Secretary Albright. Yes; that is correct. Part of the issue
    here is that we hope to be able to finance a large part out of
    asset sales in other parts of the world. But because one can't
    always gear exactly the right time to sell, we have to make
    sure that we're selling at a good price in other places.
        And China, we plan to fund the major portion of this out of
    other asset management sales. But I agree with you. It is
    pretty miserable.

                           retention of Fees proposal

        Senator Hollings. With respect, I would get back to the old
    accounting. We got into that asset sales thing, and that crisis
    selling, downtown Buenos Aires and a lot of good valuable
    properties, because we can make a heck of a lot of money and
    satisfy budget problems in the short run, but it is very, very
    damaging to the Department of State and the United States of
    America in the long run.
        Specifically these fees, there, $140 million in visa fees.
    Now collected and retained by the Department. But under this
    budget they would go on budget, and instead of going to the
    State Department, we would have to increase your budget just to
    keep you in place.
        So that's the kind of--this is OMB shenanigans, on China,
    on selling property, on visa fees. If you let those number
    crunchers take you all, that's why--well, let's go right to the
    point.
        The President's budget proposes a $1 billion increase in
    foreign aid, and they give you $60 million, to the Department
    of State. AID gets an almost 9-percent increase, and you get a
    mere 2 percent, which does not keep up with inflation.
        Secretary Albright. You are asking something very difficult
    of me, Senator. The fact is that for American foreign policy
    purposes, we need a full budget, which requires aid as well as
    the people to dispense it.
        We are trying very hard to maximize the money that we can
    get. We have this proposal, actually, that most fees be
    returned to the State Department. We hope that now 25 percent
    of our budget will, in fact, come from this new fee proposal.
        Because it links the resources to the people that actually
    do the job. So we are trying very hard to live within a
    balanced budget, and to try to maximize what we have.
        And it's not easy, but we have to prioritize and do what we
    can. I am very admiring of our diplomatic service, who have
    made a career choice that is a very difficult one, and I want
    to do everything I can to support them.
        So I appreciate your support of them also.

                     consolidation of the State Department

        Senator Hollings. Well, as I said a little bit earlier, Pat
    Kennedy and Richard Greene have worked hard in developing that
    international cooperative administrative system and charging
    these other departments.
        Why not embellish that even further by adding
    telecommunications and facilities? We ought to be charging
    agencies for that, too.
        Because I am the admirer of you and the Department, and
    what I want to do is get every dime we can over here, because
    they have foreign aid getting a $1 billion increase, and you're
    supposed to be in charge of foreign policy. We've got the tail
    wagging the dog.
        What about Senator Helms' proposition to bring AID and all
    of that disparate group under the Secretary? Because once when
    I traveled to Africa, they said they think the Ambassador down
    there is in charge, but we're in charge up here with AID.
        I see that, as a lay Senator, going around. That's no way
    to get a good, strong Secretary going like yourself.
        Secretary Albright. You're trying to----
        Senator Hollings. Well, I learned this like you, from
    Muskie. [Laughter.]
        Secretary Albright. Now, let me say that obviously there is
    a question as to how to reorganize and reinvent, and, as I said
    when I testified at my confirmation hearings, I have an open
    mind.
        We are now looking at a variety of ways to see how we could
    make everything more efficient for pursuing American interests.
    I will be back to all of you on that. But I think it is
    important to streamline and organize ourselves for the kinds of
    issues and threats, problems that we're now dealing with. And
    we must prepared for the 21st century as other Senators have
    said.
        So I appreciate very much what you are saying.
        Senator Hollings. Thank you, ma'am. And I hope you can help
    persuade some over in the White House, because it was going
    good. We had Democrats on the Foreign Relations Committee that
    were going and moving along with Chairman Helms on this
    initiative, and then the White House came around, and failed it
    before it could get started.
        But it is a good move to get you better coordinated and
    working. Mr. Chairman, you have been very indulgent of me, and
    I have some other questions, and I have them just for the
    record.
        Thank you very, very much.
        Senator Gregg. Let me follow up. First, I want to endorse
    Senator Hollings' view of going forward with reorganization.
    Vice President Gore had it right the first time, and we should
    bring the Arms Control and Disarmament Agency [ACDA] and AID
    under your control. There is no reason we should have these
    agencies outside of the control of the Secretary of State. It
    is clear you should have operational control over what is
    essentially foreign policy. When you come back with your
    reorganization plan, we hope you will make this committee happy
    along with Foreign Affairs.
        Senator Hollings. You're a strong Secretary. You can get it
    done.

                           retention of Fees proposal

        Senator Gregg. That's right. On the fee issue, I see this
    as a potential major problem for your Department. What OMB has
    done is play games with these fees. I am not sure how Senator
    Domenici is going to handle this, but knowing Senator Domenici,
    he is not going to tolerate it. As a result, you may end up
    with a $455 million hole in your budget because of what OMB has
    done here.
        Now, theoretically this can be avoided, and subsequently
    can be avoided, if we get the proper allocation. But this is a
    big problem. I think OMB has set you up, along with a number of
    other groups. I do not expect you to say they have--but they
    have.
        Secretary Albright. Well, on the subject, let me just say
    that we recognize the fact that this is a complex proposal. It
    is Governmentwide. And it is something that OMB is dedicated
    to, and will be pushing very hard for. I think that we see no
    reason that this proposal will fail. As I said, it's too big to
    fail.
        Senator Gregg. The reason it will fail is because it's an
    accounting mechanism to raise the discretionary caps by $3
    billion across the Government. We're not going to do that.
        Secretary Albright. But actually, Mr. Chairman, we need to
    talk more about it. We see it as kind of a good Government
    approach, which is to link the resources to the people that
    actually do the work. What this means, for instance, in our
    case, is that when more people want visas and passports, which
    require more people to do it, there will be a direct resource
    link with the fact that Americans are traveling abroad much
    more, and that they need more assistance. The fee proposal
    creates a link between those who take in the fees and those who
    actually do the work.
        Senator Gregg. I would agree with that, if it hadn't been
    used for the purposes of basically arbitrarily raising the
    discretionary caps. And that is the goal. It wasn't good
    Government. If they wanted to do good Government, they wouldn't
    have ended up with a cap. But that's another issue. I just
    think you have got to be sensitive. Hopefully, we'll get the
    allocation in this, so we will not have to deal with that
    problem.

                      advance appropriation for Arrearages

        In another area, just like this, that creates all sorts of
    budgetary issues for us is the $921 million advance
    appropriation. That's essentially an attempt to get us out of
    this budget window, which means it will be outside of
    aggravating this year's deficit projection. It becomes a
    problem for us, even if we were to agree to it. There's great
    resistance to doing it, because we'd have next year on our
    plate. So we are working on this, and our intention is to reach
    an agreement that everybody is comfortable with.
        I think we've got to come up with a way to fund the $921
    million outside of the advanced appropriation. I have looked
    through your budget and it does not appear to me that we have
    an extra $921 million sitting anywhere. We are going to have to
    look for some places to find some money. That's the way I see
    it in order to do this. And I was thinking the Advanced
    Technology Program might do about one-third of this, right?
    There are other departments we could look at.
        The National Endowment for Democracy would be a nice way.
    But this is something that we're going to have to work on. It
    is a real problem, where we get the money. As I have said,
    we're going to come up with some system that I think will
    address your problems, but finding the money is going to be a
    big issue.
        Secretary Albright. I appreciate very much your desire to
    want to work with us. I think that the issue here is to try to
    figure out a mechanism that will allow us to let the people in
    New York know that we are going to push for the reform, and
    that the money is there, if they reform.
        This is the mechanism that we have thought of. I think we
    are very appreciative of the fact that we are working in
    various groups to try to resolve this, because I think we now
    all understand the necessity of getting a United Nations that
    functions better for all of us, and makes it easier for people
    that are negotiating for the United States to have something in
    their back pocket that provides the leverage that you need for
    this kind of negotiation.
        Senator Gregg. I guess my caveat to you is you need to have
    your people who are thinking along these terms, think about
    where to find this money if we go into advance funding. It's
    obviously subject to some sort of fencing agreement, but there
    has to be the money.

                            Capital investment fund

        I notice you have $40 million in your budget for an
    increase in funding for technology. You call it capital
    improvement or something like that, but I think it's mostly
    technology, rising from $27 million to $60 something million.
    Is that for your communications systems primarily?
        Secretary Albright. Yes; it's an attempt to modernize
    ourselves in terms of trying to get better communications,
    generally technology improvements. It's part of our whole
    management effort.
        Senator Gregg. Now, is there another bill that's going to
    come to us next year on this? Is this the last payment on
    upgrading communications systems?
        Secretary Albright. This is an ongoing improvement. We will
    get to you what is coming on. But we are trying to do it
    systematically.
        We are also going to try, as Senator Hollings was getting
    at, to cooperate on our technology systems together. It is
    appalling that we have a diplomatic service every place in the
    world, but we do not have adequate modern ways of
    communicating. For example, we have to update our e-mail
    systems and generally----
        Senator Gregg. I don't argue the need--I think the need is
    important. I don't even argue that amount. I am going to try,
    with Senator Hollings, to fund the whole amount.
        I am wondering about what the out-year plan is.
        Secretary Albright. We have provided our overall
    information plans.
        Senator Gregg. How much technology are you planning to buy?
    Whether you are going to buy it in some sort of orderly
    fashion? We've had some problems with other agencies who have
    bought technology that did not work. We don't want to go
    through that with you. So do we have somebody looking at how
    this is being purchased? Or is it being done in house? There
    are big problems where it's being done in house with another
    agency. They probably should have gone over to the Defense
    Department to use some of their expertise in how to buy this
    stuff. I would be interested in knowing about your plans.
        Secretary Albright. Let me have some of my experts talk to
    you.
        Senator Gregg. OK.

                    importance of State's economic officers

        Senator Hollings. Of course, the Secretary did say NED.
    Years ago I thought it was killed, but then you got the
    printing presses in Indiana, over into Europe, and it helped
    create free elections.
        But on a very important subject that you run into on the
    House side, that Chairman Gregg and I see it, with respect to
    the State Department economic counselors, and the Commerce
    Foreign Commercial Service attaches, both are needed in my
    judgment.
        What happens is the Foreign Commercial Service is of a
    character, the chamber of commerce is there, meeting, greeting,
    out trying to get information for exports and getting visiting
    business folks there to help them get contracts.
        The economic counselor does an outstanding job in
    counseling with respect to these trade agreements, the far more
    sophisticated and otherwise. But the House has tried to get rid
    of the economic counselors under our budget.
        And I want to keep that economic service going, because
    there is a very strong move of the multinationals to get rid of
    them, because they interfere with this give it all away and
    everything else like that.
        It shows itself in the Multinational Times, the New York
    Times. The membership for China here, the concluding sentence
    says, congressional interference serves no good purpose.
        Here under article I, section XVII of the Constitution, not
    the Executive, not the Supreme Court, but the Congress shall
    regulate foreign commerce. And yet they got the arrogance to
    say that we interfere.
        Senator Gregg. New York attitude.
        Senator Hollings. Yeah, that's exactly right. So that
    attitude is against your economic counselors, and they do an
    outstanding job in helping us with trade matters, and getting
    these agreements.
        Thank you, very, very much, Mr. Chairman.
        Secretary Albright. I think, Senator Hollings, in my most
    recent travels around, I can see more and more the importance
    within our Embassies of economic activities, whether they be
    the analytical ones that are necessary, or those that are out
    really helping American business.
        So I also know a lot about the commerce clause. So I do not
    see this as interference.
        Senator Gregg. Well, we appreciate your time. I do want to
    reinforce that this $900 million is not going to fall out of
    the sky, as is proposed by the present budget. And we're going
    to have to find some way to get it.

                         Additional committee questions

        But I certainly do appreciate your taking your time to come
    today.
        Secretary Albright. Thank you very much, Mr. Chairman. I
    appreciate it.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                Questions Submitted by Senator Pete V. Domenici
                        state department reorganization
        Question. My question to you Madam Secretary is, do you agree with
    my assessment of the need for reorganization and consolidation of the
    U.S. foreign policy apparatus?
        Answer. Given the many changes and the new challenges we face after
    the Cold War and as we approach the Twenty-first Century, I agree that
    we need to reinvent the foreign affairs agencies and that this will
    require some integration of agencies into the State Department, as it
    will also require significant changes within our Department itself. I
    also agree that such efforts can free up some resources for
    reinvestment into the infrastructure and other shortfalls faced by the
    State Department. But I would caution against any belief that
    organization changes can provide major savings.
        Question. As you know, the authorizers are ready to start on a
    bill. What schedule do you plan to follow with respect to submitting a
    reorganization plan to Congress?
        Answer. On April 18, the President released the attached fact sheet
    setting forth his plan for reintegrating and reinventing the foreign
    affairs agencies. The Administration proposes to submit a plan for
    implementing these changes within 120 days from May 1. The
    Administration's plan will call for integrating ACDA into the State
    Department within a year from when the above mentioned plan is
    completed, to integrate USIA into the State Department within two
    years, and to integrate some specified USAID function into the State
    Department. As part of this plan, we will also undertake major
    reinvention efforts within the State Department. Since broad
    legislative authorities will be needed the Administration has also
    submitted the following legislative provisions to the authorizing
    committees which we wish to see enacted as soon as possible.
                                     ______

                     [White House Press Release Fact Sheet]

                                       The White House,
                                 Office of the Press Secretary,
                                                        April 18, 1997.
                     Reinventing State, ACDA, USIA and AID
                the era of big government is over.--bill clinton
        President Clinton's plan brings an end to bureaucracies originally
    designed for the Cold War, streamlines the Executive Branch's policy-
    making process, and enhances our nation's ability to meet the growing
    foreign policy challenges of the 21st century. It puts matters of
    international arms control, sustainable development, and public
    diplomacy where they belong, at the heart of our foreign policy within
    a reinvented Department of State. It incorporates key lessons from the
    private sector.
    The Plan:
        The State Department will undertake a new round of internal
    reinvention to incorporate new organizations and to manage new
    responsibilities. This reinvention will make the new State Department
    more effective and efficient and better able to defend American
    interests and promote American values abroad.
        The Arms Control and Disarmament Agency will be fully integrated
    with State within one year by merging both agencies' related arms
    control and nonproliferation functions. The ACDA Director will be
    double-hatted as the Under Secretary of State for Arms Control and
    International Security Affairs, and then the two positions will be
    merged as Under Secretary/Senior Advisor to the President and Secretary
    of State, which will be able to communicate with the President through
    the Secretary of State. ACDA's unique advocacy role will be preserved
    and the policy process supporting those efforts will be strengthened
    through additional interagency responsibilities. Along with ACDA's
    technical and policy expertise, its verification, compliance, and legal
    functions will be preserved.
        The United States Information Agency and the State Department will
    be integrated over a two year period. During that process, the Director
    of USIA will be double-hatted as the new Under Secretary of State for
    Public Diplomacy. This process will likely begin with an integration of
    related functions, such as legislative and public affairs; after that,
    the integration process will turn toward USIA's overseas press
    expertise and State's press offices. The distinctiveness and editorial
    integrity of Voice of America and the broadcast agencies will be
    respected. A new bureau will be created within the State Department to
    handle cultural and exchange issues.
        The Agency for International Development will remain a distinct
    agency, but will share certain administrative functions with State and
    will report to and be under the direct authority and foreign policy
    guidance of the Secretary of State. Within two years, AID will
    integrate its press office and certain administrative functions. The
    International Development Cooperation Agency, created in 1979, will be
    abolished. The Secretary of State and AID administrator will recommend
    what further steps might be taken to eliminate duplication.
        The President's plan was the result of a long and deliberative
    process under the leadership of Vice President Gore. This
    reorganization plan enjoys the support of the Secretary of State and
    the heads of ACDA, AID and USIA. In developing this plan, the Vice
    President worked from three guiding principles:
        The programs of ACDA, USIA, and AID must be preserved. Sustainable
    development, nonproliferation, and public diplomacy are now more
    central than ever to American foreign policy; our institutional
    arrangements should reflect that. Moreover, there is no better time
    than the present to launch this process, at the outset of a new term, a
    new Congress, and with a new Secretary of State.
        Complexities must be fully acknowledged. Reinvention and
    integration should take into account the central and continuing
    importance of reform of all of the agencies including the State
    Department, the relative complexity of the smaller agencies and
    anticipated level of difficulty in merging and integrating them, and
    the need to preserve the unique skills and capabilities inherent in
    each of the agencies. Any reorganization plan should be designed around
    our greatest strength--the abilities and expertise of the dedicated
    public servants who work in those agencies.
        The Executive and Legislative Branches must cooperate on foreign
    affairs. The need for reorganization in the foreign policy agencies is
    also recognized by key members of Congress. Their views and expertise
    on these matters should inform our process. Our ability to work
    together with the Congress on this endeavor should encourage our
    bipartisan approach toward foreign policy matters.
        After much deliberation, the plan the Vice President devised
    strikes a sound balance between the need for greater policy coherence
    and effectiveness with the necessity of preserving the special missions
    and skills of the three smaller agencies.
                                     ______

        amendment regarding reinvention of the foreign affairs agencies
      (a)(1) Strike Title II of Division A and renumber the subsequent
    titles and sections accordingly.
      (2) Strike the following sections, for the purpose of conforming
    Division B to this amendment, and renumber the remaining provisions
    accordingly: 1301, 1303, 1304, 1305, 1306, 1321, and 1707.
      (b) Insert the following new title at the end of Division B:

            TITLE XVIII--REINVENTION OF THE FOREIGN AFFAIRS AGENCIES

    SEC. 1801. SHORT TITLE.

        This Title may be cited as the ``Foreign Affairs Agencies
    Reinvention Act of 1997.''

    SEC. 1802. REINVENTION OF THE FOREIGN AFFAIRS AGENCIES.

        The Congress of the United States makes the following findings:
              (1) With the end of the Cold War, the international
            challenges facing the United States have changed, but the
            fundamental national interests of the United States have not.
            The security, economic and humanitarian interests of the United
            States require continued American engagement in international
            affairs. The leading role of the United States in world affairs
            will be as important in the twenty-first century as it has been
            in the twentieth.
              (2) In this context, the United States has an historic
            opportunity to continue the reinvention of the agencies
            primarily responsible for implementing the nation's foreign
            policies.
              (3) The continuing reinvention of the foreign affairs
            agencies, the Department of State, the Arms Control and
            Disarmament Agency, the United States Information Agency, the
            International Development Cooperation Agency and the United
            States Agency for International Development, must ensure that
            these agencies can effectively confront the new and pressing
            challenges of the post-Cold War world.
              (4) The reinvention of the foreign affairs agencies
            recognizes the fact that arms control and nonproliferation,
            sustainable development, and public diplomacy are now more
            central than ever to the success of U.S. foreign policy. Any
            integration of these agencies should preserve the unique skills
            and capabilities of each of the agencies in a reinvented
            Department of State.
              (5) A streamlined, reorganized and more flexible foreign
            affairs structure under the strengthened leadership of the
            Secretary of State can more effectively promote the
            international interests of the United States and enhance the
            United States' ability to meet the growing foreign policy
            challenges during the next century.

    SEC. 1803. PURPOSES.

        The purposes of this title are--
              (1) to provide for the reinvention of the Department of State
            to enable it better to incorporate additional functions and
            agencies, manage new responsibilities, and make the Department
            more effective and efficient and better able to defend American
            interests and promote American values abroad;
              (2) to integrate certain agencies and certain functions of
            other agencies of the United States into the reinvented
            Department of State; and
              (3) to strengthen--
                      (A) the coordination of United States foreign policy;
                    and
                      (B) the leading role of the Secretary of State in the
                    formulation and articulation of United States foreign
                    Policy.

    SEC. 1804. DEFINITIONS.

        For the purpose of this title--
              (1) ``agency'' means the Department of State, the Arms
            Control and Disarmament Agency, the United States Information
            Agency, the International Development Cooperation Agency, and
            the Agency for International Development;
              (2) ``reorganization'' means integration, transfer,
            consolidation, coordination, authorization, or abolition,
            referred to in section 1805 of this title; and
              (3) ``officer'' is not limited by section 2104 of Title 5 of
            the United States Code.

    SEC. 1805. REORGANIZATION PLAN FOR REINVENTING THE FOREIGN AFFAIRS
                        AGENCIES.

        (a) No later than 120 days after the enactment of this Act, the
    President shall submit to the Congress a reorganization plan for the
    foreign affairs agencies specifying the reorganization of the
    Department of State, the Arms Control and Disarmament Agency, the
    United States Information Agency, the International Development
    Cooperation Agency, and the Agency for International Development. Such
    plan may provide for--
              (1) the transfer of the whole or a part of an agency, or of
            the whole or a part of the functions thereof, to the
            jurisdiction and control of the Department of State;
              (2) the abolition of all or a part of the functions of an
            agency, except that no enforcement function or statutory
            program shall be abolished by the plan;
              (3) the consolidation or coordination of the whole or a part
            of an agency, or of the whole or a part of the functions
            thereof, with the whole or a part of another agency or the
            functions thereof;
              (4) the consolidation or coordination of a part of an agency
            or the functions thereof with another part of the same agency
            or the functions thereof;
              (5) the authorization of an officer to delegate any of the
            officer's functions; or
              (6) the abolition of the whole or a part of an agency which
            agency or part does not have, or on the taking effect of the
            plan will not have, any functions.
        (b) Such plan shall provide that--
              (1) with respect to the Department of State, the Department
            shall undertake a new round of internal reinvention to
            incorporate new organizations and to manage new
            responsibilities;
              (2) with respect to the Arms Control and Disarmament Agency--
                      (A) within one year of the effective date of the
                    reorganization plan for the foreign affairs agencies,
                    the Arms Control and Disarmament Agency shall be fully
                    integrated with the Department of State by merging both
                    agencies' related arms control and nonproliferation
                    functions;
                      (B) the positions of the Director of the Arms Control
                    and Disarmament Agency and the Under Secretary of State
                    for Arms Control and International Security Affairs
                    shall be merged as the Under Secretary/Senior Advisor
                    to the President and the Secretary of State, which will
                    be able to communicate with the President through the
                    Secretary of State;
                      (C) the Arms Control and Disarmament Agency's unique
                    advocacy role shall be preserved and the policy process
                    supporting those efforts will be strengthened through
                    additional interagency responsibilities; and
                      (D) along with the Arms Control and Disarmament
                    Agency's technical and policy expertise, its
                    verification, compliance, and legal functions shall be
                    preserved;
              (3) with respect to the United States Information Agency--
                      (A) within two years from the effective date of the
                    reorganization plan for the foreign affairs agencies,
                    the United States Information Agency and the Department
                    of State shall be integrated;
                      (B) a new Under Secretary for Public Diplomacy shall
                    be established; and
                      (C) the distinctiveness and editorial integrity of
                    the broadcast entities shall be respected; and
              (4) with respect to the United States Agency for
            International Development--
                      (A) the Agency shall remain a distinct agency, but
                    shall share certain administrative functions with the
                    Department of State and report to and be under the
                    direct authority and foreign policy guidance of the
                    Secretary of State;
                      (B) within two years from the effective date of the
                    reorganization plan for the foreign affairs agencies,
                    its press office and certain administrative functions
                    shall be integrated with the Department of State; and
                      (C) the International Development Cooperation Agency
                    shall be abolished.
        (c) The President shall have the reorganization plan for the
    foreign affairs agencies delivered to both Houses on the same day and
    to each House while it is in session. If either House is out of session
    at the end of the 120 days after the enactment of this Act, the plan
    shall be submitted on the first day thereafter when both Houses are in
    session. The President's message shall include an implementation
    section which shall (1) describe in detail (A) the actions necessary or
    planned to complete the reorganization, (B) the anticipated nature and
    substance of any orders, directives, and other administrative and
    operational actions which are expected to be required for completing or
    implementing the reorganization, and (C) any preliminary actions which
    have been taken in the implementation process, and (2) contain a
    projected timetable for completion of the implementation process. The
    President shall also submit such further background or other
    information as the Congress may require for its consideration of the
    plan.
        (d) Any time during the period of 60 calendar days after the date
    on which the plan is transmitted to it, but before any joint resolution
    described in section 1809 has been ordered reported in either House,
    the President may make amendments or modifications to the plan,
    consistent with sections 1805-1807 of this title, which modifications
    or revisions shall thereafter be treated as a part of the
    reorganization plan originally transmitted and shall not affect in any
    way the time limits otherwise provided for in this title.

    SEC. 1806. ADDITIONAL CONTENTS OF REORGANIZATION PLAN.

        A reorganization plan for the foreign affairs agencies transmitted
    by the President under section 1805 of this title--
              (1) may provide for the appointment and pay of one or more
            officers of any agency, including appointment of additional
            Under Secretaries and Assistant Secretaries (not to exceed the
            number, respectively, of officers authorized at Executive
            Levels III and IV of the transferring agencies), if the
            President finds, and in his message transmitting the plan
            declares, that by reason of a reorganization made by the plan
            the provisions are necessary;
              (2) shall provide for the transfer or other disposition of
            the records, property, and personnel affected by a
            reorganization;
              (3) shall provide for the transfer of such unexpended
            balances of appropriations, and of other funds, available for
            use in connection with a function or agency affected by a
            reorganization, as the President considers necessary by reason
            of the reorganization for use in connection with the functions
            affected by the reorganization, or for the use of the agency
            which shall have the functions after the reorganization plan is
            effective;
              (4) shall provide for terminating the affairs of an agency
            abolished;
              (5) may provide that provisions of law applicable to a
            transferring agency remain applicable only to transferred
            functions of that agency; and
              (6) shall designate which provisions of law requiring the
            establishment of specified positions are no longer effective.
    If the reorganization plan for the foreign affairs agencies transmitted
    by the President contains provisions required by paragraph (3) of this
    section, such plan shall provide for the transfer of unexpended
    balances only if such balances are used for the purposes for which the
    appropriation was originally made or for the purpose of reorganization.

    SEC. 1807. LIMITATION ON POWERS.

        The reorganization plan for the foreign affairs agencies submitted
    under this title may not provide for, and a reorganization under this
    title may not have the effect of--
              (1) creating a new executive department or renaming an
            existing executive department, or abolishing or transferring an
            executive department or all the functions thereof;
              (2) authorizing an agency to exercise a function which is not
            expressly authorized by law at the time the plan is transmitted
            to Congress; or
              (3) creating a new agency which is not a component or part of
            an existing agency.

    SEC. 1808. REFERRAL OF PLAN AND JURISDICTION OVER RESOLUTIONS.

        The reorganization plan for the foreign affairs agencies submitted
    pursuant to this title and any joint resolution with respect to such
    plan shall be referred to the Committee on Foreign Relations of the
    Senate and the Committee on International Relations of the House (and
    all joint resolutions with respect to the such plan shall be referred
    to the same committee) by the President of the Senate or the Speaker of
    the House of Representatives, as the case may be.

    SEC. 1809. EFFECTIVE DATE, DISAPPROVAL AND PUBLICATION OF
                        REORGANIZATION PLAN FOR THE FOREIGN AFFAIRS
                        AGENCIES.

        (a) Except as provided under subsection (c) of this section, a
    reorganization plan shall be effective upon such date as the President
    shall determine to be appropriate and announce by notice published in
    the Federal Register, which date may be not earlier than 120 calendar
    days after the President has submitted the reorganization plan for the
    foreign affairs agencies, and such plan shall become effective then
    only if the Congress does not enact prior to that date a joint
    resolution disapproving the plan.
        (b)(1) Any joint resolution disapproving the reorganization plan
    for the foreign affairs agencies shall be considered in the Senate in
    accordance with the provisions of section 601(b) of the International
    Security Assistance and Arms Export Control Act of 1976.
        (2) For the purpose of expediting the consideration and enactment
    of any joint resolution disapproving the reorganization plan for the
    foreign affairs agencies, a motion to proceed to the consideration of
    any such resolution after it has been reported by the appropriate
    committee shall be treated as highly privileged in the House of
    Representatives.
        (c) Under provisions contained in a reorganization plan for the
    foreign affairs agencies, any provision thereof may be effective at a
    time later than the date on which the plan otherwise is effective.
        (d) A reorganization plan for the foreign affairs agencies which is
    effective shall be printed (1) in the Statutes at Large in the same
    volume as the public laws and (2) in the Federal Register.

    SEC. 1810. EFFECT ON OTHER LAWS, PENDING LEGAL PROCEEDINGS, AND
                        UNEXPENDED APPROPRIATIONS.

        (a) A statute enacted, and a regulation or other action made,
    prescribed, issued, granted, or performed in respect of or by an agency
    or function affected by a reorganization under this chapter, before the
    effective date of the reorganization, has, except to the extent
    rescinded, modified, superseded, or made inapplicable by or under
    authority of law or by the abolition of a function, or otherwise by
    operation of the reorganization plan for the foreign affairs agencies
    under this title, the same effect as if the reorganization had not been
    made. However, if the statute, regulation, or other action has vested
    the functions in the agency from which it is removed under the
    reorganization plan, the function, to the extent which it is to be
    exercised after the plan becomes effective, shall be deemed as vested
    in the agency under which the function is placed by the plan.
        (b) For the purpose of subsection (a) of this section, ``regulation
    or other action'' means a regulation, rule, order, policy,
    determination, directive, authorization, permit, privilege,
    requirement, designation, or other action.
        (c) A suit, action, or other proceeding lawfully commenced by or
    against the head of an agency or other officer of the United States, in
    his official capacity or in relation to the discharge of his official
    duties, does not abate by reason of the taking effect of a
    reorganization plan under this title. On motion or supplemental
    petition filed at any time within twelve months after the
    reorganization plan takes effect, showing a necessity for a survival of
    the suit, action, or other proceeding to obtain a settlement of the
    questions involved, the court may allow the suit, action, or other
    proceeding to be maintained by or against the successor of the head or
    officer under the reorganization effected by the plan or, if there is
    no successor, against such agency or officer as the President
    designates.
                                 united nations
        Question. If I may call on your expertise to help Congress
    prioritize the various reforms that still need to be implemented, Madam
    Secretary, could you give us a brief overview of the fundamental
    reforms you see that could contribute the most to a more efficiently
    run United Nations.
        Answer. The Administration has proposed that the U.N. achieve
    specific reform measures in the areas of budget, personnel, oversight,
    management, and peacekeeping. These include:
      --Reduced U.S. assessment rates, budget cuts and budget freezes in
            the U.N. system to reduce U.S. total obligations.
      --A cap of 25 percent on U.S. peacekeeping assessments.
      --Creation of a ``contested arrears'' account for U.N. charges which
            the U.S. disputes.
      --A code of conduct for U.N. employees.
      --Further U.N. staff reductions.
      --Strengthening the Office of Internal Oversight Services and other
            oversight mechanisms, particularly in the major U.N.
            specialized agencies.
      --Improving U.N. effectiveness by restructuring and prioritizing,
            especially in the economic and social areas.
      --Further improving management of peacekeeping operations by:
        --Implementing a uniform, transparent, less costly Contingent-Owned
                Equipment reimbursement standard.
        --Negotiating more contingency contracts to support and expedite
                deployment of peacekeeping operations.
        --Improving recruitment and training of civilian police.
        On March 17, the Secretary General announced ten specific U.N.
    reform measures for immediate implementation, including a reduction of
    $123 million in the regular budget for 1998-99, a merger of three
    departments in the U.N. Secretariat, and a code of conduct. We strongly
    support these efforts, and look forward to a second phase of reform
    proposals by mid-year.
                                     ______

              Questions Submitted by Senator Kay Bailey Hutchison
        Question. Would it not make more sense to downsize some of our
    missions in more luxurious European locations so that we can establish
    a small and effective presence in some of the world's emerging markets?
    Are you willing to work with the Committee to respond to the concerns
    of providing diplomatic support for American citizens working and
    living in Equatorial Guinea and other emerging markets?
        Answer. Our Embassy in Malabo was closed in October 1995 due to
    budgetary constraints. Since that time we have had to close a number of
    other small posts, such as the Embassy in Victoria, Seychelles and the
    Consulate General in Bordeaux, France, as well as downsize the State
    Department's component at many other, larger posts, including those in
    Europe. The reason for these very difficult steps is simply the lack of
    sufficient overall funding for our operations.
        With regard to Equatorial Guinea, Ambassador Charles Twining in
    Yaounde is also accredited to the Government of Equatorial Guinea, and
    he has made numerous visits to Malabo and to the Rio Muni on the
    continent since arriving at post fifteen months ago. He has direct
    access to President Obiang and key government ministers. In addition,
    the chief of Embassy Yaounde's consular section has been designated as
    ``Malabo watcher''. He is fluent in Spanish and has also visited Malabo
    and Rio Muni many times to meet with American citizens, both oil
    company employees and missionaries. He organized the warden systems in
    both areas of Equatorial Guinea. The commercial officer has also
    visited our oil companies in Malabo. In all, the Ambassador and his
    staff have made over twenty-five visits to Equatorial Guinea since the
    closure.
        The Department is concerned with meeting fully the needs of our
    American citizens in Equatorial Guinea and with supporting our
    expanding commercial interests there. We have been considering
    alternatives to the present level of representation.
        I want very much to work with the Committee to assure appropriate
    diplomatic and consular representation to meet the needs of our people.
    I must tell you frankly, however, that only adequate funding will
    enable us to have as expansive a presence in all regions of the world
    as we might like.
                        latin american arms sales policy
        Question. We have a policy [for] 20 years dating to the Carter
    Administration of blocking the export of advanced arms sales to Latin
    America. There has been a fundamental change in the regimes of the
    region and I don't think our current policy adequately reflects that
    change. Since 1976, when the policy was implemented, democratically
    elected governments have driven out dictatorships throughout Latin
    America with the exception of Cuba. The policy of restricting the sale
    of advanced arms to Latin America has had the effect of blocking only
    American firms from the market place. In the past 20 years France alone
    has sold 200 fighter aircraft to seven Latin American countries. In the
    past 12 months, Peru bought 12 Mig 29's, Ecuador bought [a] small
    number of Israeli KFIRS with potential for additional sales and Chile
    bought 20 Mirages.
        These countries will modernize regardless of American policies. The
    actions this administration takes in the next few months will determine
    American defense industry's role in Latin America for the next 25 years
    and there will be a spillover which will impact commercial industries
    as well. I am afraid that continuing this policy of restricting certain
    arms sales is anachronistic and patronizing. There are very good
    strategic reasons why it is in America's interest to ensure American
    defense industry is represented. I am interested in your views on this
    situation and if it is your intention to promote American interests by
    quickly mov[ing] to rescind this policy [which] prohibits the sale of
    advanced arms to Latin America?
        Answer. The USG has decided to authorize the issuance of marketing
    licenses to companies which wish to compete in Chile's selection of
    fighter aircraft, while making clear to both the GOC and to the
    companies involved that the licenses are for marketing information only
    and do not constitute approval for an actual sale. A decision whether
    to permit such a sale has not been made. This decision to issue
    marketing licenses was made so as not to disadvantage U.S. companies in
    the competition. These licenses allow these companies to provide the
    Government of Chile with technical data on advanced fighter aircraft.
        As you know, the Administration is reviewing U.S. conventional arms
    transfers toward Latin America in the context of the significant
    political, economic, and military changes that have been occurring in
    the past ten years. This review is ongoing. The welcome expansion and
    strengthening of democracy and democratic institutions in recent years
    makes it prudent for us to undertake this policy review at this time.
        Our policy worldwide is to consider pending arms transfers on a
    case-by-case basis. Our long-standing policy in Latin America is, and
    will continue to be, to address potential transfers in the context of
    restraint.
        Our enduring goals for the countries of Latin America are to
    enhance democracy including civilian control of the military, to foster
    regional stability, transparency and confidence building, and to ensure
    that the weapons modernization decisions of these countries address
    legitimate defense needs within their existing economic resources.
                                nato enlargement
        Question. I realize that prospective new members have worked among
    themselves to satisfy long-standing borderland ethnic disputes, but I
    am concerned that NATO has no process by which such disputes could be
    managed once these countries enter the alliance. Our experience with
    some current members of NATO should make us particularly cautious that
    we not repeat circumstances we were forced to accept during the Cold
    War but which we need not accept now. Will you insist that NATO develop
    and establish a dispute resolution mechanism as a principal condition
    of NATO entry for new members?
        Answer. No, we do not believe that a formal dispute resolution
    mechanism would be appropriate within NATO. While common membership in
    NATO has contributed to resolving longstanding differences among
    Allies, the U.S. has consistently opposed efforts to inject such
    disputes into NATO fora and we have cautioned certain Allies against
    using NATO institutions to further bilateral aims. Considering such
    disputes in NATO could impede consensus decision-making and could
    poison the atmosphere during discussions of Alliance policy. At the
    same time, the goal of NATO membership has moved some of those states
    who have indicated an interest in NATO membership to negotiate and
    resolve bilateral differences.
        While all NATO Allies share a common interest to preserve Alliance
    cohesion and effectiveness, we believe it is incumbent upon all NATO
    Allies to work creatively to resolve differences between them.
        Question. The Administration estimates the cost of expansion at $35
    billion over the next 12 years, including a $2.5 billion U.S. share.
    The Congressional Budget Office estimates that the U.S. share of the
    costs during a similar time will be between $4.8 billion and $18.9
    billion. How do you explain this discrepancy?
        Answer. The Administration's study and the CBO study were based on
    different assumptions. The Administration's cost estimates were based
    on certain assumptions about the projected European security
    environment, the military implications and associated costs of NATO
    adaptation, and the countries which will be invited to join the
    Alliance. The Administration used a capabilities-based analysis to
    ascertain the costs of developing the kinds of military capabilities
    that the Alliance, both new members and current ones, would need in the
    context of the current European security environment.
        The Administration's study projects a security environment in
    Europe over the period 1997-2009 similar to what exists today. In
    particular the study notes that realistic threat estimates show that a
    direct conventional threat to new members is unlikely for the
    foreseeable future and would take many years to develop, if at all. If
    the security environment were to change significantly for the worse,
    the costs would certainly rise. We do not anticipate that happening.
        The CBO study assumed a much more difficult threat environment,
    requiring significantly different force levels and postures.
        Question. All previous expansions (Greece, Turkey, Germany, and
    Spain) have required Senate advise and consent. At what point in this
    process will the Senate be asked for its advice and consent of the
    expansion?
        Answer. The accession negotiations for those countries invited to
    begin them at the July 1997 NATO Summit in Madrid should be concluded
    by the NATO Ministerial meeting in December. The result of those
    negotiations will be one or more instruments of accession signed by all
    NATO Allies, which, as in the case of previous new members, will be
    submitted to the Senate for advice and consent to ratification. We
    would therefore anticipate beginning the ratification process with the
    Senate in early 1998. After all Allies have ratified the instrument,
    the new members will themselves sign and ratify the amended Washington
    Treaty. During this process the Administration will continue to consult
    closely with the Congress.
        Question. Our objective is to strengthen economic freedom and
    security in Europe. We might be able to advance that cause by using the
    EU as a de facto European component of NATO that would properly link
    these two organizations in a way that they have not been linked before.
    We know that at least one EU member, Turkey, is so concerned about
    being left out of the EU that it may oppose NATO expansion. Clearly,
    our goal of continued American leadership and strong European allies
    would not be advanced if that were to happen. Why wouldn't we use EU
    membership as a guide to NATO expansion?
        Answer. The EU and NATO fulfill complementary purposes. The EU
    ensures its members' political and economic integration, while NATO
    supports its members, defense and security integration. But one is not
    a substitute for the other nor can a prospective candidate for
    membership in one necessarily also meet the membership criteria in the
    other. NATO views its own enlargement process as mutually supportive of
    and parallel to the EU's enlargement.
        Both NATO and the European Union are embarked upon significant
    processes of internal and external adaptation aimed at meeting the
    challenges of the post Cold War era. Both institutions have unique
    contributions to make in developing a new security structure in Europe.
        Joining the economies of central Europe to the EU single market is
    a massive undertaking. The EU will require its new members to meet
    numerous complex criteria that have nothing to do with NATO membership.
    Membership in the Alliance should neither be held up nor accelerated by
    the progress countries make in this process.
        Nor do we believe that EU enlargement alone can solve the security
    challenges facing Europe and particularly central and eastern Europe.
    While the EU decides how and when to expand, NATO membership will
    remain crucial to U.S. interests. NATO is the linchpin of European
    security and the principal mechanism for American involvement in
    Europe.
        The United States strongly supports the European Union's
    enlargement process and the objective of integrating new members as
    quickly as possible. We have also made clear that we do not believe
    linking NATO enlargement to any Ally's concerns about its relations
    with Europe or the EU would further our shared goals.
                                     ______

             Questions Submitted by Senator Ben Nighthorse Campbell
                      international drug trafficking/hidta
        Question. The State Department's Bureau of International Narcotics
    and Law Enforcement is charged to break foreign and domestic drug
    sources of supply, destroy illicit drug crops at their source, pursue
    drug kingpins, and interdict drugs.
        Illegal drug trafficking continues to be a serious problem for the
    United States. In my home state of Colorado, which the Drug Enforcement
    Administration has identified as a key cross-country transit point,
    there has been a significant increase in shipments of marijuana, crack,
    cocaine, heroin and methamphetamines. One drug kingpin alone is
    reported to be responsible for smuggling tons of cocaine into Colorado.
        To help address this problem, the DEA and the Office of National
    Drug Control Policy are establishing a High Intensity Drug Trafficking
    Area, referred to as a HIDTA, in the Rocky Mountain region.
        To what extent does the State Department's Bureau of International
    Narcotics and Law Enforcement work with DEA?
        What additional steps can the State Department and its Bureau of
    International Narcotics and Law Enforcement take to support DEA in its
    operation of the Rocky Mountain HIDTA?
        Will you provide me your assurance today to expand the State
    Department's role in working with DEA to support the Rocky Mountain
    HIDTA.
        Answer. The State Department's Bureau of International Narcotics
    and Law Enforcement Affairs (INL) works in close and continuing
    coordination with DEA at all levels, in Washington and outside the
    United States. State/INL and DEA are both members of the Inter-Agency
    Working Group on International Narcotics chaired by the Office of
    National Drug Control Policy. Both agencies develop policies, programs
    and budgets in mutual consultation and in coordination with ONDCP, in
    the policy framework defined by the National Drug Control Strategy.
    Officers of State/INL and DEA headquarters in Washington work together
    in a wide variety of other standing and ad hoc interagency groups and
    committees.
        DEA is fully engaged in all preparations by State/INL to represent
    the United States in global, regional, or bilateral diplomatic
    contacts, international conferences or negotiations. A DEA agent is
    assigned by DEA Headquarters to work as liaison officer to INL at the
    Department of State. In foreign countries, under the authority of the
    chief of mission, Narcotics Affairs Sections responsible for
    International Narcotics Control assistance to the foreign government,
    and DEA Country Offices engaged in cooperative drug enforcement
    operations with foreign government authorities, consult and cooperate
    closely. In each mission, the NAS and the DEA Country Office coordinate
    in preparing the narcotics control annex that is an integral element of
    the chief of mission's annual mission program plan in every major drug
    source or transit country.
        The most effective support that the Department of State and INL can
    provide to DEA's operation of the Rocky Mountain HIDTA is to carry out
    as effectively as possible the assistance programs in foreign countries
    whose purpose is to reduce the production of illicit drugs abroad and
    their smuggling to the United States. As a matter of equal importance,
    the INL program serves to improve the effectiveness of foreign drug law
    enforcement agencies and institutions with which DEA cooperates
    operationally abroad. We are committed to the importance of these
    programs, and will continue to dedicate our efforts to implementing
    them effectively.
        The Department of State will do its utmost to work with DEA in
    activities that will support the Rocky Mountain HIDTA. These will
    include implementation of INL assistance programs abroad, and
    diplomatic advocacy of our national drug control goals with foreign
    countries. Activities of DEA offices abroad will be similarly supported
    by the chiefs of mission, State Department and other USG agencies that
    are also parts of those missions.
               impact of international crime on the united states
        Question. The United States has seen within its borders serious
    levels of Russian Organized Crime, Asian gang activity, international
    drug trafficking, and money laundering.
        The Bureau of International Narcotics and Law Enforcement plays a
    lead role at the State Department in this area.
        What programs currently are operated by the Bureau and other State
    Department agencies to fight crime which has a direct impact on the
    United States?
        What are some of the successes of the Bureau in fighting crime
    which has a direct impact on the United States?
        Does the State Department have plans to expand the Bureau's law
    enforcement activities in the coming year? If so, in what ways?
        Answer. All of the INL Bureau's programs to combat narcotics
    trafficking and international crime are designed to fight crime which
    has a direct impact on the citizens and national security interests of
    the United States. INL also has responsibility for the development and
    implementation of $16.2 million in Freedom Support and SEED Act
    criminal justice programs. INL works directly with federal, state and
    local law enforcement and justice agencies to set priorities and carry
    out training programs abroad. U.S. programs abroad have led directly to
    the arrests of major Latin American drug traffickers, Asian organized
    crime figures involved in alien smuggling to the United States, arrests
    of Russian organized crime figures involved in various financial crimes
    against American citizens, and seizures of counterfeit U.S. currency
    abroad.
        The Department's Bureau of Diplomatic Security (DS) has fully
    trained law enforcement agents in many U.S. embassies abroad, and works
    closely with our domestic passport agencies to investigate the whole
    range of passport and visa offenses. DS agents have doubled their
    number of passport and visa fraud related arrests from 256 to 567 last
    year, a number of which involved terrorists, narco-traffickers, and
    fugitive felons.
        We will continue, and expand where possible, the outstanding
    bilateral initiatives by federal law enforcement agencies to forge new
    cooperative relations with law enforcement officials from Russia to
    Thailand to South Africa to Brazil. Programs stressing the need for
    rigorous internal controls, offices of professional development, and
    inspector generals are an important element of our approach. We will
    expand our programs with foreign law enforcement and bank regulatory
    agencies to address money laundering and related financial crimes.
    Programs with strong ATF, FBI and Customs support are underway in Latin
    America to address the problem of trafficking in small arms and stolen
    cars. Other commitments to cooperate on the problem of vehicle theft
    and the return of stolen property have been reached with Poland and
    through the United Nations with other nations of the NIS and Central
    Europe.
        We are engaging U.S. state and local law enforcement in cooperation
    with partner universities to expand our programs to train Central
    European, Russian and Independent States' law enforcement officials in
    community-oriented policing. These programs in Florida, South Carolina,
    Kentucky and Vermont will continue to promote the fundamental changes
    in how law enforcement officials maintain law and order, prevent and
    investigate criminal activity, including transnational crimes, in a
    democracy and market economy.
                              denmark/biker gangs
        Question. Recent news reports portray a deadly and startling war
    between armed biker gangs across Scandinavia, especially in Copenhagen,
    Denmark. A violent turf war between the Banditos and Hells Angels biker
    gangs has been raging since the summer of 1993, when the Bandidos moved
    into the area. What is especially disturbing is their choice of fire
    power--rocket-launched grenades and automatic weapons.
        The Danish Government has called on the United States for help.
        In addition to any support provided by the FBI, what additional
    steps can the State Department take to assist Denmark and the other
    Scandinavian countries with this serious biker gang war?
        Is there a mechanism in the Department of State by which experts--
    both law enforcement and community leaders--in the United States could
    be made available through a Technical Assistance program to assist
    Denmark's police departments and communities?
        Answer. Embassy reporting on this issue has helped focus attention
    on the problem. The existence of these gangs, among other organized
    crime concerns, was an important consideration for the Department as it
    worked with the FBI to develop its five-year overseas expansion plan,
    which includes the recommendation to assign a legal attache to Embassy
    Copenhagen in fiscal year 1998. Treasury's Bureau of Alcohol, Tobacco
    and Firearms has also worked extensively with Scandinavian authorities
    on these gangs and the illegal weapons they use. The Department's
    Bureau of International Narcotics and Law Enforcement Matters (INL)
    which works closely with U.S. law enforcement agencies in coordinating
    the fight against international organized crime, has also sponsored,
    through the U.N. Crime Division, two major conferences in Europe on
    stolen vehicles, including motorcycles, and continues to work closely
    with the National Insurance Crime Bureau (NICB), the FBI, U.S. Customs,
    and foreign police authorities worldwide to combat the international
    trade in stolen vehicles.
        Through cooperative efforts with our Embassies in the region, USIA,
    the Department's INL Bureau, and NGO's such as Sister Cities
    International, U.S. expertise can and is being made available to the
    Government of Denmark and other concerned governments in the region.
    Law enforcement attaches at the embassies and TDY personnel work the
    problem at the cop-to-cop level, and international visitor and guest
    speaker programs developed by the Embassy, the Department, and USIA can
    provide political and academic exchanges. INL will continue to work
    with law enforcement agencies on coordinated efforts to combat
    trafficking in stolen vehicles and illegal firearms. Additionally,
    Denmark has seven ``Sister City'' relationships in the United States
    that could be more effectively used to exchange law enforcement and
    broader community expertise in addressing the problem of gang activity.
    These local and state level cooperative efforts have also proven to be
    excellent mechanisms for the exchange of expertise and experience.
                     assisting other countries fight crime
        Question. Many countries around the world are experiencing rising
    crime rates, increasing violence, and a breakdown in law enforcement.
        The seriousness of this issue was addressed by AID Administrator
    Brian Atwood in his testimony on February 27 before the Foreign
    Operations Subcommittee. Mr. Atwood stated: ``The reality is that most
    nations in conflict simply lacked the institutional capacity to avoid
    escalating violence.''
        The United States has a wealth of expertise in ``what works'' to
    fight crime, drugs, and gangs. Experts who have first hand experience
    in these areas--from law enforcement and community based
    organizations--could be invaluable resources to other countries
    experiencing these problems if some technical assistance were
    available. This assistance could be provided on a reimbursable basis,
    where appropriate.
        The State Department's Bureau for International Narcotics and Law
    Enforcement operates a Training and Technical Assistance Program which
    helps governments in Central Europe and the New Independent States with
    organized crime, financial crime and drug trafficking.
        Does the Bureau plan to expand the scope of its Training and
    Technical Assistance Program to assist other countries?
        What are some of the Bureau's anticrime successes?
        Does the State Department operate any other assistance programs
    which would directly assist communities and local law enforcement in
    other countries to fight gangs, drugs, and crime?
        When a country such as Denmark requests help from the United States
    to combat gang violence, what are your thoughts on providing technical
    assistance to developed countries?
        Would you advocate an expansion of programs operated by the State
    Department which would assist other countries fight gang violence,
    crime, and drugs?
        Answer. The State Department's Bureau for International Narcotics
    and Law Enforcement Affairs (INL) has traditionally had a training and
    technical assistance program to combat narcotics trafficking and
    production in Latin America, Asia, the Caribbean, and Africa. This
    assistance has been delivered bilaterally and through international
    organizations. In addition, the Department has expanded the scope of
    its training and technical assistance programs to meet emerging threats
    in Central Europe and the Newly Independent States.
        In Africa, INL is providing a two-week condensed International Law
    Enforcement Academy (ILEA) seminar on organized crime, financial fraud
    and drug trafficking to both French and English speaking countries. We
    are also funding anti-narcotics training by the U.S. Customs service
    and DEA for a number countries in this region.
        In the Caribbean, in addition to its drug efforts, INL along with
    U.S. federal, state and local law enforcement agencies will provide
    training on combatting gang violence, and witness and judicial
    protection.
        In Asia, INL is working with U.S. federal law enforcement agencies
    and providing training in the areas of forensic science, hostage
    negotiations, and financial crimes. We are also funding anti-narcotics
    training by the U.S. Coast Guard, U.S. Customs Service and DEA in the
    region, in addition to funding a heroin reduction program through the
    United Nations Drug Control Program (UNDCP).
        In Latin America, INL is providing training to combat firearms and
    drug trafficking, organized crime, and financial fraud.
        One of INL's anti-crime successes was the prosecution and
    conviction of a major Russian organized crime figure in New York City,
    which was a direct result of having the Russian police work side-by-
    side with U.S. federal law enforcement during the investigation of the
    case. The Russian police were able to provide invaluable insight into
    the suspects and their criminal enterprises.
        The INL Training and Technical Assistance Program is the only
    assistance program operated by the State Department that directly
    assists foreign communities and foreign law enforcement in their
    efforts to combat gangs, drugs and crime.
        When a developed country, such as Denmark, requests assistance, we
    provide both policy and operational guidance. This allows the
    requesting country the ability to view issues in a much broader range
    than just that of operational concerns. As a rule, we do not fund
    training programs for developed countries, although we do permit the
    inclusion of their officials in existing training programs on a
    reimbursable and space available basis, where appropriate.
        Within overall budgetary and program constraints, we believe there
    are excellent opportunities for expanding these successful programs. We
    hope to be able to provide increased assistance to other regions as
    noted above. This expanded effort would help to combat and disrupt
    transnational crime on a larger global scale, as noted in the
    President's remarks during his address in 1995 to the United National
    General Assembly.
                         coordination of crime programs
        Question. There are a number of anti-crime programs operated by
    various bureaus and agencies in the State Department, the Justice
    Department and the Treasury Department.
        For example:
      --The State Department's Bureau of International Narcotics and Law
            Enforcement targets drug production and trafficking, as well as
            international crimes.
      --State's Bureau of Latin American Affairs funds the International
            Criminal Investigative Training Assistance Program (ICITAP)
            which is operated by the Justice Department and trains police
            in Central America and Bosnia.
      --AID funds the Administration of Justice Program which supports
            courts and prosecutors in developing countries.
      --The Justice Department has an Executive Office of National Security
            in the Deputy Attorney General's Office, an Office of
            International Affairs in the Criminal Division, and an
            international clearinghouse of justice information operated by
            the Department's Office of Justice Programs.
      --Other Justice Department agencies, including the FBI and DEA are
            actively involved in international crimes and drug trafficking.
      --And, the Treasury Department's Financial Crimes Enforcement Network
            (FINCEN) works with international organizations to target money
            laundering and other complex financial crimes.
        How do you ensure full coordination between the State Department
    and other federal agencies which also support various international
    crime programs?
        Is there an inter-agency working group which would ensure
    coordination of international crime programs? If so, which federal
    agencies are represented, at what level, and how often does the group
    meet?
        Answer. In an effort to improve full coordination between the State
    Department and other federal agencies which also support international
    crime programs, the Department's Bureau of International Narcotics and
    Law Enforcement Affairs (INL) chairs a monthly inter-agency Law
    Enforcement Working Group (IWG). The group jointly develops programs
    and priorities for the responsible use of INL, Freedom Support Act
    (FSA) and Support to East European Democracy (SEED) funds for anti-
    crime training and technical assistance programs.
        The law enforcement agencies of the Departments of Justice,
    Treasury and State participating in these meetings include: Drug
    Enforcement Administration, Federal Bureau of Investigation,
    Immigration and Naturalization Service, International Criminal
    Investigative Training Assistance Program, Department of Justice's
    Office of Professional Development, Internal Revenue Service, Bureau of
    Alcohol, Tobacco and Firearms, Customs, Secret Service, Financial
    Crimes Enforcement Network, the Federal Law Enforcement Training
    Center, and the Diplomatic Security Service. Representatives are
    usually international training division chiefs and representatives of
    operational units in each agency, as appropriate. Other participants
    include: Office of Management and Budget, the Office of the Comptroller
    of the Currency, the Federal Reserve, the State Department's assistance
    coordinators for Central Europe and the New Independent States, and a
    representative of the U.S. Intelligence Community.
        The Department (INL) also prepares a cable for our embassies which
    provides information from the meetings on matters of general interest.
    These reports may be used to assist in decisions made by the embassy's
    country team, which includes representatives of the law enforcement
    community.
                           middle east peace process
        Question. In signing the Hebron agreement with the Palestinians,
    Israel's Prime Minister, Benjamin Netanyahu, has demonstrated Israel's
    continuing commitment to the peace process and the willingness to take
    risks for peace. Yet the toughest issues in the peace process now will
    be addressed in the negotiations, making it more important than ever
    that the U.S. stand by its friend and ally Israel.
        What are your plans to provide assistance to those countries
    directly involved in the peace process? What specific support will be
    provided to Israel?
        Given the helpful role that Jordan has played in advancing the
    Middle East peace process, what are your plans to provide sufficient
    support to Jordan?
        Answer. The U.S. continues to provide substantial bilateral
    assistance to those countries directly involved in the peace process.
    Assistance to Israel and Egypt account for a substantial portion of
    U.S. bilateral economic and military aid. In the Administration's
    fiscal year 1998 budget request, we have once again requested
    traditional assistance levels for Egypt and Israel. For Israel, this
    includes $1.2 billion in Economic Support Funds and $1.8 billion in
    Foreign Military Financing. In addition, approximately $80 million is
    provided to the United Israel Appeal to support refugee relocation
    assistance to Israel. Israel is the beneficiary of numerous cooperative
    programs with the U.S. Department of Defense (and has earned the
    designation of Major Non-NATO Ally), as well as cooperation in the
    field of counterterrorism. In addition, Israel benefits from numerous
    regional programs, including those in the critical areas water resource
    and environmental management, that are outgrowths of the Middle East
    peace process. It is the desire and expectation of the Administration
    that these programs will continue.
        The U.S. is committed to supporting King Hussein's difficult
    political decisions on behalf of peace and his government's efforts to
    maintain stability and promote Jordan's long-term economic viability.
    The President's fiscal year 1998 budget request asks for an increase in
    Economic Support Funds for Jordan. In addition, Jordan benefits from
    military training under the International Military Education and
    Training (IMET) program, a Foreign Military Financing program
    (currently supporting delivery and maintenance of a squadron of F-
    16's), recent designation as a Major Non-NATO ally, a program of debt
    relief, demining assistance, and from several key regional programs in
    the areas of water resource and environmental management associated
    with the multilateral track of the Middle East peace process. In
    addition, we recently signed an ``Open Skies'' air transport agreement
    and reached agreement on a Bilateral Investment Treaty. We are always
    looking for creative ways to support Jordan as it transitions to an
    open economy and continues to support the peace process. The President
    has made clear we are committed to being responsive to Jordanian
    requests and we are always looking for ways to do so.
                                   terrorism
        Question. International terrorism at both home and abroad continues
    to be a matter of great concern. The United States has provided
    strategic and monetary assistance to her allies to help fight
    terrorism. For example, Congress has appropriated $100 million for
    anti-terrorism assistance to Israel.
        How have these funds been allocated?
        Answer. The President requested and Congress appropriated $50
    million for Phase I of the counterterrorism equipment assistance
    package for Israel in fiscal year 1996. These funds are being used by
    mutual agreement for Israel to acquire a variety of screening systems
    for use at checkpoints to inspect bags, goods, pallets and containers;
    for equipment to neutralize and dispose of explosive devices; for
    equipment to enhance forensic investigative capabilities of the Israeli
    police; and for equipment to upgrade Israeli police surveillance and
    operational capabilities.
        The President requested and Congress appropriated a second tranche
    of $50 million for Phase II of the counterterrorism equipment
    assistance program for Israel in fiscal year 1997. We have recently
    concluded intensive discussions with Israeli authorities and have
    agreed that these Phase II funds will be used to fill in the remaining
    gaps of screening systems for detecting explosives; for equipment to
    establish a border control and personnel monitoring system; for the
    purchase, testing and enhancement of surveillance and detection
    equipment; and for additional equipment to enhance the investigative,
    forensic science, and operational capabilities of the Israeli police
    forces.
        Question. Have these funds been effective in combatting terrorism?
    Could a similar program be applied to other countries which face
    comparable threats?
        Answer. The equipment Israel is acquiring under the equipment
    assistance program will substantially upgrade its counterterrorism
    capabilities, especially when the entire equipment package is
    completely installed and operating. Even now, with only that limited
    portion of the program that has been completed, we have seen a major
    improvement in Israel's ability to speed up the movement of people and
    goods from Palestinian areas in Gaza to and through Israel. This in
    turn enhances the economies of both Israelis and Palestinians and
    reinforces the positive lessons learned from security cooperation.
        However, as demonstrated by the Palestinian March 21 suicide
    bombing at a Tel Aviv cafe by a terrorist from the West Bank, there is
    simply no fool-proof equipment or security system that can stop
    determined terrorists all of the time.
        In the long term, we believe the program will play a major part in
    upgrading Israeli security capabilities. Moreover, some of the
    equipment can play an important role in providing the security
    assurances both Israelis and Palestinians require. Although we are
    still in the early stages of this effort, it may provide experience in
    border control security systems that could be relevant elsewhere.
        Question. In what other ways could the United States effectively
    work to combat terrorism. What more should the U.S. do in the future?
        Answer. There is no one certain solution to the problem of
    terrorism. Basic elements of our policy include: no concessions to
    terrorists; aggressive pursuit of terrorists; using the combined assets
    of law enforcement, diplomacy, and intelligence; and using economic and
    diplomatic sanctions against designated state sponsors, while urging
    other nations to do likewise.
        We also use a variety of specialized tools and measures, such as
    training, counterterrorism research and development, improving
    intelligence collection, analysis and sharing, and enforcement of
    political and economic measures against state supporters of terrorism,
    and hampering terrorists' fundraising.
        Specific programs, for example, include State's Antiterrorism
    Assistance (ATA) Program which has trained over 18,000 foreign
    officials from 90 countries in CT techniques and aviation security. We
    need to keep working on training as the threats continue to evolve. We
    also need to sustain our productive interagency research and
    development program to make use of modern technology to detect and
    counter terrorist attacks, explosives and other lethal substances.
        We also work with other governments in multilateral
    counterterrorism initiatives. For example, working with friends and
    allies in the Group of Eight, we are participating in negotiations in
    the U.N. Sixth Committee on a new Terrorist Bombing Convention. We are
    also working to develop better ways to counter terrorism against land
    transportation, such as buses and trains and to investigate attacks
    through improved information sharing and data bases. And, of course, we
    share information and work with the Justice Department and FBI, the
    lead agencies for dealing with terrorism attacks in the United States
    and investigating terrorist attacks against Americans overseas.
        In order for these and other specific counterterrorism efforts to
    succeed, and to maintain relations with other governments that are
    needed for effective cooperation, we also need sustained resources
    adequate to support overall U.S. leadership and diplomacy abroad.
                              illegal immigration
        Question. The waves of illegal immigration continue to take their
    toll on the resources of inland states, such as Colorado and Utah. As
    these states grapple with the problems associated with illegal
    immigration, the countries of origin seem to do little to stem the
    tide. It also seems that if the origin countries, such as Mexico, had
    better economies, they could provide employment for their citizens and
    reduce or eliminate a major reason for their leaving.
        What are your plans to leverage these countries of origin to do
    more in controlling illegal immigration?
        Answer. While many migrants depart their country for economic
    reasons, some are driven from their homelands by natural disasters,
    political turmoil and wars. Whatever the reason, the United States
    alone cannot stem this illegal movement of migrants across
    international boundaries. In response to President Clinton's directives
    to deter alien smuggling, the Department has been engaged for some time
    with both sending and transit countries. We have been working with
    these countries to pass laws which would criminalize alien smuggling.
    Two countries in Central America, Nicaragua and Panama, have passed
    laws against alien smuggling as a result of our efforts. Other
    countries within the region are using a model legislative package we
    have created, to introduce similar laws. We will continue to work with
    these and other countries to criminalize alien smuggling.
        The U.S. is actively engaged with countries throughout the
    hemisphere in bilateral and multilateral discussions to address
    migration and migrant trafficking. In March, Assistant Secretary
    Phyllis Oakley and INS Commissioner Doris Meissner led a delegation to
    the Second Regional Migration Conference held in Panama. The conference
    was attended by vice ministers from every government in Central and
    North America. This forum assists in coordinating migration policy,
    procedures, law enforcement approaches and training opportunities.
        Alien smuggling is facilitated by official corruption. Poorly
    trained and paid immigration inspectors and border guards are easily
    bribed to assist smuggled aliens. In an effort to instill a sense of
    professionalism, the Department, in concert with the Department of
    Justice, has funded training programs for these officers. The
    Department has cancelled visas of officials known to be involved in
    alien smuggling and made their trafficking activities known to the
    public.
        Information is a key element to combatting alien smuggling. The
    Department has worked with cooperative transit and sending countries in
    an effort to improve the flow of information regarding frequently used
    alien smuggling travel routes, known smugglers and fraudulent documents
    vendors.
        These initiatives are not exhaustive but representative of the
    Department's efforts to combat alien smuggling within source and
    transit countries.
                                  microcredit
        Question. What are your thoughts on microcredit generally? What
    plans does the State Department have to expand the microcredit program?
        Answer. Microcredit programs can help low-income people become
    economically self-reliant through market-driven, productive activities.
    Credit supports entrepreneurs and encourages microenterprises and small
    businesses to grow.
        Women will benefit particularly from microcredit programs. In Latin
    America, for example, women-owned businesses are one of the fastest
    growing segments of the microenterprise sector.
        Economic reform measures such as the lifting of interest rate caps
    and deregulation of the banking sector are key to the success of
    microcredit programs. We are urging the governments of developing
    countries to move ahead on economic reform.
        USAID has an active microenterprise initiative, developed in close
    consultation with Congress, which provides training and technical
    assistance to banks and borrowers, and capital for non-banking
    institutions providing microcredit. This program provides more than
    $120 million annually and has just been extended for two more years.
        We are encouraging multilateral development institutions, such as
    the World Bank, to expand funds and programs available to support
    microenterprise and small business.
        Support for microenterprises was an initiative of the 1994 Miami
    Summit of the Americas. We will be reviewing the progress on this
    initiative as we prepare for the next Summit of the Americas to be held
    in Santiago, Chile in 1998.
                                    bulgaria
        Question. What action is the State Department taking to provide
    assistance to Bulgaria? What additional steps does the Department plan
    to take in the future?
        Answer. Through the Support for East European Democracy (SEED)
    program, we have allocated $2.5 million to provide humanitarian
    assistance to Bulgaria consisting of $2.1 million in pharmaceutical
    supplies and $400,000 in response to an appeal from the International
    Red Cross. We have also offered Bulgaria $25 million in agricultural
    credit guarantees to help them import vital foodstuffs. We presently
    are exploring the possibility of providing additional food aid through
    the Food for Peace program.
                 current position on the proposed 621 provision
        Question. Last year, the Administration opposed the provision
    included in the Senate version of the Commerce, Justice, and State
    Appropriations Bill related to the importation of ``curios and
    relics''. (Section 621) Does the State Department still have concerns
    outlined in this position paper?
        Answer. The Department continues to have the same concerns
    regarding proposed legislation modifying Section 38 of the Arms Export
    Control Act (AECA) and thus restricting the President's authority to
    control the importation of defense articles and services, including
    curio and relic firearms, into the United States.
      --Currently, the AECA generally prohibits the return for private sale
            of any U.S. origin defense items furnished under the AECA or
            any foreign assistance or sales programs. Although there's an
            exemption permitting consideration of imports of curio and
            relics, for important policy concerns, end-use and retransfer
            controls and other legal concerns, the State Department
            generally advises that import-licenses be denied. The
            legislation originally proposed would have precluded such
            considerations and the Department believes such a review is
            more appropriate than a legislative mandate to approve all such
            requests.
      --Furthermore, in most cases, these firearms, now designated curios
            and relics, were originally provided to foreign governments by
            the United States for their national defense, usually free-of-
            charge. In most of these cases, the USG is allowed to receive
            the net proceeds of any sales made by foreign governments of
            defense articles provided on a grant basis by the U.S. An
            enactment that would permit the importation of all curios and
            relics would restrict the USG from requiring foreign
            governments to return such proceeds and certain foreign
            governments, rather than U.S. taxpayers, would reap a windfall
            from such sales.
      --Approval for all curios and relic importation would also require
            the Department to approve the importation of curio and relics
            from proscribed countries. As indicated in the September
            position paper, Vietnam holds a significant quantity of U.S.
            origin M-1 firearms, but is considered a proscribed country and
            prohibited from exporting military items to the United States
            under the International Traffic in Arms Regulation.
        We continue to believe that such a measure would limit the
    Department of State's ability to provide advice relating to foreign
    policy and national security considerations related to such transfers.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                                  icass reform
        Question. Dick Moose, Pat Kennedy and Rich Greene have worked for
    years to develop a system so that overseas administrative costs are
    more fairly and accurately distributed. It is called ICASS--
    International Cooperative Administrative Services.
        It is not reflected in the President's budget in State, Commerce,
    Justice or any other agency. Why? When are we going to receive a budget
    amendment?
        ICASS does not distribute telecommunications and facilities costs.
    Why don't we distribute those costs too?
        Answer. When the President's budget was released on February 6, we
    had not yet finalized the ICASS budget estimates. This task is now
    complete. I am pleased to report that on March 17, President Clinton
    transmitted to Congress an fiscal year 1998 budget amendment that will
    provide the legislative authority to make a one-time transfer of $113
    million from the Department of State to the 23 other United States
    Government agencies and departments operating abroad in order to
    implement the ICASS system.
        We consider ICASS a work in progress. The fiscal year 1998 ICASS
    budget amendment includes such items that are now currently being fully
    funded by State as building operating expenses, non-residential local
    guard costs, and posts' community liaison offices. For fiscal year
    1998, these were the only additions to the pool of shared
    administrative expenses that the participating agencies would agree to
    include in ICASS. In future years, however, the Department would like
    the participating agencies to consider adding such items as non-
    Diplomatic Telecommunications Service (DTS) communications expenses
    (e.g., the distribution of classified and nonclassified cable traffic
    at posts) and Diplomatic Security costs. DTS costs are already
    distributed through a separate cost sharing program. With respect to
    our overseas facilities, the Department made a conscious decision to
    initially exclude long-term leased and government owned properties from
    the pool of shared ICASS costs due to the magnitude of the value of
    these capital investments and the complexity of managing these
    facilities.
                          capital improvement funding
        Question. Your budget includes no funding for new capital
    construction. Instead it states that the Department of State will rely
    on real property sales for Embassy construction and renovation. In
    fiscal year 1998, it is estimated that the State Department will yield
    $137 million from such sales.
        Are such estimates realistic?
        For which embassy projects are you proposing to use these funds?
        Answer. The Security and Maintenance of U.S. Missions Fiscal Year
    1998 Budget document cited two sales figures: $180 million for fiscal
    year 1997 and $137 million for fiscal year 1998. Both of these are
    based on the total dollar amounts to be realized if all properties
    projected for possible sale in those years are in fact sold and if
    sales take place at or near estimated values.
        In fiscal year 1997 to date, 15 sales have been completed from
    which approximately $38 million in sale proceeds will be realized. In
    addition, offers have been accepted for another 19 properties, but
    sales have yet to be completed. The dollar value of these latter
    transactions is approximately $69 million.
        The ability to realize the full $180 million in fiscal year 1997
    and $137 million in fiscal year 1998 is dependent on multiple factors,
    many of which are beyond the Department's control. Changes in local
    real estate market conditions, delayed receipt of host government
    approval for sale and/or USG tax exempt status, unexpected financial
    difficulties encountered by purchasers, political upheavals and/or
    catastrophic events, and unanticipated legal issues requiring
    resolution, frequently intervene and disrupt sale timeliness.
        The Department intends to use fiscal year 1997 proceeds of sale for
    residential housing acquisition to buy down the lease hold account, and
    acquire new office and other diplomatic facilities. We plan to use
    proceeds from the sale of properties in Germany to help finance the new
    embassy office building in Berlin; proceeds from Bangkok to finance
    needed construction in Bangkok and also construction and acquisitions
    in China; and the proceeds from Beirut to construct new facilities in
    Luanda, Kampala, and Abidjan.
        Not all of the requirements in the above posts can be financed with
    proceeds of sales. A further concern is that some of these scarce funds
    may have to be used for other high priority, unbudgeted needs elsewhere
    (e.g., Bridgetown, Capetown, Doha, Dubai, Dushanbe, Istanbul, Kingston,
    Rabat, Seoul, Tashkent, Tunis, and posts in Nigeria and Pakistan).
                      capital improvement funding--germany
        Question. What is the situation in Germany? As I understand it, the
    plan since the early 1990's is to sell property in Bonn to build a new
    Embassy in Berlin. Is that plan on schedule? Will our Berlin Embassy be
    ``self-financing?''
        Answer. We plan to relocate the American Embassy to Berlin in the
    summer of 1999.
        The staff will continue to utilize two existing buildings for
    office space until the new embassy is built. One building is the former
    chancery of the American Embassy to East Germany, and the second is
    located at Clayallee, site of the former U.S. Mission to Berlin.
    Renovation of these facilities (security, fire/life safety, and make
    ready work) in preparation for the relocation will be completed by the
    summer of 1998 and cost approximately $6 million.
        Through negotiations with the German government, the Department has
    acquired housing units in Berlin in exchange for housing units in Bonn.
    The Department is evaluating the condition of these properties to
    determine necessary renovations. Because of possible high renovation
    costs, the Department is exploring alternatives, including disposal of
    some current housing to finance construction and/or the acquisition of
    more cost effective housing.
        Because appropriations are not available, the Department will use
    asset management to finance to the extent possible, the construction of
    new facilities, i.e. from the proceeds of sale of various properties in
    Germany, which will become excess when the Embassy relocates to Berlin.
        Short term plans call for the sale of six properties. The
    Department has received approximately $12.5 million from the sale of
    properties in Duesseldorf and Stuttgart, and anticipates proceeds of $4
    million from the sale of properties in Hamburg.
        We anticipate the majority of required funds for construction of
    the new chancery to come from proceeds generated from the sales of the
    Berlin Radio In Allied Sector (RIAS) Site and Bonn Plittersdorf Housing
    Compound. The Plittersdorf housing properties cannot be made completely
    available to a purchaser until the Bonn properties are closed in the
    summer of 1999.
        An Architectural and Engineering firm has been selected to design
    the new chancery building. As soon as sufficient funds from the sale of
    assets in Germany are available, the Department will proceed with the
    design. Design is expected to be completed in 15 months once the notice
    to proceed is given.
                              new post in vietnam
        Question. I've understood that for some time the Department has
    planned to open a new consulate in Saigon, or Ho Chi Minh City as it is
    now called. Apparently that is where the business opportunities are for
    U.S. industry and it is where there is an extremely high consular
    workload. It would be the third most active consular post in Asia.
    Where does the Department stand on opening this post? When are we going
    to see this proposal? How big a consulate do you contemplate?
        Answer. I agree with your assessment. A consulate in Ho Chi Minh
    City would be very important in addressing a very large consular
    workload and in advancing our commercial and other interests in
    southern Vietnam. It would also allow us to monitor more closely human
    rights and social conditions in Vietnam. Accordingly, the Department
    has conducted consultations with Congressional committee staff on its
    plan to open a post in Ho Chi Minh City. The Department is now
    considering whether to submit a formal reprogramming notification that,
    if approved, would permit an opening of this post in the current fiscal
    year.
        Our most conservative estimates are that the consulate will process
    roughly 16,000 to 20,000 immigrant visa applications and 75,000 non-
    immigrant visa applications per year. The new post will also provide
    citizen services for nearly 3,000 resident Americans and roughly 75,000
    American citizen visitors per annum. The Department's plan, if approved
    by the Congress, would be to assign eighteen direct-hire American
    employees to Ho Chi Minh City, not including temporary positions
    required for oversight of any facilities construction/renovation
    projects. Among these employees would be eight consular officers.
        Three other USG agencies have expressed interest in being
    represented at the post: the Department of Commerce (Commercial
    Service), the U.S. Information Agency and the U.S. Immigration and
    Naturalization Service.
                                      fees
        Question. In the name of ``government reform'' it looks like
    Franklin Raines at OMB has really screwed up the State Department's
    budget.
        As I understand the budget proposal, $140 million in visa fees now
    collected and retained by the Department would now go ``on budget'' and
    be scored by CBO. So this Subcommittee would have to add $140 million
    to the State Department appropriation 4 and take up room in our
    allocation 4 just to provide the funds you now have for free.
        How does that provide an incentive? It seems to me that OMB may
    feel good about this proposal that is theoretically sound, but in the
    real world the State Department loses.
        Answer. There are several good reasons for implementing the fee
    proposal. It is good government to establish a closer link between the
    fees charged to service users and the financing of the Government
    operations that provide the service. The fee proposal will give the
    Department greater flexibility to meet mandatory passport and visa
    issuance workload. As workload increases, the Department's revenue will
    increase to match the rising cost of providing increased services. The
    fee proposal allows the Department to adequately budget for inflation
    and investment in the future. The fee funded portion of the
    Department's diplomatic and consular functions will be insulated from
    the impact of world-wide inflation. The Department can invest in the
    tools required to provide more effective service and the Department can
    better ensure that our core diplomatic functions are adequately funded.
        In addition to specific authorization and appropriation language,
    the Administration is proposing a change to the scoring rules under the
    Budget Enforcement Act (BEA) of 1990 to make this proposal work. This
    scoring change will address the concerns raised concerning the impact
    of this proposal on Congressional Budget Office scoring and budget
    subcommittee allocations. If the Administration and Congress work
    together to put these legislative pieces in place, we can make the
    transition to greater application of user fees to provide more
    efficient and effective Department services at less cost to the general
    taxpayer.
                            function 150 priorities
        Question. Why is the Administration so committed to putting a
    priority on giving money to others rather than supporting our own men
    and women? Does this reflect your priorities, or is this OMB again?
        Answer. The President's fiscal year 1998 International Affairs
    budget request of $19.45 billion seeks to sustain and support America's
    leadership. I urge you to support full funding for this request.
    American leadership is the cornerstone of efforts around the world to
    advance American prosperity; ensure the emergence and maintenance of
    free markets and democracy; confront the problems of environmental
    degradation, runaway population growth, and endemic poverty; achieve
    regional peace and stability; and help others cope with humanitarian
    crises. The request reflects the fact that these objectives cannot be
    achieved without strong and proactive diplomacy.
        The Foreign Operations component of the President's request seeks
    increased funding to support transition to democracy and free markets
    in the New Independent States, including the Partnership for Freedom
    trade, investment, and anti-crime initiative. The Administration is
    also requesting additional funding to combat narcotics and deal with
    unanticipated crises by drawing on Economic Support Funds and funds for
    voluntary Peacekeeping Operations. The request also includes a down
    payment on U.S. arrears to the Multilateral Development Banks. All of
    these activities advance American interests.
        I appreciate your continued support of sufficient funding for State
    Department Operations. Maintaining America's strength requires world-
    class diplomacy. Given broad, bipartisan support for reducing the
    Federal deficit, this request increases funding for Department of State
    operations by a modest four percent. This increase would cover
    inflation and provide the funding the Department must make to modernize
    information technology and reverse the deterioration of infrastructure
    overseas.
                       duplication between state and fcs
        Question. Our House Chairman, Hal Rogers, believes that State's
    economic officers often duplicate the function served by our Foreign
    Commercial Service Officers overseas. It has always seemed to me that
    they are different types of people doing different missions. FCS
    officers often have background in the private sector and hustle to help
    American businesses get market access and contracts. State Economic
    Officers are more traditional Foreign Service officers who negotiate
    trade agreements with foreign ministries and who provide economic
    reporting. What is your position on this issue Madam Secretary?
        Answer. I agree with your assessment. We need both Foreign
    Commercial Service Officers and State Economic Officers working
    together overseas, because they have different responsibilities and
    skills.
        State Economic Officers seek to influence foreign government's
    legal and policy environment on economic issues affecting the United
    States and promote policy reforms to provide a more predictable
    environment for U.S. business. Commercial officers promote exports by
    helping individual U.S. firms take advantage of the existing business
    environment. In major markets we need both to push governments to level
    the playing field and to help U.S. companies challenge the competition.
    In small markets the State Department Economic Officers do both jobs.
        We know the House Subcommittee is concerned about overlap. To the
    extent that there is any overlap, there is always room for improved
    coordination. I will look to Stu Eizenstat, when he becomes Under
    Secretary for Economic, Business and Agricultural Affairs at the State
    Department, to continue the progress made by former Under Secretary
    Spero at dealing with concerns raised by the House Subcommittee
    regarding an effective division of labor between State and Commerce
    officers overseas.
                    international organizations supplemental
        Question. If we give the U.N. the $658 million you have requested
    for peacekeeping arrearages, how do we know we won't be right back
    again in another year or two?
        Answer. Effective in fiscal year 1996, the Administration began
    notifying Congress of its intention to vote for a new or expanded
    United Nations peacekeeping operation 15 days in advance of the
    Security Council vote, and providing a notice of reprogramming of
    existing appropriated funds.
        In addition, the critical, examinations which the Administration
    undertake of existing peacekeeping operations is reflected in a
    generally downsized level of peacekeeping operations at the U.N. in
    recent years.
        Question. Isn't most of the arrearage request for money Britain and
    France say we owe them for Bosnia?
        Answer. The attached table shows the operations and amounts for
    which we have requested funding to pay arrearages. The UNPROFOR
    operation is the largest single line item. However, we do not have
    information from the U.N. as to how payments from the United States
    might be spent, such as which countries could expect to receive
    reimbursement for their participation in assessed peacekeeping
    operations and which countries would not be reimbursed.

    Fiscal year 1997 arrears to U.N. peacekeeping operations

                             [Dollars in thousands]

            U.N. Force/Region                                        Arrears

    UNIKOM--Iraq/Kuwait...........................................    $2,539
    MINURSO--Sahara...............................................    30,016
    UNPROFOR--Yugoslavia..........................................   533,306
    UNOSOM II--Somalia............................................    94,004
    UNAMIR--Rwanda................................................     4,498
    UNOMIL--Liberia...............................................       268
    UNIFIL--Liberia...............................................    15,715
    UNAVEM--Angola................................................    22,276
    UNFICYP--Cyprus...............................................     3,029
    UNOMIG--Georgia...............................................     2,364
                        --------------------------------------------------------------
                        ____________________________________________________

          Total...................................................   708,015
                        ==============================================================
                        ____________________________________________________
    Fiscal year 1997 funds available to pay arrears \1\...........    50,000
    Outstanding after payment.....................................   658,015

    \1\ Payment to be made upon required certification.
    ---------------------------------------------------------------------------
                                 nato expansion
        Question. In 1956, I remember when the Hungarians rebelled and the
    Russians invaded. They believed Secretary Dulles and our radio
    broadcasts, but we did not come to their aid.
        Now you are proposing to bring Poland, the Czech Republic,
    Slovakia, and Hungary into NATO.
        Does this mean that you are now making a treaty commitment that the
    U.S. is obligated to go to war to defend these countries? That is what
    you are saying, isn't it?
        Answer. Article 5 of the North Atlantic Treaty provides that, in
    the event of an armed attack against a member of NATO, each other
    member ``in exercise of the right of individual or collective self-
    defense recognized by Article 51 of the Charter of the United Nations,
    will assist the Party or Parties so attacked by taking forthwith
    individually and in concert with the other Parties, such action as it
    deems necessary, including the use of armed force, to restore and
    maintain the security of the North Atlantic area.''
        The Treaty protects our right to act in accordance with our
    national interests and the provisions of our Constitution. We do,
    however, consider it a commitment to come to the assistance of any NATO
    member who is the victim of outside aggression. Whichever new countries
    are admitted to NATO (and that decision has not yet been made) will
    bear the same responsibilities and share the same rights and privileges
    as the existing members.
        NATO's essential purpose to safeguard the freedom and security of
    its members and to work for the establishment of a just and lasting
    peaceful order in Europe has not changed and will not change with the
    admission of new members. NATO's principle of collective defense has
    served as an effective deterrent to armed aggression against its
    members for almost 50 years. Enlarging NATO will further our efforts to
    strengthen stability and security in Europe.
                                     ______

               Question Submitted by Senator Barbara A. Mikulski
                              outdated technology
        Question. How can our diplomats represent our interests with rotary
    phones and outdated computers?
        Answer. The Department of State is engaged in a long-term effort to
    modernize its information technology to successfully support the
    conduct of foreign affairs. To this end, the Department has focused on
    three areas in its modernization efforts:
      --The application of management improvement strategies for all
            information technology projects, including appropriate decision
            making processes, project management methodologies, capital
            planning and performance measures practices;
      --A coordinated planning approach including a Strategic Plan that
            lays out a five-year program that will resolve critical
            problems with our obsolete technology infrastructure. In
            addition, we are implementing a Tactical Plan, to be followed
            over the next two years to achieve the goals set out in the
            Strategic Plan. Simply put, the Strategic Plan states what must
            be done and the tactical plan lays out in two-year increments,
            how we will do it;
      --Through targeted investments, we have directed limited IRM funding
            to the Department's high priorities: replacing obsolete
            equipment (desktop PC's, overseas radios and telephones);
            extending electronic mail world-wide; and upgrading our
            mainframe computer capabilities. We have made strides in
            reducing the number of obsolete units in unclassified systems
            overseas, classified systems overseas, telephones, unclassified
            e-mail, and computer mainframes.
        Our next step is to continue investing in information technology
    upgrades and improvements. The additional $80 million we plan to invest
    in fiscal year 1998 (above our base) will be used for:
      --Infrastructure upgrades.--We will continue to work toward
            eliminating our underlying antiquated infrastructure so that we
            can provide business quality information systems and services.
            Overseas, posts will have modern desktop, computer, and
            communications equipment and higher speed communications
            circuits. Our headquarters infrastructure will be upgraded as
            well to accommodate requirements from overseas.
      --Applications.--We are preparing for the Year 2000 and will continue
            to develop new and replacement systems supporting major
            business requirements such as border security, financial
            management, personnel, public access, medical records,
            logistics, electronic commerce and real property. We will also
            replace our existing electronic mail systems with a better
            designed and integrated system, based on industry standards.
      --Training.--We will develop a training strategy and employ
            innovative tools such as distance learning. Our new School of
            Applied Information Technology must map training to the new
            generation of equipment being installed and the replacement
            business systems that will soon be in use at all department
            sites worldwide.

                              subcommittee recess

        Senator Gregg. If there is nothing further, the
    subcommittee is recessed.
        [Whereupon, at 3:32 p.m., Thursday, March 6, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            TUESDAY, MARCH 11, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 1:55 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senator Gregg.

                         SMALL BUSINESS ADMINISTRATION

    STATEMENT OF AIDA ALVAREZ, ADMINISTRATOR
    ACCOMPANIED BY GREG WALTER, DEPUTY CHIEF FINANCIAL OFFICER

                               prepared statement

        Senator Gregg. You are here and I am here, so let us get
    started.
        Ms. Alvarez. OK.
        Senator Gregg. I expect from our notes that we may not have
    a full complement anyway. Hopefully, other Senators will join
    us.
        This is a fairly informal exercise on this side of the
    Capitol. We welcome you to the committee. It is a pleasure to
    have you here. Why do you not give us your thoughts on your
    budget?
        Ms. Alvarez. I hope you do not mind if I have some prepared
    notes here. I want to thank you for the opportunity to appear
    here to discuss with you, Mr. Chairman and members of the
    committee, the President's fiscal year 1998 budget request for
    the U.S. Small Business Administration. After my brief remarks,
    I, of course, hope to respond to questions and I request that
    you enter my written statement into the record.
        Senator Gregg. That will be done.
        [The statement follows:]
                       Prepared Statement of Aida Alvarez
        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to appear before you today to discuss the President's
    fiscal year 1998 Budget request for the U.S. Small Business
    Administration (SBA).
        It has now been a little over three weeks since I was privileged to
    take the oath of office as Administrator of the SBA. I have met some
    terrific people who have been doing a great job for America's small
    business owners. I am excited at the prospect of leading this Agency
    forward and believe we can make the SBA even more efficient, more
    effective, and of broader help to America's small businesses.
        As I said at my confirmation hearing on February 12, I want SBA to
    be on the leading edge in financial management, a disciplined,
    sophisticated institution that keeps its eye on its larger mission. I
    will seek partnering opportunities that leverage our resources and will
    apply business-like methods and economies. I also hope to be a strong
    advocate for small business. I know that we cannot accomplish our
    objectives without adequate resources and strong cooperation with the
    Congress. A review of the President's budget request is an appropriate
    place to begin our joint effort to chart a course for the SBA. And so I
    welcome this opportunity to discuss it with you.
        The President's request reflects his continued strong support for
    small business and his confidence in the SBA's ability to perform its
    mission. It is also consistent with his overall objective to reach a
    balanced budget by the year 2002. We appreciate the President's support
    and understand his insistence that we work smarter, with greater use of
    new technology, and more innovative approaches to program delivery. Our
    programs at the SBA are already helping millions of small business
    owners. With new resources, we will be able to do even more.
        President Clinton has established five priorities for the SBA which
    provide the context for our long-standing programs as well as new
    initiatives. Those priorities are to: Improve access to capital for
    small business owners; reduce burdensome regulations and unnecessary
    paperwork requirements that inhibit the growth of small businesses;
    make the SBA more effective, efficient and focused on customer needs;
    support small business education, counseling and training; and be a
    voice for America's small businesses.
                       small business in the u.s. economy
        As we discuss the budget request for SBA, it is important to keep
    in mind how critical small business is to the U.S. economy:
      --The number of small businesses is growing at a record pace, with
            over 825,000 new firms created in 1996--a 55 percent increase
            in the total number of new small businesses since 1982.
      --Small businesses employ more than 50 percent of the American work
            force and generate more than 50 percent of the gross domestic
            product (GDP).
      --Small businesses are our country's leading source of innovation.
            Studies show that small firms innovate at twice the rate of
            large firms.
      --Small firms also bring more members of society into the economic
            mainstream. New women-owned firms (one-third of all firms) have
            grown at twice the rate of men-owned businesses for a decade.
            From 1987 to 1992, businesses owned by African-Americans grew
            at twice the rate of all firms, and Hispanic-owned firms grew
            over three times to the rate of all firms.
      --Small businesses are the key to a successful national export
            strategy. Ninety-six percent of all exporting companies are
            small or medium-sized with fewer than 500 employees, according
            to the latest Commerce Department data.
      --Small business is healthier today, with failures and bankruptcies
            declining every year since 1993.
                             recent accomplishments
        SBA has played a key role in the growth of small business over the
    last four years by nearly doubling its loan volume, providing record
    amounts of private capital investment, and ensuring that millions of
    small business owners receive the counseling and training they need to
    succeed. With an increased emphasis on building successful public-
    private partnerships, the SBA is clearly a leader in the
    Administration's efforts to reinvent government and ``do more with
    less''. In fact, while SBA's current business portfolio is more than
    $35 billion, the Agency's entire fiscal year 1998 budget is less than
    the taxes paid in one year by just one company that received critical
    SBA financing when it was quite small--Intel Corporation.
        During fiscal year 1996, SBA achieved many successes in carrying
    out the President's goals for the Agency. We increased access to
    capital by guaranteeing more than $10 billion in small business loans,
    licensed more new Small Business Investment Companies (SBIC's) than in
    the previous 20 years combined, reduced the regulatory burden by
    rewriting all of our regulations in plain English and reducing them by
    more than half, streamlined Agency operations through the Liquidation
    Improvement Project (LIP), and improved access to education and
    counseling by funding nineteen new Women's Business Centers (formerly
    known as Women's Demonstration Sites) and fifteen U.S. Export
    Assistance Centers nationwide.
        Over the history of the disaster loan program, SBA has helped over
    1.3 million disaster victims by providing more than $24.1 billion in
    disaster assistance. During 1996 alone, SBA approved nearly 38,000
    disaster loans for an amount of almost $1 billion.
        A more complete listing of SBA's fiscal year 1996 achievements are
    listed in an Appendix attached to this statement.
                        fiscal year 1998 budget request
        This budget request for the SBA reflects continued support by the
    Administration to fund the growth in demand for SBA's principal credit
    and non-credit programs during fiscal year 1998.
        For fiscal year 1998, SBA requests $701.6 million in new budget
    authority and total staffing of 4,634 Full Time Equivalents (FTE's),
    which includes 3,047 non-disaster, non-Inspector General (IG) FTE's.
    This compares to our fiscal year 1997 appropriation of $852.4 million
    that funded 4,569 FTE's, including 2,985 non-disaster, non-IG FTE's.
    The principal reason for the reduction in our appropriation requirement
    from fiscal year 1997 is the use of unobligated balances to fund the
    disaster loan program in fiscal year 1998 and lower loan program
    subsidy costs.
        In 1998, SBA proposes to continue to increase its reliance on its
    private sector partners. Three initiatives will allow SBA to complete
    its transition from physically servicing and liquidating its $36
    billion loan portfolio to overseeing its private sector partners.
    First, 7(a) General Business lenders will be required to service and
    liquidate all loans approved after fiscal year 1997. Second, SBA will
    sell its $10 billion portfolio of defaulted guarantees and direct loans
    beginning in fiscal year 1998, which includes $9 billion currently
    outstanding as well as $1 billion in new direct loans and newly
    defaulted guarantees. Third, SBA requests $18 million to improve its
    portfolio monitoring capabilities. These proposals will allow SBA to
    focus its limited resources on expanding assistance to small businesses
    while relying on its private sector partners for ``back-end''
    activities. The budget estimates that these proposals will lead to
    lower credit, administrative, and subsidy costs.
        The budget proposes growth in programs to expand access to capital,
    assist disadvantaged small businesses, and provide education and
    training. As part of SBA's goal of stretching taxpayers' dollars, the
    budget also assumes that (1) Small Business Development Companies will
    charge counseling fees to substitute for a reduction in federal grants
    and proposes that (2) disaster loan borrowers pay an interest rate
    equal to the rate on Treasury securities of comparable maturity.
        Some of the more significant aspects of our fiscal year 1998 budget
    request are:
      --Budget authority of $153 million to provide guaranty authority of
            $8.5 billion for the 7(a) General Business Loan Guaranty
            program;
      --For the Section 504 Certified Development Company loan program, no
            new budget authority is required to provide a program level of
            $2.3 billion;
      --For the Small Business Investment Company program, $20.2 million in
            budget authority to provide program levels of $376 million of
            debenture guarantees and $456 million for participating
            securities;
      --For the Microloan program, no new budget authority for loan-making
            is required. $44.1 million in microloans in fiscal year 1998
            will be funded through the carryover of unused budget authority
            from fiscal year 1997. SBA is requesting $16.5 million for
            technical assistance to microloan borrowers;
      --An additional $18 million to support enhanced lender monitoring and
            oversight;
      --$600,000 to support increased International Trade outreach and
            implementation of the new ``SBA Export Express'' lending tool;
      --No new loan subsidy budget authority is requested for the Disaster
            Loan program. Expected carryover from fiscal year 1997 will be
            used to support $785 million in disaster lending;
      --$57.5 million in federal funding for the Small Business Development
            Center (SBDC) program;
      --$3.5 million to provide $1.7 billion in surety bond guarantees;
      --An increase in funding for the Minority Enterprise Development
            (MED) program to restore 7(j) business development assistance
            to previously-provided levels;
      --For the Office of Advocacy, a restoration of a $1.4 million funding
            level for data collection and research that is statutorily-
            mandated;
      --In support of women business entrepreneurs, $4 million to provide
            technical and business development assistance through the
            Women's Business Centers;
      --To support SBA's Regulatory Ombudsman and the regional Regulatory
            Fairness Boards, $500,000; and
      --$10.6 million for the Office of Inspector General.
        Now I would like to take you through a more detailed description of
    our budget:
    Credit and finance programs
        The SBA expands small business access to capital by providing
    credit, in partnership with thousands of financial intermediaries, for
    those small businesses unable to obtain loans through the commercial
    markets to start up or expand their business. Historically, small firms
    have faced serious problems obtaining long-term loans in the private
    credit marketplace because lenders try to avoid mismatches of long-term
    assets with their mostly short-term liabilities. The SBA, however, has
    helped to alleviate this problem by providing loan guarantees to
    participating lenders under a variety of programs.
        7(a) General Business Loan Guarantee Program.--In its Section 7(a)
    general business loan guaranty program, SBA guarantees loans made by
    private sector lenders to small firms for working capital, start-up
    costs, expansion, and other purposes. For fiscal year 1998, SBA
    proposes to increase the level of Section 7(a) loans. An appropriation
    of $153 million is requested, which will support a program level of
    $8.5 billion, up 9 percent from the $7.8 billion program level in
    fiscal year 1997.
        Reflecting an improvement of the 7(a) loan portfolio and
    implementation of SBA's Liquidation Improvement Project, the baseline
    (current services) 7(a) subsidy rate declines from 2.5 percent to 2.32
    percent. We propose reducing this rate to 1.80 percent through the
    following policy initiatives. First, we propose that all new 7(a) loans
    approved in fiscal year 1998 be serviced and liquidated by the
    participating lender. In the event of default, lenders will be required
    to liquidate all non-real estate assets prior to purchase by the SBA,
    with the real estate liquidated after purchase. Given the time value of
    money and the reduced purchase of interests, this will lower SBA's
    default costs--and therefore the fiscal year 1998 subsidy rate--by an
    additional 26 basis points and $22.1 million. Currently, nearly 70
    percent of new loans are serviced and liquidated by lenders through our
    LowDoc, Preferred Lender, Certified Lender, and FA$TRAK programs. This
    proposal builds on this record of success.
        Second, the budget includes $18 million for portfolio monitoring
    improvements. This funding will be used to recruit expertise in lender
    oversight, establish financial performance goals for lenders, create a
    database for tracking lender and portfolio performance, and develop a
    management information system to provide timely and accurate
    information to Agency management. This initiative will lend to lower
    defaults and increased recoveries, lowering the 7(a) subsidy rate by an
    additional 26 basis points, which saves $22.1 billion at our requested
    $8.5 billion loan level.
        Certified Development Company (504) Program.--The Section 504
    Certified Development Company (CDC) Loan Program provides long-term,
    fixed-rate financing to small businesses to acquire real estate,
    machinery, and equipment for expansion of business or modernizing
    facilities. Through this program, the Agency promotes economic
    development and job creation by stimulating the flow of long-term
    financing to small firms for projects that involve fixed assets or
    expansion.
        SBA requests extension of the Section 504 program fees authorized
    by the Congress for fiscal year 1997. Using a 15/16 percent pass-
    through fee authorized by Congress last year, coupled with improved
    program performance and increased expected recoveries by SBA resulting
    from the LIP, provides a zero percent subsidy rate, the same rate as in
    fiscal year 1997. With no new appropriations required, SBA proposes a
    program level of $2.3 billion.
        Small Business Investment Company Program.--The Small Business
    Investment Company (SBIC) Program is an important source of equity and
    subordinated debt financing for small businesses. The program provides
    SBA-backed funds to supplement private capital raised by private sector
    venture capital companies. These combined funds represent an important
    source of capital for growing small businesses.
        For fiscal year 1998, SBA proposes to increase the level of the
    SBIC Debentures and Participating Securities programs.
        For the SBIC debenture guarantee program, the improvement in the
    default rate has resulted in a lowering of the subsidy rate from 3.19
    percent in fiscal year 1997 to 2.30 percent in fiscal year 1998. Our
    request of $8.7 million will support a program level of $376.2 million,
    up 25 percent from the $300 million program level in fiscal year 1997.
        For SBIC Participating Securities, due to changes in the discount
    rate, market premiums and other technical changes, the subsidy rate
    declined from 3.29 percent in fiscal year 1997 to 2.54 percent in
    fiscal year 1998. Our request of $11.6 million will support a program
    level of $455.9 million, up 11 percent from the $410.3 million program
    level in fiscal year 1997.
        Microloan Program.--The Microloan Demonstration Program allows SBA
    to evaluate the effectiveness of using third-party, experienced lenders
    and technical assistance providers to make smaller loans and provide
    technical support to small businesses who lack access to even very
    small amounts of capital. The program's great strength is the technical
    assistance that accompanies each microloan and is provided by SBA grant
    funding.
        For fiscal year 1998, SBA proposes to increase the level of
    Microloan credit and technical assistance available to small
    businesses. For direct loans, SBA proposes to use $2 million in
    unobligated funds available in this program from fiscal year 1997 to
    support a program level of $19.5 million, at a 10.28 percent subsidy
    rate. For Microloan guarantees, SBA proposes to use $2 million in
    unobligated funds available from fiscal year 1997 to support a program
    level of $24.6 million, at a 8.12 percent subsidy rate.
        SBA also proposes to increase the level of microloan technical
    assistance grants, which are a critical component of this program's
    success. Funding for these grants is requested at a level of $16.5
    million, with $2.5 million proposed to be transferred from fiscal year
    1997 unobligated balances in the microloan program. This is a 27
    percent increase above the fiscal year 1997 level of $12.9 million.
        Export Loans.--In fiscal year 1998, SBA will increase its efforts
    to assist U.S. small businesses that are ``going global'' through an
    expanded Export Working Capital Program and implementation of the new
    ``SBA Export Express'' package, which is designed to increase the
    number of lenders willing to extend export working capital to small
    businesses. The ``SBA Export Express'' was recently announced by
    President Clinton in the fiscal year 1996 report issued by the Trade
    Promotion Coordinating Committee. SBA is developing this tool to
    provide lenders with an easy method to evaluate overseas market
    conditions and associated risk, thus allowing them to more readily and
    accurately assess the ``bankability'' of particular export
    transactions, resulting in more capital provided to small businesses.
    The fiscal year 1998 budget requests $600,000 to support increased
    International Trade outreach and the Export Express initiative.
        Disaster Loan Program.--SBA administers the only Federal government
    credit program assisting businesses and homeowners who are victims of
    disasters. The program is the only form of SBA assistance not limited
    to small businesses. Disaster loans from the SBA help homeowners,
    renters, businesses of all sizes and non-profit organizations return to
    their pre-disaster condition. The SBA's disaster loans are often the
    lifeline in disaster-ravaged communities, helping to spur employment
    and stabilize the tax base.
        Due to the availability of sufficient unobligated balances from
    fiscal year 1997, no new appropriations are requested for fiscal year
    1998 to support the proposed $785 million in disaster loans. This
    represents the ten-year average level of program activity, excluding
    the Northridge earthquake. SBA's policy proposal is to reduce the
    subsidy rate from 20.02 percent in fiscal year 1997 to 11.44 percent in
    fiscal year 1998 due to an increase in the interest rate charged to
    loan borrowers. The interest rate for borrowers ``without credit
    elsewhere'' is proposed to be increased to the Treasury cost of funds
    (anticipated at 6.11 percent in fiscal year 1998). Additionally, the 8
    percent interest rate cap for borrowers ``with credit available
    elsewhere'' is proposed to be removed.
        Federal Disaster Contingency Funding.--Emergency needs beyond the
    10-year average of the disaster loan program are proposed to be funded
    from a central contingency fund requested as Funds Appropriated to the
    President (FAP). This account will include funds for emergency federal
    disaster response efforts, including the Small Business Administration,
    the Federal Emergency Management Agency (FEMA), Departments of
    Agriculture and Interior firefighting, Department of Transportation
    federal-aid highways emergency relief, and Corps of Engineers emergency
    activities.
        Surety Bond Guarantee Program.--SBA is requesting $3.5 million in
    new budget authority to support $1.67 billion in guarantees for the
    Surety Bond Guarantee Program. In this program which consists of a
    prior approval program and a preferred surety bond program, SBA
    guarantees bonds issued by surety companies on behalf of small
    contractors. The SBA guarantees up to 90 percent of losses incurred on
    bonds for construction, service and supply contracts of $1.25 million
    or less that are performed by small business.
    Education and training
        During fiscal year 1998, SBA plans to increase the number of
    outlets serving our small business customers across the country,
    including the One Stop Capital Shops, Women's Business Centers,
    Business Information Centers and Microloan intermediaries. At the same
    time, SBA plans to expand the activities and improve the effectiveness
    of its U.S. Export Assistance Centers. SBA will also work to coordinate
    business education more closely with financial assistance to maximize
    the chances of success for small business owners who obtain SBA-
    guaranteed loans. The Agency will offer education for small businesses
    in electronic commerce and electronic data interchange, expand its on-
    line services for small businesses, and focus business development
    assistance on traditionally under-served groups, such as veterans,
    women, African Americans, Native Americans, Hispanic Americans, and
    Asian Americans.
        SBA will also continue to integrate the use of private sector
    resource partners such as the nearly 1,000 Small Business Development
    Centers and 12,500 Service Corps of Retired Executives (SCORE)
    volunteers to provide counseling, training and other resources with
    SBA's financial programs.
        Small Business Development Centers.--The Small Business Development
    Center (SBDC) Program operates nearly 1,000 centers in all parts of the
    country to foster economic development through the provision of
    management, technical and research assistance to the nation's small
    businesses. SBDC's are partially funded from Federal appropriations,
    using significant matching funds to provide for the program's
    successful operation.
        For fiscal year 1998, the Administration proposes to reduce the
    federal appropriation for Small Business Development Centers to a level
    of $57.5 million. Beginning in fiscal year 1996, the congressional
    restriction on charging fees for counseling was lifted. The SBA assumes
    that SBDC's use this authority to supplement the level of federal
    funding to provide enhanced services to small businesses. Education and
    training are critical to the success of established small business
    owners as well as new entrepreneurs. Last year, an estimated 850,000
    individuals received management training and counseling from SBA's
    national network of business education and assistance programs,
    primarily from the nearly 1,000 SBDC's and 12,400 SCORE volunteers.
        Business Information Centers.--This program is requested at a level
    of $500,000 for fiscal year 1998, allowing us to open 10 to 12 new BIC
    locations. SBA will also support the effort started two years ago to
    open new Tribal Business Information Centers (TBIC's) to assist Native
    American entrepreneurs. BIC's combine the latest computer technology,
    hardware and software, an extensive small business reference library of
    hard copy books and publications and management videotapes to help
    entrepreneurs plan their business, expand an existing business or
    venture into new business areas. The use of software for a variety of
    business applications offers customers of all types a means of
    addressing diverse needs. In addition to the self-help hardware,
    software and reference materials, BIC's have on-site counseling
    provided by Service Corps of Retired Executives (SCORE) volunteers and
    other resource partners. The BIC's are one of our most innovative
    methods of providing a one-stop approach to information, education and
    training for small business owners.
        Service Corps of Retired Executives.--The budget requests that
    funding for the SCORE program return to a level of $3.5 million, an
    increase of 6 percent above the fiscal year 1997 level of $3.3 million.
    SCORE counsels and trains the largest number of start-up business
    owners each year. Through one-on-one counseling and workshops conducted
    by 12,500 volunteers, SCORE reaches approximately 350,000 business
    owners annually, and because the program utilizes volunteers, the
    program represents one of the best bargains for the taxpayer in terms
    of expenditures compared to services delivered.
        Women's Business Centers.--The fiscal year 1998 budget proposes to
    continue funding for the Women's Business Centers (formerly known as
    the Women's Demonstration Sites) at a level of $4 million for fiscal
    year 1998, allowing SBA to open 10 to 12 new business centers. These
    Centers provide valuable counseling, training, and other forms of
    assistance to the ever-growing population of women-business owners and
    entrepreneurs.
        To expand the information available to the federal government on
    women business owners, SBA will facilitate a survey by the Bureau of
    the Census. For fiscal year 1998, the cost of this effort to the Agency
    will be $1 million, which is included in the Agency's budget request.
    This will not reduce any of the funding for our Women's Business
    Centers.
        One-Stop Capital Shops.--The One-Stop Capital Shop (OSCS) program
    is requested at a level of $3.1 million, an increase of 12 percent
    above the fiscal year 1997 level. This amount is needed to support the
    program after an additional six shops are opened in fiscal year 1997,
    bringing the total number to 17. The OSCS program combines several of
    SBA's resources into a single program located in Empowerment Zones and
    Enterprise Communities. Combining the delivery of our financial and
    business development programs in one location provides a more user-
    friendly approach to serving our customers.
        United States Export Assistance Centers.--SBA proposes to increase
    funding for the U.S. Export Assistance Centers (USEAC's), which provide
    U.S. exporters with information and access to all export promotion and
    export finance activities of the Federal Government. The requested
    level is $3.1 million, an increase of 24 percent above the fiscal year
    1997 level of $2.5 million, which will be used to support a network of
    19 USEAC's in operation.
    Small business advocacy
        Office of Advocacy.--During fiscal year 1998, SBA, through its
    Office of Advocacy, will assist the small business community by
    providing the small business perspective in regulatory, policy and
    legislative forums. This includes providing oversight of the Regulatory
    Flexibility Act, championing implementation of recommendations from the
    1995 White House Conference on Small Business while maintaining close
    liaison between the Agency and Conference delegates.
        SBA requests funding for the Advocacy Database and Analysis at a
    level of $1.4 million. This amount represents a funding level similar
    to the levels provided to this office by Congress prior to fiscal year
    1995. It is also the amount required to fulfill the office's statutory
    mandates. Funding for this office's functions during fiscal year 1996
    and fiscal year 1997 has depended on limited reprogramming of SBA's
    general salaries and expenses. The Advocacy database facilitates the
    analysis and reporting on small business trends, needs and
    characteristics, which are relied on heavily by legislators, federal
    policy makers and the media. The database also provides the basis for
    the statutorily-mandated annual report, ``The State of Small Business:
    A Report of the President''.
        Minority Enterprise Development.--Through the MED program, SBA
    assists small businesses owned and controlled by socially and
    economically disadvantaged individuals to develop to the point where
    they can compete successfully in the mainstream economy. Through
    management and technical assistance and the award of sole-source and
    limited-competition contracts, MED provides a way for such small
    businesses to grow so that they can create jobs and contribute to our
    economy.
        SBA proposes to increase funding for Section 7(j) management and
    technical assistance. This program is requested at a level of $9.2
    million, an increase from the fiscal year 1997 level of $2.6 million.
    The 7(j) program provides necessary business development and technical
    assistance to socially and economically disadvantaged individuals,
    allowing them to improve their skills.
        SBA also proposes a $1.9 million increase in the MED operating
    budget to improve processing of 8(a) applications and eligibility
    determinations, and to improve program administration by hiring 10
    FTE's and making improvements to the MED program systems.
        Government Contracting.--SBA's Government Contracting program
    ensures access to opportunities for government contracts and
    subcontracts. Each year, these opportunities result in billions of
    dollars in contract and subcontract awards to small business firms.
        The budget requests an increase in funding for the Procurement
    Automated Source System (PASS), to a level of $1.2 million. This
    increase will allow for the maintenance of this important small
    business database and its expansion as a government-wide source of
    small businesses to address recent Electronic Commerce initiatives.
        Office of the Inspector General (OIG).--SBA proposes to increase
    the Office of Inspector General's (OIG) staffing by 10 FTE above the
    fiscal year 1997 authorized level. The burgeoning Agency loan portfolio
    (both in the business loan and the disaster assistance programs) and
    the increased reliance on lenders to originate and service SBA-
    guaranteed loans make the oversight role of the OIG critical.
    Inadequate OIG staffing would be an imprudent risk at a time when
    ``doing more with less'' is a policy which must succeed--and failures
    resulting from fraud, waste, or abuse cannot be tolerated. An increase
    of $1.36 million over fiscal year 1997, for a total of $10.6 million,
    would allow the OIG to fund a ``current services'' level of oversight,
    as well as add 10 FTE to begin addressing SBA's business loan portfolio
    growth. This level of staffing would ensure at least a minimal level of
    oversight and assurance that the programs and funds of the Agency are
    being managed in an appropriate manner.
        Championing Regulatory Reform and Paperwork Reduction.--During
    fiscal year 1998, SBA will continue to work with other Federal
    agencies, including the Occupational Safety & Health Agency (OSHA), the
    Environmental Protection Agency (EPA) and the Internal Revenue Service
    (IRS), to minimize the burden of regulations and paperwork requirements
    on small businesses so that they can be more productive. The Small
    Business Regulatory Enforcement Fairness Act (Public Law 104-121)
    enabled SBA to create a national Ombudsman and to establish ten
    regional regulatory fairness boards. These initiatives began in fiscal
    year 1996 without separate funding in SBA's budget. The fiscal year
    1998 budget requests $500,000 to support the Ombudsman and the
    operational costs of the regional Regulatory Fairness Boards.
    Streamlining the SBA
        Efforts to streamline the SBA can result in a more efficient, cost-
    effective delivery of services and reduced fraud, waste, and abuse.
    Improved financial management, expanded training, and increased use of
    information technology will also result in portfolio quality
    improvements and, consequently, fewer defaults and reduced loss reserve
    requirements. These efforts include:
        Participating lenders will service and liquidate all new 7(a)
    loans.--Starting in fiscal year 1998, an SBA participating lender will
    be required to service and liquidate all new 7(a) loans. The lender
    will liquidate all non-real estate assets of the business prior to
    SBA's purchase, and complete the liquidation of the real estate after
    the purchase. This proposal has a direct impact on the lowering of the
    7(a) subsidy rate in fiscal year 1998 due to the deferral in the timing
    of the SBA purchase and the anticipated increase in net recoveries to
    the government.
        SBA will increase its lender oversight and financial information.--
    Over the past four years, SBA has aggressively increased access to
    capital, reduced staffing, and delegated authority to its private
    sector partners. In order to support these trends and to maintain a
    quality portfolio, the budget provides $18 million for improving
    portfolio monitoring. This funding will be used to recruit expertise in
    lender oversight, establish financial performance goals for private
    sector partners, create a database for tracking lender and portfolio
    performance, and develop a management information system to provide
    timely and accurate information to Agency management. Because this
    improved oversight capability will allow SBA to reduce the risk of
    default and increase recoveries, this proposal has a direct impact on
    lowering the 7(a) subsidy rate in fiscal year 1998.
        Business loan assets will be sold.--Beginning in fiscal year 1998,
    and through the end of fiscal year 1999, SBA proposes to sell its
    business loan assets comprised of all direct loans, guaranteed loans
    purchased, and other liquidation assets, such as collateral acquired as
    a result of liquidation. The Administration estimates that these
    business loans can be sold above the government's hold value, producing
    $50 million in savings in both fiscal year 1998 and 1999. SBA will sell
    future defaulted guarantees on an on-going basis. SBA's loan asset sale
    initiative draws on the success of other federal agencies, such as the
    RTC, HUFD, and the VA, in selling loan assets. These sales will allow
    the government to take advantage of the efficiencies of the private
    sector and allow SBA to focus its limited budget resources on extending
    credit to small businesses rather than servicing and liquidating a
    growing portfolio.
        Disaster loan assets will be sold.--Beginning in fiscal year 1998,
    and through the end of fiscal year 2000, SBA proposes to sell its
    disaster loan assets comprised of direct loans and other liquidation
    assets, such as collateral acquired as a result of liquidation.
    Provisions will be concluded in the sale contracts to protect the
    public policy mission of this program.
        SBIC examination and license fees will be used to offset
    administrative costs.--A legislative proposal is being made to have the
    license and examination fees charged SBIC's deposited into the Salaries
    and Expenses account. This will help offset the administrative costs of
    this program and provide for the contracting-out of certain
    administrative activities, such as annual SBIC examinations. The fiscal
    year 1998 budget includes a minimum of $1 million as ``offsetting
    collections'' from this proposal.
        Improve Office of the Chief Financial Officer expertise.--This
    budget requests $1 million over the current services funding for the
    OCFO to allow the office to increase staffing, skills, and systems
    capacity. This funding will allow SBA to continue to improve its
    financial analysis of loan performance and subsidy estimates, including
    contract for outside expertise as needed.
        Increase SBA's Full-Time Equivalent (FTE) employment level by 62
    above the fiscal year 1997 funded level.--The budget proposes to
    increase SBA's regular-funded FTE level by 62 above the level that
    could be funded within the fiscal year 1997 appropriation. These
    positions will be specifically targeted to bring technically expert
    individuals to the priority areas indicated within our proposed budget,
    such as lender monitoring and oversight, asset sales, 8(a) application
    processing, financial management and systems.
        Mr. Chairman, the fiscal year 1998 budget reflects the President's
    continuing commitment to the nation's small business community and to a
    strong SBA. SBA will build upon its successes and accomplishments of
    the last four years. SBA will continue to serve as a vital catalyst for
    economic growth through its support of the small business sector, using
    both the proven successes of its traditional credit and business
    education programs, and the new initiatives which are improving the
    accessibility and efficiency of SBA's services. The budget request for
    the SBA provides the appropriate level of resources to support these
    goals and objectives.
                                     ______

                                    Addendum
        Recent Accomplishments of the U.S. Small Business Administration
        The following achievements and others during fiscal year 1996 have
    laid the groundwork for SBA's continued contribution to this
    Administration's economic legacy.
             providing access to capital for small business owners
        Recent SBA achievements in this area are:
        The 7(a) and 504 Loan Programs.--Access to adequate start-up and
    working capital is a key to a healthy small business sector. Since
    fiscal year 1992, SBA has significantly improved access to capital for
    America's entrepreneurs through its 7(a) and 504 loan programs. In
    fact, the agency's annual guaranteed loan volume has more than doubled
    since fiscal year 1992. Over that same period, the number of loans to
    non-minority businesses has grown, loans to women small business owners
    has more than tripled, and loans to minority borrowers have nearly
    tripled in number and more than doubled in amount (see table below).
    The important factors in this expansion were the Small Business Lending
    Enhancement Act of 1995, internal agency reforms, and our emphasis on
    reaching traditionally underserved segments of the populace.

                                         INCREASES IN SBA'S 7(A) AND 504 LENDING
    ----------------------------------------------------------------------------------------------------------------
                                                               Fiscal year 1992               Fiscal year 1996
                                                       -------------------------------------------------------------
                                                           No. of                         No. of
                                                           loans          Dollars         loans          Dollars
    ----------------------------------------------------------------------------------------------------------------
    Total.............................................       26,381    $6,500,000,000       52,729   $10,200,000,000
    Women.............................................        3,588       634,000,000       11,452     1,600,000,000
    Minorities........................................        3,868     1,000,000,000       10,135     2,100,000,000
    Veterans..........................................        3,710       904,000,000        7,155     1,400,000,000
    ----------------------------------------------------------------------------------------------------------------

        SBIC Program.--The SBA has extended greater access to equity
    capital through the SBIC program which provides leveraged private
    equity and subordinated debt to small businesses through licensed
    private venture capitalists. In fiscal year 1996, more than 2,100
    businesses received SBIC financing valued at $1.6 billion. In fact,
    more private capital has been raised in the SBIC program in the last
    two years than in the past 20 years combined. It is significant to note
    that SBA-backed venture capital assisted, at some point, in the
    development of 18 of the ``100 Fastest-Growing Public Firms'' in the
    U.S. as ranked by Fortune magazine in 1996.
        Liquidation Improvement.--Last year, the Agency developed and began
    implementation of a Liquidation Improvement Project (LIP) to increase
    the SBA's dollar recoveries and reduce the Agency's subsidy rate (loss
    reserves requirement), through timely completion of liquidation and
    litigation and other improved servicing actions. LIP's impact is
    reflected in the fiscal year 1998 7(a) and 504 subsidy rates. These
    rates project that SBA will increase recoveries by 7.3 percent in the
    7(a) program and 11.4 percent in the 504 program over historical rates.
    SBA anticipates that will result in a 20 percent increase in
    recoveries. LIP has also lowered the estimate cost of loans disbursed
    in fiscal year 1991-1996 by $89.4 million.
        Disaster Assistance--Serves as the federal government's ``disaster
    bank'' for non-farm private sector losses.--For over 40 years, SBA has
    helped more than 1.3 million homeowners, renters, businesses of all
    sizes, and non-profit organizations pay for rebuilding after disasters,
    an amount exceeding $24.2 billion in assistance. In fiscal year 1996,
    SBA approved 37,822 loans for a total of $987.9 million in disaster
    assistance to both homeowners (27,542 loans for $475.7 million) and
    large and small businesses (10,280 loans for $512.2 million). Note that
    the preponderance of the agency's disaster loans are made to
    individuals, not businesses, notwithstanding SBA's name.
        Angel Capital Electronic Network (ACE-Net).--SBA's Office of
    Advocacy developed the ACE-Net, which was announced by President
    Clinton in October, to help small businesses raise private equity
    capital in the range of $250,000 to $5 million. ACE-Net will make it
    easier for small entrepreneurs to network with ``angel'' (accredited)
    investors nationwide by listing investment opportunities on the
    Internet.
        Microloan Demonstration Program.--The Microloan Demonstration
    Program makes very small loans ($25,000 and under) available to
    entrepreneurs traditionally considered ``unbankable,'' largely due to
    inexperience with credit, credit problems, or lack of assets. Since its
    inception in 1992, more than 100 lender intermediaries have made $51
    million in microloans to more than 4,000 entrepreneurs, and we have
    experienced no losses to date due to the oversight provided by the
    microloan technical assistance providers.
        Minority, Women's, and Veterans' Prequalification Loan Programs.--
    SBA has developed two pilot loan programs to provide specialized
    support and financial assistance to minorities and women. The Women's
    Prequalification Loan program, which was highlighted by President
    Clinton in October, is now offered through many of the SBA's district
    offices, and the Minority Prequalification Loan program continues in
    its initial pilot stage. Both programs allow SBA to prequalify
    guarantees for loans of up to $250,000 before the business owner
    approaches a bank and to focus on the applicant's character, credit
    experience and reliability rather than assets. Additionally, SBA is now
    developing a Veterans prequalification pilot program to further assist
    veterans seeking to start a small business.
        International Trade.--In fiscal year 1996, SBA initiated
    partnership agreements with its counterparts in Russia and Ireland to
    foster improved cooperation and business opportunities for small
    businesses in these markets. SBA, now represented in the Gore-
    Chernomyrdin Commission, is actively working with the banking and small
    business communities to encourage American small businesses to explore
    exporting opportunities in the Russian Federation. Similarly, at the
    State Department's request, Administrator Lader made presentations at
    the past two Middle East/North Africa Economic Summits and led the U.S.
    delegation to this year's Asia Pacific Economic Cooperation (APEC)
    Small and Medium-sized Enterprises Ministerial meeting. Such SBA
    efforts to promote small business export and development
    internationally are likely to have long-term positive consequences.
        U.S. Export Assistance Centers (USEAC's).--Working with the
    Department of Commerce and Export Import (Ex-Im) Bank, SBA has already
    opened 15 USEAC's across the country to provide in a single location
    hands-on export marketing and trade finance counseling. Another 4
    USEAC's are scheduled to open in early 1997 for a total of 19. SBA and
    Ex-Im have also harmonized their Export Working Capital Guarantee
    programs to achieve a streamlined application process and cut
    duplication of effort. These actions are important to help small
    businesses with foreign orders secure financing to produce goods and
    services for export.
        Research and Technology Development.--SBA is also improving access
    to capital for small businesses in the research and technology sector.
    Under SBA's Small Business Innovation Research (SBIR) program, small
    businesses propose innovative ideas in competition for specific
    research and development awards from participating federal agencies
    with the goal of subsequent commercialization. Federal agencies made
    approximately 4,500 awards to SBIR firms totaling almost $900 million
    in fiscal year 1996; and this amount is expected to grow to 5,500
    awards totaling approximately $1.1 billion in the current fiscal year.
     reduce burdensome regulations and unnecessary paperwork requirements
                  that inhibit the growth of small businesses
        Increase the support for SBA's Ombudsman and Regional Regulatory
    Fairness Boards.--For fiscal year 1998, SBA requests $500,000 to
    support the ``Ombudsman'' and the operation costs of the Regional
    Regulatory Fairness Boards, mandated by the Small Business Regulatory
    Enforcement Fairness Act (SBREFA), passed by Congress last year.
        Recent SBA achievements in this area are:
        Regulatory Reform.--SBA's page-by-page, line-by-line review of its
    regulations converted them to a plain-language format and eliminated
    more than half the pages. The Agency has nearly completed the same
    reform of its 25,000-page Standard Operating Procedures, which are
    anticipated to be reduced to about 8,000 pages when completed.
        SBA has also achieved significant results in working with other
    federal agencies to ensure compliance with the Regulatory Flexibility
    Act. Illustrations include the EPA (simplifying reporting for small
    firms dealing with hazardous waste), the SEC (developing a simplified
    registration requirement for small companies), the FCC (structuring
    bidding rules favorable to small businesses for the auction of personal
    communications services licenses), and OSHA.
        Paperwork Reduction.--The SBA's Low Documentation, or ``LowDoc,''
    loan application, first established in 1993, is an excellent example of
    reducing paperwork and providing better service. Through this program,
    SBA has reduced the paperwork small business owners need to complete to
    obtain loans of under $100,000 from a voluminous application to just
    one page, with dramatically faster approval time. Since smaller loans
    are less profitable for lenders, LowDoc makes it easier for a lender to
    ask for SBA's guarantee. In fiscal year 1994, 5,862 SBA LowDoc loans
    were approved; that number increased to 20,728 loans in fiscal year
    1996. Additionally, in 1993, the disaster business loan application was
    cut in half.
        A new pilot, FA$TRAK, reduces paperwork further by allowing
    certified lenders to use their own paperwork, complete no SBA forms,
    and share the risk equally with the Agency by retaining a 50 percent
    exposure on the loan. In fiscal year 1996, this program accounted for
    2,733 loans worth $113 million.
        The average processing time for 8(a) applications has been reduced
    from 208 days in 1993 to 89 days currently; and through the recent
    introduction of computer-disk applications, the processing time will
    soon be reduced to 15 days.
                              streamlining the sba
        Recent SBA achievements in this area are:
        U.S. Business Advisor.--In 1996, SBA and the Commerce Department
    unveiled the U.S. Business Advisor, an Internet service providing
    nearly all the federal government's available small-business
    information. SBA's own Home Page, developed in this Administration, has
    already logged over one million hits per week.
        Centralization and Streamlining.--SBA has centralized the Preferred
    Lenders Program (PLP), which authorizes active, best-performing lenders
    to use their own credit judgment, without SBA's re-analysis, in giving
    an SBA guarantee on a loan. This provides the opportunity to initiate
    more efficient, computer-based tracking systems and to streamline the
    loan eligibility determination process. Centralization played a strong
    role in increasing the number of loans approved under the PLP process
    from 4,298 loans totaling $1.3 billion in fiscal year 1995 to 9,624
    loans totaling $3 billion in fiscal year 1996, nearly 40 percent of the
    dollar value of all 7(a) loans approved.
        Continue to support centralization.--SBA continues to look for
    further opportunities to streamline operations and centralize functions
    when it improves the efficiency and effectiveness of program delivery
    and operations and serves to improve customer service. During fiscal
    year 1996-1997, SBA centralized a large portion of its loan servicing
    operations, and is currently implementing the centralization of its
    LowDoc loan processing.
        Contracts in the 8(a) program have increased.--8(a) contracts have
    increased from a total of $4.9 billion in fiscal year 1992 to
    approximately $6.6 billion for fiscal year 1996. Also, in the past
    year, more firms have been removed from the 8(a) program than in the
    program's cumulative history since 1968, and renewed emphasis has been
    placed on its economic development mission.
                   expanding access to education and training
        Recent SBA achievements in this area are:
        One Stop Capital Shops (OSCS's).--A good example of SBA's
    commitment to traditionally underserved constituencies is the OSCS's,
    SBA's contribution to President Clinton's Empowerment Zone/Enterprise
    Community (EZ/EC) initiative. In the last 18 months, SBA opened 10
    OSCS's in Boston, Kansas City, Detroit, Harlem, Philadelphia/Camden,
    the Kentucky Highlands, Rio Grande, Baltimore, Tacoma, and Oakland,
    providing a full range of SBA lending programs, counseling and
    technical assistance to distressed urban and rural communities. Seven
    more sites are planned for fiscal year 1997, bringing the total number
    to 17.
        SBDC's and SCORE.--Education and training are critical to the
    success of established small business owners as well as new
    entrepreneurs. Last year, an estimated 850,000 individuals received
    management training and counseling from SBA's national network of
    business education and assistance programs, primarily from the nearly
    1,000 SBDC's and 12,400 SCORE volunteers.
        Women's Business Centers.--Across the country, SBA sponsors 54
    Women's Business Centers (formerly the Women's Demonstration Sites),
    designed to provide long-term training and counseling to current and
    potential women business owners. Women's business ownership, through
    these centers and in all of the Agency's programs, has been a major
    Administration initiative.
        USEAC's.--The USEAC's jointly operated by SBA, Commerce, and the
    Ex-Im Bank provide business counseling and training to small businesses
    interested in exporting and provide them access to programs like SBA's
    new Export Working Capital loan program. This year, four new USEAC's
    are scheduled to open, for a total of 19.
        BIC's.--Since 1993, SBA has established 38 BIC's, and in the past
    two years established 15 Tribal BIC's nationwide. These facilities make
    available to small business owners the latest high-tech hardware,
    software, interactive videos and telecommunications equipment.
                   advocating for america's small businesses
        Recent SBA achievements in this area are:
        White House Conference on Small Business.--The 1995 White House
    Conference on Small Business, including the preliminary state and
    regional conferences held across the country, attracted more than
    20,000 small business owners who contributed their thoughts, interests,
    and ideas to the Clinton Administration and to Congress. At the
    national Conference, some 2,000 national delegates made 60
    recommendations concerning areas as diverse as access to capital, the
    globalization of markets, health care, pension reform and the effect of
    taxes on small business formation and growth. During the
    Administration's first term, an unprecedented number of recommendations
    from the White House Conference have been addressed, either whole or in
    part, making the 1995 gathering the most successful White House
    Conference on Small Business ever. The Office of Advocacy worked
    tenaciously to keep delegates informed about the Administration's and
    Congress' progress, distributed an implementation report to
    participants, and at the end of last year hosted a Washington
    conference for White House Conference delegates to update them on
    continuing progress.
                                    ------

                      Biographical Sketch of Aida Alvarez

        Aida Alvarez is administrator of the U.S. Small Business
    Administration (SBA) and a member of the President's Cabinet.
        Alvarez, 47, is a former government financial regulator,
    investment banker and journalist. She is the first Hispanic
    woman and the first person of Puerto Rican heritage to hold a
    position in the President's Cabinet.
        As SBA Administrator, Alvarez directs the delivery of a
    comprehensive set of financial and business development
    programs for U.S. small businesses. The agency provides
    financing worth about $11 billion a year to small businesses
    across the nation.
        Alvarez comes to the SBA after leading the government's
    first effort to regulate the nation's two largest housing
    finance companies, the Federal National Mortgage Association
    (Fannie Mae) and the Federal Home Loan Mortgage Corporation
    (Freddie Mac). As Director of the Office of Federal Housing
    Enterprise Oversight (OFHEO), she created a financial safety
    and soundness oversight program for Fannie Mae and Freddie Mac.
    These two firms are government-chartered corporations whose
    operations form the core of the trillion-dollar secondary
    mortgage market.
        Before her OFHEO appointment in June 1993, Alvarez was an
    investment banker at the First Boston Corporation and at Bear
    Stearns. Her public service background includes two years as
    vice president at the NYC Health & Hospitals Corporation. She
    also served as a commissioner on the New York City Charter
    Revision Commission, a member of the Governor's State Judicial
    Screening Committee, and a member of the Mayor's Committee on
    Appointments.
        During her career as a journalist, Alvarez won a Front Page
    award while at the New York Post. She also was an award winning
    television news reporter and anchor for Metromedia television
    (Channel Five) in New York. In 1982, she won an Associated
    Press Award for Excellence and an Emmy nomination for her
    reporting of guerrilla activities in El Salvador.
        Her past board memberships include the National Hispanic
    Leadership Agenda, the New York Community Trust and the
    National Civic League. She is a former board chairman of the
    Municipal Assistance Corporation/Victim Services Agency, New
    York.
        Alvarez is a native of Aguadilla, Puerto Rico. She is a cum
    laude graduate of Harvard College. In 1985, she was awarded an
    honorary Doctor of Laws from Iona College.

                               summary statement

        Ms. Alvarez. I am most enthusiastic about the challenge
    before me and I am grateful for the opportunity to be the 20th
    SBA Administrator. This is my 22d day on the job, and during
    that time, I have been quite busy, including being involved at
    the four different disaster sites in Arkansas, Kentucky,
    Tennessee, and Ohio. I have to say, I marvel at the courage of
    the disaster victims, but I also was very impressed by the
    Federal response. Certainly, I was very impressed by the SBA
    response. I think many people do not realize that the SBA is
    the banker to disaster victims and making loans across the
    board beyond the small business loans. The sort of the first-
    rate operation that the disaster folks operate is actually
    typical, I think, of what SBA does and of the smart
    professional people with a lot of heart who work at SBA.
        SBA's budget request for fiscal year 1998 continues the
    administration's commitment to assisting small businesses. We
    are requesting $701.6 million, compared to $852.4 million for
    fiscal year 1997. Though this request is reduced from previous
    years, it does allow for a continuation of all the existing
    programs, and, in fact, the total credit assistance would be
    $14.4 billion for fiscal year 1998 as compared to $13.8 billion
    for fiscal year 1997.

                                     Loans

        This is a critical time for the SBA. We are shifting the
    traditional loan-related activities to the private sector and
    we are also centralizing loan servicing and processing
    functions. Currently 70 percent of new 7(a) loans are serviced
    and processed by private lenders and the expectation is that in
    1998, all new 7(a) loans will be serviced and liquidated by
    private lenders.
        We are implementing a pilot project to privatize 30 percent
    of the disaster home loan servicing and we are also starting in
    fiscal year 1998 to begin selling business loan and disaster
    loan assets. So there is a great deal going on that should
    transform the SBA and it is something that we intend to execute
    in a carefully managed and monitored way to ensure positive
    results. This is a fundamental shift and it does pose critical
    questions with public policy implications regarding the
    objectives of SBA programs and the effect of this fiscal
    reordering on the SBA mission, its structure, and its
    employees.
        There is a critical element to the budget request related
    to this transformation and that is the request for an
    additional $18 million, which will be used to improve the
    financial and information management systems as well as to
    improve oversight of the SBA portfolio and of participating
    lenders.
        We also are asking for an additional $1 million to conduct
    a more sophisticated analysis of the loan performance. Our goal
    is, simply put, to make SBA into a leading-edge financial
    agency, which will allow us to better assess risk and manage
    our credit programs.
        By the way, related but not part of the budget request, I
    note that there are a number of deadlines that were part of
    last year's omnibus appropriation bill that were meant to
    ensure a timely transformation of these credit programs as well
    as other programs and I intend to make sure that SBA meets
    these deadlines.

                             review of SBA programs

        SBA is at a critical crossroads, I believe, as we attempt
    to bring more Americans into the economic mainstream, and to
    accomplish this requires a review of program effectiveness and
    an infusion of resources, for example, into the minority
    enterprise development programs. I would also want to see
    reform and a modernizing of the 8(a) program, which has a need
    for technology and systems as well as staffing to accomplish
    that end.
        Another segment that needs to be brought into the
    mainstream are families on welfare, and in the next year, we
    hope to explore an array of alternatives to providing
    opportunities for former welfare recipients, including hiring
    them at the SBA. We will also work with small businesses to
    explore incentives for employment, coordinating with State
    efforts, collaborating with other Federal agencies to provide
    technical assistance, and also using the SBA microloan program
    to help budding entrepreneurs.
        There is no question that SBA plays a critical role as the
    source of much needed access to capital and credit for small
    business. The requested authority for the fiscal year 1998
    business loans budget is $173 million [sic], which would
    provide guarantee authority of $8.5 billion for 7(a) loans,
    $2.3 billion for the 504 debentures, $832 million for SBIC
    debentures and participating securities, and $44 million for
    microloans, and, of course, for continued support and
    assistance for disaster victims.

                               Training programs

        In addition to requesting continued support for SBA's
    credit programs, we currently train and educate nearly 1
    million small business owners and we hope to continue assisting
    those most in need. We believe that restoring funding to
    previous levels for the 7(j) program, for example, is one way
    to help more women, minorities, and disadvantaged individuals,
    to make them competitively viable. We also propose to add 10 to
    12 new women's business centers to the existing network of 54
    and to increase the 39 business information centers, the BIC's,
    by 10 to 12. We have heard overwhelming praise for these
    centers. They do a fabulous job and we think they deserve
    strong funding.
        We also hope to continue support for SCORE and the SBDC's.
    We are strongly committed to the SBDC program. They do a very
    capable job in counseling and training across the country and
    we want them to continue their fine work. As the budget
    reflects, SBA wants those benefitting from the program to bear
    a share of the costs and we propose that they pay reasonable
    fees for the services rendered. We will work very closely with
    the SBDC's to ensure their continued viability and success.
        And finally, I hope to follow closely the progress of the
    ombudsman and the newly created Regulatory Fairness Board. I
    think that those boards, together with the Office of Advocacy,
    should protect the interests of the small business community
    from regulatory missteps.
        SBA has played a key role in the growth and support of
    small business throughout its history. There are many
    significant achievements. SBA now manages a $42 billion loan
    portfolio and it has improved the lives of millions of
    Americans, helping them to start, run, and succeed in their own
    small businesses. I hope to add to this list of achievements
    and accomplishments.
        This is an important time of transition. I look forward to
    working with you closely to improve the way in which our
    Government serves small business. I welcome your questions.
        Senator Gregg. Thank you. Thanks for that overview. I
    appreciate that.
        First off, let me say that I think the Small Business
    Administration does a superb job, at least in my State. It has
    a track record of being very successful in helping people who
    are starting businesses, especially those who probably would
    not otherwise be able to find financing, and it is a well-run
    organization.

                                Disaster funding

        There are a few issues, though, that do stand out that I
    would like to get your thoughts on. The first is the disaster
    in Arkansas. These disasters appear to happen with more
    regularity in recent years, but there does not appear to be any
    significant disaster money in your budget. Can you tell us how
    you plan to pay for it?
        Ms. Alvarez. SBA makes an assessment of the future disaster
    funding need by using a 10-year rolling average to calculate
    what the projected funding requirements might be. As a result
    of that calculation, the administration felt that there was
    sufficient funding that could be carried forward.
        Senator Gregg. You do not expect to ask for supplemental
    funding, then?
        Ms. Alvarez. That is not the expectation. The expectation
    is that the existing moneys would cover us not only in fiscal
    year 1998 but there would also be some left to go forward to
    fiscal year 1999, God willing.

                                  7(a) program

        Senator Gregg. In the 7(a) program, you talked about this
    $18 million you are going to spend. Have you checked with any
    of the other agencies that do the management, such as Fannie
    Mae, to see how they do it? There is a lot of experience out
    there.
        Ms. Alvarez. You know I was the regulator for Fannie Mae
    and Freddie Mac. That was my previous incarnation.
        Senator Gregg. So then you are bringing in their
    experience.
        Ms. Alvarez. First of all, the proposal for the $18
    million, is well considered, and frankly, it may not be enough
    given what it costs to really create an infrastructure that is
    very sophisticated technically. It is, I think, potentially a
    very modest request, but it is best to proceed carefully.
        I certainly have not had the opportunity yet but intend to
    devote time and also work to see to what extent the Fannie Mae/
    Freddie Mac technology is relevant here. But I think a great
    deal of time and thought went into this.
        Greg Walter is the Deputy Chief Financial Officer [CFO] at
    SBA. Do you want to comment on that?
        Mr. Walter. Sure. Mr. Chairman, we have already reviewed
    three of the current systems that are being used throughout the
    Government. We went over and visited with Ginnie Mae a couple
    of weeks ago and saw what they call the issuer portfolio
    analysis data bases and the correspondent portfolio analysis
    data base system which they use at VA and HUD, and then we have
    also visited with Farmers Home to look at their policy
    financial analysis model system.
        We think there is some portability, if you will, in the
    technologies they are using with what we will need, but we have
    to look into it further as we go along to see exactly how much
    can be used and how much distinction there is between what SBA
    needs and what they do.
        Senator Gregg. We would strongly encourage you to do that.
    You know, we find in this committee, and not specifically with
    SBA but with a number of other agencies, that they keep trying
    to reinvent the wheel when some other agency in Government has
    already gone through and invented the wheel.
        Ms. Alvarez. Right.
        Senator Gregg. It does seem like a terrible waste of
    ability. It is a turf issue to some degree, but I would suggest
    a formalized system of going out and finding out what is out
    there and using that expertise to the extent that you think it
    is appropriate.
        A number of industry lenders claim that with the 7(a)
    program the amount available in that area is underestimated.
    What are your thoughts in response to that?
        Ms. Alvarez. We have been monitoring that very closely, in
    fact, on a daily basis. Presently, we think we are OK, that we
    have got enough funding to meet the needs, but frankly, if the
    demand steps up, we think there is a possibility of shortfall.
    We will certainly be talking with you about it.
        Senator Gregg. That is going to be a problem, both in the
    7(a) program and 504 program, because we are going to be under
    tremendous pressure in this committee. For a variety of
    reasons, the White House has targeted this committee for
    dramatic increases in spending but has not agreed to pay for
    them in different accounts. For example, in the State
    Department, they want an extra $1 billion for the United
    Nations and in the Justice Department they want a huge amount
    of money for juvenile justice.
        We are not going to have a whole lot of flexibility, so we
    need to know what the numbers are because you are not going to
    be coming back to us. You are going to have to live with what
    we give you. I hope you are as confident as you appear with
    these numbers, because it is probably what you are going to end
    up with.
        There is a little bit of history on the 7(j) program. The
    only reason it survived was because of me. It would have been
    gone 1\1/2\ years ago. The prior chairman of this committee
    would have eliminated it, as did the House. I notice you are
    expanding it. What I am interested in is what the expansion is
    going to be used for.
        Ms. Alvarez. There is an expectation that as a result of
    Adarand, the question of who becomes eligible, for example, to
    be an 8(a) firm will expand, as well. The test, if you will,
    the strictness which eliminated about 50 percent of the
    applicants from that field will be loosened and many women and
    other disadvantaged who might not have been eligible will be
    eligible. The thought is that really the intent of 8(a) was
    that this should be a business development program, that we are
    going to need funding to provide expertise, counseling, and
    training, at various stages in the development of these
    companies. That is why we are requesting the expansion.
        Senator Gregg. That gets away from the basic education and
    workshop type of approach.
        Ms. Alvarez. It is not exclusive.
        Senator Gregg. Do you expect the education and workshop
    type of approach to be maintained or is that going to be
    reduced in order to fund the review of the 8(a) accounts?
        Ms. Alvarez. We had success with the education workshops,
    but I think as we expand the pool, there is going to be a need
    for one-on-one counseling and other types of training. It would
    be an expansion, not an elimination of the existing approach.

                      Small business development councils

        Senator Gregg. How about these fees for the small business
    development councils [SBDC's]? How are people going to react to
    that? What do you think they are going to be and how much
    pressure are they going to put on utilization?
        Ms. Alvarez. In our judgment, the intent is certainly not
    to diminish or to reduce the services rendered because we
    believe that, in fact, the users of the SBDC's will pay. We are
    talking about very modest fees with a great deal of flexibility
    on the part of the SBDC to decide whether someone should be
    charged and how much they should be charged.
        The SBDC's already charge fees for training. Last year,
    they charged and made $4.8 million in training fees. In
    addition, other programs that serve comparable populations, for
    example, the women's business centers charge fees to women who
    are considered economically and socially disadvantaged and they
    actually have a very successful track record.
        So we do not think this should be an impediment. We think
    this will be very modest. We think it is consistent with what
    other programs are asking and we hope to continue to support
    what the SBDC's do.
        Senator Gregg. How are these fees being accounted for? Are
    they going directly back into your budget?
        Ms. Alvarez. The $4.8 million?
        Senator Gregg. Yes.
        Ms. Alvarez. They are not.
        Senator Gregg. Are they being accounted for in the way that
    the other fees----
        Ms. Alvarez. Yes.
        Mr. Morhard. They are used to run the program.
        Mr. Walter. The SBDC's define it as program income, so it
    comes back into the SBDC network and they use it to do their
    agenda. It is not part of the matching formula.
        Ms. Alvarez. It is not part of the matching formula.
        Mr. Walter. It does not come back into the SBA or count as
    matching funds against the grant funds.
        Senator Gregg. How does that affect the budget?
        Mr. Morhard. It does not affect the budget. That was part
    of the 1990 agreement.
        Senator Gregg. I do not understand. I am going to have to
    have someone explain that to me at some point.
        Ms. Alvarez. All right.

                               Microloan program

        Senator Gregg. OK. How about this Microloan program? How
    much have you spent out of that, do you know, and where do you
    stand on it, and whether it is working?
        Mr. Walter. On the lending program itself?
        Senator Gregg. Right.
        Mr. Walter. I can tell you, through the end of January, we
    have made about $1.2 million in the direct program and just a
    little over $1 million in the guarantee program.
        Senator Gregg. How much is left in those accounts?
        Mr. Walter. This year, we have availability of about $37
    million in the direct program and $22 million in the guarantee,
    so very little has been spent on those programs.
        Senator Gregg. What are your plans for that? Do you plan to
    accelerate that or can you move that money around?
        Ms. Alvarez. My understanding is that little has been spent
    partly because of the pilot nature of the program; that there
    are lots of kinks to be worked out of the system. These
    intermediaries were wanting assurances on technical assistance
    funds and so far, there have been no defaults to SBA related to
    these loans.
        Senator Gregg. It is a little early.
        Ms. Alvarez. So we are on a good path there. And also, I
    think that as people become more familiar--as long as there is
    technical assistance associated with those loans, the
    expectation is that they will be successful and that is a
    substantial part of what the funding goes for.
        Greg, is it not 25 percent?
        Mr. Walter. One other clarification here, too, is the
    formula that is in the statute calls for us to provide
    technical assistance for loans that were made in prior years as
    long as they stay outstanding in the portfolio, so a good
    portion of SBA's current technical assistance budget is used to
    continue to fund technical assistance for loans that were made
    in prior years, which restricts our ability to add new loans
    into the system and to add new intermediaries.
        So the technical assistance component of the program is
    critical to not only maintaining the current portfolio but also
    to allow us to expand the program. If there is not sufficient
    technical assistance to support the micro intermediaries to
    enter the system, they will not even come into the process.
        Senator Gregg. If you were to point out the one thing in
    the agency that you are most interested in pursuing and
    expanding or improving, what would that be?
        Ms. Alvarez. I am very focused on making SBA a leading-edge
    financial agency. I really think that not only is SBA
    positioned to do some interesting things with the private
    sector which I hope will result in economies, efficiencies, and
    potentially a reduction in cost to the taxpayer and an increase
    of access to credit to the consumer. Given my recent background
    as the direction of OFHEO, I just feel that that is at the top
    of my list.

                                    SBA 2000

        Senator Gregg. This SBA 2000, have you gotten very far into
    that yet or do you have a program for that?
        Ms. Alvarez. I have not gotten into it. Oh, you are talking
    about the----
        Senator Gregg. The planning.
        Ms. Alvarez. You are talking about the planning for the
    transformation into the----
        Senator Gregg. No; I am talking about your plans for the
    strategic effort called SBA 2000 that is just starting out.
        Ms. Alvarez. Right. OK. With respect to the strategic
    planning, the 6-year strategic plan, the Government Performance
    and Results Act [GPRA], we have actually begun to talk to the
    folks on the Hill to get their input. In my 22 days as
    Administrator, I have had an opportunity to read the plan. I
    cannot say that I have had an opportunity to have a meeting
    about it.
        Senator Gregg. Is there any money in here for that planning
    process, do you know?
        Mr. Walter. No, Senator, there is not.
        Senator Gregg. Very good. Is there anything else you think
    we should know?
        Ms. Alvarez. We are an open book and it is in front of you
    in the form of a budget. I look forward to working with you.
        Senator Gregg. So do I. If you have problems or concerns or
    other issues, give me a call, or give Jim a call. Obviously, if
    you are going to have problems with these accounts and you see
    it coming, the earlier we know, the better, especially with the
    disaster issues and maybe the underestimation of the 7(a). This
    is important, so give us lead time.
        Ms. Alvarez. Yes, sir; we will do that.

                         Additional committee questions

        Senator Gregg. Thank you for coming. I appreciate it. If
    there are any additional questions, they will be submitted to
    your agency for response.
        Ms. Alvarez. Thanks very much.
        [The following questions were not asked at the hearing, but
    were submitted to the administration for response subsequent to
    the hearing:]
                Questions Submitted by Senator Pete V. Domenici
       small business regulatory enforcement fairness act advisory panels
        Question. Will you, as Administrator, give the support and
    resources necessary to ensure these panels are established and become
    an integrated force within the regulation review process?
        Answer. Yes, of course. But the agency will need some help from
    Congress.
        The Office of Advocacy has been very active in promoting compliance
    with SBREFA. It has conducted training sessions for more than 600
    Federal executives, including economists. It has also held meetings
    with small business trade association executives on the new law and is
    currently conducting additional sessions for trade association staffs.
        One thing that the new law has done is place a greater emphasis on
    data that will help agencies, and the Office of Advocacy, measure the
    impact of proposed regulations and their alternatives on small
    business. For the past two years, research funds for the Office of
    Advocacy have not been explicitly appropriated by the Congress. The
    Agency has used discretionary authority to reprogram minimum funds to
    finance very basic economic research. For fiscal year 1998 we are
    requesting $1.4 million specifically for SBA's database and for
    economic research by the Office of Advocacy, a significant portion of
    which will be used by the panels reviewing OSHA and EPA regulatory
    proposals. These funds are needed if Advocacy is to fulfill the
    statutory mandates established by Congress.
        Question. What is the current status of establishing the small
    business advisory panels mandated by SBREFA?
        Answer. Under SBREFA, OSHA and EPA are to convene small business
    regulatory review panels if the agencies believe a rule they are
    contemplating will have an impact on small business. The Office of
    Advocacy will provide names of small entities that both the agency and
    the panel should consult. The entities recommended by Advocacy are
    selected according to their particular stake in the issue and will vary
    from rule to rule. The panel then convenes to review all the materials
    provided by the Agency to the small entities and the small entities'
    comments and recommendations on the materials. This review is to occur
    before an agency publishes a proposed regulation for public comment as
    required by the Administrative Procedure Act.
        OSHA has convened one panel on a proposal to limit employee
    exposure to TB infections. The panel completed its report and submitted
    it to the agency. OSHA is planning to publish its proposed regulation
    in the very near future. The Office of Advocacy will submit comments
    for the record on the proposal as appropriate. OSHA has also started
    outreach to small entities, many of which were recommended by Advocacy
    to convene a second panel on another issue. The outreach will help the
    agency determine, preliminarily, the extent and nature of the impact on
    small entities.
        EPA has convened one panel on off-road diesel emissions. The
    panel's work is currently in process, with an estimated completion date
    soon. EPA has also convened a panel for Implementation of Phase I of
    the National Ambient Air Quality standards for ozone and particulate
    matter.
                      office of women's business ownership
        Question. Has the SBA fully integrated the OWBO into its decision
    making activities so that other programs and activities of the agency
    take into account and address the needs of women owned businesses?
    Please provide examples.
        Answer. SBA has integrated the OWBO by taking into account the
    needs of women's business in other programs and activities of the
    agency. For example, SBA involves the needs of women in the following
    programs:
    Access to Capital
        From 1992 to 1995, SBA increased loans to women by almost 300
    percent. SBA went from making 3,588 loans to women in fiscal year 1992
    to making 11,452 in fiscal year 1996 (this includes the 7(a) and 504
    programs).
        The Women's Pre-Qualification Pilot Loan program, in effect since
    June 1994, has made more than $58 million in loans in 16 pilot sites.
    Under the program, SBA agrees, up-front, to guarantee the loan if the
    borrower meets the lenders' credit criteria. Loans under these programs
    are limited to amounts of $250,000 or less. The prequalification
    program focuses primarily on the character, credit and apparent ability
    of the applicant to repay the loan from earnings. On Oct. 22, 1996,
    former Administrator Philip Lader signed a decision memorandum to
    extend the program nationwide.
        In 1996, women received 28 percent of LowDoc loans. These loans of
    less than $100,000 combine a simplified, one page application with a
    rapid response from SBA loan officers, usually only two or three days.
        More than 40 percent of all SBA microloans go to women. The
    Microloan program targets individuals, often low-income, who would not
    otherwise be able to obtain standard loans from financial institutions,
    largely due to bad credit, no credit, or lack of assets. The average
    microloan amounts to $10,800 and creates three new jobs.
    SBA Offices and Resource Partners
        All SBA resources are available to men and women equally. Services
    focused on women business owners vary from district office to district
    office. Individual District Directors have the discretion to assign an
    employee to serve as a Women's Business Ownership Representative and to
    decide how much time should be spent on that task. The Office of
    Women's Business Ownership has insufficient resources to assign an
    employee full-time--as it has in the past--to serve as a field liaison.
        District SBA offices, often in conjunction with SCORE members,
    organize mentoring for current and aspiring women business owners
    through the Women's Network for Entrepreneurial Training. Both peer-
    group and one-on-one mentoring is offered. SCORE has just added its
    first woman to its board of directors to help spearhead an effort to
    bring more women into SCORE as both counselors and clients.
        By sponsoring research on women and entrepreneurs, the Office of
    Women's Business Ownership and the Office of Advocacy promote
    thoughtful development of public policy to foster women's business
    ownership. The Office of Advocacy worked with the OWBO and the National
    Women's Business Council to introduce its new Internet-based Angel
    Capital Electronic Network (ACE-NET) at a White House meeting of key
    women business leaders. OWBO is continuing to work with the Office of
    Advocacy on PRO-NET, an offshoot of the ACE-NET technology that will
    help all small businesses, including women-owned business, get
    government contracts.
        The Office of Women's Business Ownership has a homepage that is
    part of the SBA's World Wide Web site. The OWBO page reaches women
    regardless of their location and provides links to 40 related websites.
    (www.sba.gov/womeninbusiness/)
        To increase women's access to capital for high-technology research,
    OWBO and the Office of Technology jointly sponsor seminars for women on
    accessing the Small Business Innovation Research grant program.
        Question. What are the current prime contracting and sub-
    contracting goals for women owned businesses for each participating
    federal agency?
        Answer. Please see the attached chart which details the goals and
    actual awards of prime contracts and subcontracts to women-owned
    businesses by the major federal purchasing centers for fiscal years
    1994 and 1995, the latest years for which federal agencies have
    reported their awards to SBA.

                          TABLE 11.--WOMEN-OWNED SMALL BUSINESS SHARE OF FEDERAL PRIME CONTRACTS: PERFORMANCE BY MAJOR FEDERAL AGENCIES, FISCAL YEAR 1994 AND FISCAL YEAR 1995
                                                                                          [Dollars in millions]
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                               Fiscal year 1995                                               Fiscal year 1994
                                                                       -----------------------------------------------------------------------------------------------------------------------------
                                                                               Agency projections                Actual awards                Agency projections               Actual awards
                                                                       -----------------------------------------------------------------------------------------------------------------------------
                                                                                         WOB share                       WOB share                      WOB share                      WOB share
                                                                          Total   ----------------------   Total   --------------------   Total   --------------------   Total   -------------------
                                                                         dollars    Dollars    Percent    dollars    Dollars   Percent   dollars    Dollars   Percent   dollars    Dollars   Percent
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    Department of Agriculture.........................................    2,643.8       92.5       3.5     3,115.5       87.4      2.8    2,905.1       72.6      2.5    3,897.5      123.0      3.2
    Department of Commerce............................................      766.0       38.3       5.0       829.6       54.4      6.6      697.4       27.9      4.0      750.8       27.3      3.6
    Department of Defense.............................................  103,900.0    1,766.3       1.7   110,033.0    1,994.0      1.8  100,000.0    1,599.9      1.5  112,013.0    1,857.0      1.7
    Department of Education...........................................      310.0       15.5       5.0       376.6       12.7      3.4      284.0       10.0      3.5      329.9        8.9      2.7
    Department of Energy..............................................   16,480.0      415.0       2.5    16,375.4      505.5      3.1   18,000.0      639.9      3.5   17,104.7      418.2      2.4
    Department of Health and Human Services...........................    2,818.1      113.2       4.0     3,163.0      816.3      5.9    2,538.5      103.3      4.1    3,119.3      149.6      4.8
    Department of Housing and Urban Development.......................      906.5       63.5       7.0       668.9       49.9      7.5      690.1       38.0      5.5      685.3       55.5      8.1
    Department of the Interior........................................    1,292.8       53.0       4.1     1,289.2       63.5      4.9    1,282.3       51.3      4.0    1,386.3       65.0      4.7
    Department of Justice.............................................    1,964.0       58.9       3.0     1,941.3       49.2      2.5    1,786.4       53.6      3.0    1,983.3       47.2      2.4
    Department of Labor...............................................      766.8       39.8       5.2       871.7       24.1      2.8      767.7       32.5      4.2      846.4       17.3      2.0
    Department of State...............................................      500.0       25.0       5.0       636.1       42.2      6.6      475.0       23.8      5.0      616.6       38.3      6.2
    Department of Transportation......................................    3,363.1       67.3       2.0     2,513.8       96.9      3.9    3,601.0       72.0      2.0    2,471.9       55.1      2.2
    Department of the Treasury........................................    1,500.0       78.0       5.2     1,278.5       66.7      5.2    1,500.0       60.0      4.0    1,310.6       64.0      4.9
    Department of Veterans Affairs....................................    2,000.0       60.0       3.0     4,655.6      226.7      4.9    3,000.0       72.0      2.4    4,114.8      155.9      3.8
    Environmental Protection Agency...................................    1,400.0       70.0       5.0     1,144.8       26.5      2.3    1,300.0       26.0      2.0    1,342.1       18.5      1.4
    General Services Administration:
        Federal Supply Schedule \1\...................................    2,465.3       46.2       6.3     2,806.8       47.8      7.2    2,459.3       30.8      5.9    1,801.0       34.0      6.3
        Non-Federal Supply Schedule...................................    5,443.0      163.3       3.0     6,531.9      135.8      2.1    5,428.6       97.7      1.8    6,461.9      129.2      2.0
    National Aeronautics and Space Administration.....................   10,643.0      112.0       1.05   10,109.0      159.1      1.6   10,430.0      104.3      1.0    9,766.0      118.4      1.2
    Tennessee Valley Authority........................................    1,945.0       31.1       1.6     2,956.2       43.8      1.5    1,700.0       23.8      1.4    2,112.0       14.1       .7
    U.S. Agency for International Develop-  ment......................      433.9       21.7       5.0     1,431.1       33.1      2.3      413.3       18.2      4.4    1,505.5       21.7      1.4
    All Others........................................................      900.2       29.5       3.3       901.0       40.6      4.5      873.3       27.4      3.1      936.0       48.7      5.2
                                                                       -----------------------------------------------------------------------------------------------------------------------------
          Total.......................................................  162,441.5    3,360.1       2.1   173,629.2    3,946.2      2.3  160,132.0    3,075.2      1.9  174,554.9    3,466.9      2.0
    ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
    \1\ GSA FSS goal percentages are based on number of contracts awarded.

    Note: Dollar or percentage figures may vary slightly because of rounding or necessary corrections of figures submitted in year-end reports by some federal agencies. Information not given in
      written reports was obtained by telephone.

    Source: U.S. Small Business Administration, Office of Government Contracting, unpublished data, 1996.

        Question. What percentages of federal contracts are currently being
    awarded to women owned businesses for each respective agency?
        Answer. Please refer to the above answer.
        Question. What recommendations does the SBA propose to Congress
    concerning efforts to increase the number of government contracts being
    awarded to women-owned businesses?
        Answer. A major priority of the Office of Women's Business
    Ownership is to expand public and private market opportunities for
    women-owned business. As an advocate, OWBO is involved in the following
    initiatives:
      --The fifty-three Women's Business Centers offer procurement
            training;
      --The Federal Procurement Pilot Program for Women-Owned Businesses
            brings together SBA officials with representatives from federal
            agencies with substantial procurement budgets to work toward
            increasing opportunities for women in the federal marketplace;
      --Small Business Innovation Research seminars);
      --PRO-NET;
      --SBA sponsored procurement training conference, Women $ and Sense;
      --Update of the publication ``Women Selling to the Federal
            Government.''
        Question. What current plans are being made to expand the OWBO
    Demonstration Sites program to all fifty states? Please provide
    examples.
        Answer. OWBO's goal is to establish a Women's Demonstration Program
    site in every one of the fifty states. This year, the program has the
    budget to open four new sites. If reauthorized at the requested level
    of funding of $4 million for fiscal year 1998, OWBO can open 10 to 12
    new sites.
        To enhance the success of the Women's Demonstration Program, the
    Office of Women's Business Ownership began in 1995 to build a women's
    business center in cyberspace. This service, the Online Women's
    Business Center, consists of a private Intranet site shared by the 53
    women's business centers, and an Internet site that will be available
    to women in all geographic locations every day at all times of day.
          paperwork reduction within the small business administration
        Question. What goals were established for the SBA with regard to
    the reduction of federal paperwork?
        Answer. SBA's continuing goal is reducing federal paperwork. With
    respect to the Financial Assistance programs the goals are as follows:
        Review and revise loan application documents and procedures to
    minimize paperwork.--The SBA is currently reviewing its application
    forms and required documentation to determine whether any can be
    eliminated, combined with others or simplified. In addition, the review
    of the forms includes amending the language in the forms to use plain
    English to provide easier understanding and interpretation. Frequently,
    the frustration of applicants with paperwork is from a lack of
    understanding of what is wanted rather than the amount of information
    being sought.
        Review and revise loan closing documents and procedures to achieve
    easier understanding through use of plain English language and to
    reduce the amount of paperwork required to close a loan by combining as
    many documents as possible.--The SBA is currently reviewing and
    amending the loan Authorization and other loan documents for each of
    its lending programs to eliminate unnecessary conditions, convert the
    wording to plain English, and achieve standardization, to the greatest
    degree possible given differences between state statutes.
        SBA has just completed a revision to its 7(a) loan closing process
    to eliminate the requirement that the lenders submit documents to SBA
    at loan closing, and substitute the submission of a single document
    that provides critically needed certifications and information.
        Develop and implement a centralized franchise clearance process.--
    We anticipate that changing these procedures will permit a shorter
    response time on franchise applications and maximize utilization of
    SBA's limited personnel resources. Loans to franchise operations
    account for 6.97 percent of fiscal year 1996 loan volume and 7.7
    percent of fiscal year 1997 year-to-date loan volume, but currently
    take more time to process than non-franchise business loan
    applications.
        Question. Other than the Low Document Loan Program (LowDoc), what
    efforts are being taken within the SBA to curb unnecessary paperwork?
        Answer. The SBA is working to expand the Preferred Lender Program
    (PLP) and encouraging lenders to utilize it more. The Agency has also
    developed and implemented on a pilot basis, a similar program for
    preferred Certified Development Companies (CDC's), the Premier
    Certified Lenders Program (PLP).
        The SBA is currently reviewing the FA$TRAK pilot loan program to
    determine whether to expand it from 18 lenders (with approximately 42
    additional affiliates) now authorized to use these expedited
    procedures; and to identify any necessary changes in procedures or
    policies to better serve applicants or protect the interests of the
    Government. Under this pilot, specified lenders may make and close
    small business loans of up to $100,000 using their own forms and
    procedures. In return, SBA guarantees only 50 percent of the loan.
        SBA plans to increase its use of automated (paperless) systems
    which will allow lenders to send information to SBA from their
    databases electronically. There are several advantages to this,
    including speedier transmission of application and other loan related
    requests, elimination of transposition and other errors due to re-
    entering the same data more than once, and the ability to have all
    information readily available without having to use physical file
    folders. SBA's staff would be able to concentrate on review of
    information--non data entry and the handling of documents. Ultimately
    SBA would only need to hold documents necessary for legal action. We
    are currently testing electronic transmission of loan applications with
    a small numbers of lenders.
        Question. How many loans have been issued under the Low
    Documentation Loan pilot program?
        Answer. From the inception of the LowDoc pilot in late November,
    1994 through February 28, 1997, SBA has approved 63,259 loans totaling
    $3.9 billion.
                       small business development centers
        Question. What efforts are currently being made to make Small
    Business Development Centers be utilized more effectively?
        Answer. The Small Business Administration continues to integrate
    Agency programs into the SBDC delivery system. With this as an
    objective, the Agency has established goals for SBA District Directors
    to emphasize, encourage, and develop positive relationships with
    SBDC's. As part of the effort to improve the utilization of SBDC's, the
    Agency has actively participated in SBDC conferences, briefing them on
    SBA programs. In May of this year, the Agency will conduct training for
    its Field personnel with SBDC oversight responsibilities. SBA's
    District Directors and SBDC Directors will also participate in this
    training. SBA has also successfully negotiated agreements with other
    Federal entities, such as the Department of Commerce, the Environmental
    Protection Agency and the Department of Energy, to deliver certain of
    their services. Consequently, the SBA has been able to successfully
    expand the scope of the SBDC Program to provide greater assistance to
    the small business community. The Agency is currently revising its
    regulations and Standard Operating Procedures governing the SBDC
    Program. During 1996, the Agency completed a total of fifteen (15)
    program and financial examinations in an effort to make SBDC's more
    effective.
        Question. What recommendations or changes to SBDC's do you propose
    Congress should consider as we begin to debate the reauthorization of
    the SBA?
        Answer. The Agency recommends that it be given discretion under the
    SBDC funding allocation formula to provide additional funds to smaller
    SBDC's in order to help maintain a network in those states. SBA also
    recommends revising the ratio of matching funds required from SBDC's
    from $1 for each federal dollar in fiscal year 1997 to $1.60 for each
    federal dollar in fiscal year 1998 and thereafter. The Agency further
    recommends that SBDC's be permitted to use program income (revenue
    generated from fees and other sources) as a match for Federal funds.
        Question. Understanding the unique funding partnerships involved
    with these centers, do you anticipate any changes in the current
    partnerships of these centers due to a reduced SBA budget?
        Answer. In addition to the legislative changes noted above, the
    Agency would also encourage SBDC's to increase their reliance on their
    non-Federal partners to offset the Federal reductions.
        These initiatives should result in maintaining the program at the
    same overall level of funding with a larger portion of the matching
    funds coming from the SBDC's' other partners.
        Question. Does the SBA have any plans to begin charging counseling
    fees for the services business owners and entrepreneurs receive at
    these centers?
        Answer. While the SBA has no plans to mandate that SBDC's charge
    fees for counseling, SBDC's are now allowed to charge such fees since
    Congress removed the prohibition against fees previously contained in
    appropriations legislation. SBDC's' ability to raise additional funds
    through the charging of fees for counseling is one of several options
    for keeping the program operating at the current funding level.
              reauthorization of the small business administration
        Question. What current activities will be sustained with these
    resources?
        Answer. The fiscal year 1998 President's budget proposes to
    continue all programs conducted in fiscal year 1997 and proposes
    increases in a number of programs to expand access to capital, assist
    disadvantaged small businesses, and provide education and training.
    Some of the more significant aspects of our fiscal year 1998 budget
    request include:
      --The budget requests $153 million to provide guaranty authority of
            $8.5 billion for the 7(a) General Business Loan Guaranty
            program;
      --For the Section 504 Certified Development Company loan program, no
            new budget authority is required to provide a program level of
            $2.3 billion;
      --For the Small Business Investment Company program, $20.2 million in
            budget authority is requested to provide program levels of $376
            million of debenture guarantees and $456 million for
            participating securities;
      --For the microloan program, $44.3 million in microloans will be
            funded and an additional $16.5 million is requested for
            technical assistance to microloan borrowers;
      --$18 million is requested to support enhanced lender monitoring and
            oversight;
      --$600,000 to support increased International Trade outreach and
            implementation of the new ``SBA Export Express'' lending tool;
      --No new budget authority is requested for the disaster loan program,
            as expected carryover from fiscal year 1997 will be used to
            support the $785 million program. The fiscal year 1998 budget
            proposes to increase the interest fee to borrowers ``without
            credit elsewhere'' to the Treasury cost of funds and the 8
            percent interest cap for borrowers ``with credit available
            elsewhere'' is proposed to be removed;
      --$57.5 million in federal funding is requested for the Small
            Business Development Center (SBDC) program;
      --$3.5 million is requested to provide $1.7 billion in surety bond
            guarantees;
      --An increase in funding is requested for the Minority Enterprise
            Development (MED) program to restore 7(j) business development
            assistance funding to previous levels;
      --A restoration of $1.4 million to the Office of Advocacy is
            requested for data collection and research that is statutorily
            mandated;
      --In support of women business entrepreneurs, $4 million is requested
            to provide technical and business development assistance
            through the Women's Business Centers;
      --$500,000 is requested to support SBA's Regulatory Ombudsman and the
            regional Regulatory Fairness Boards; and
      --$10.6 million is requested for the Office of Inspector General.
        Question. What activities will be reduced or eliminated due to
    budget reductions?
        Answer. The fiscal year 1998 budget does not propose the
    elimination of any programs, however, the budget does propose
    reductions from fiscal year 1997 funding levels for the following
    programs:
    Non-Credit Programs:
        Small Business Development Centers will be reduced by $16 million
    which is proposed to be offset, at least in part, through charging fees
    for counseling; and
        Funding for the disaster loan making function is reduced from the
    fiscal year 1997 estimated level of $103.9 million to $98.3 million
    consistent with previous funding levels.
    Credit Programs:
        No funds are requested for the Disaster Loan program, as sufficient
    unobligated balances were estimated to be available in fiscal year
    1998. This is a reduction of $218.4 million from the fiscal year 1997
    appropriations level;
        Appropriations requested for the 7(a) General Guaranteed Business
    loan program are reduced by $45 million from fiscal year 1997. Due to a
    reduced subsidy rate, a program level of $8.5 billion is proposed, up
    from $7.8 billion in fiscal year 1997;
        For the microloan program, no new budget authority is requested
    because $44 million in microloans will be funded through the estimated
    carryover of unused budget authority from fiscal year 1997. This is a
    reduction of $4 million from the fiscal year 1997 appropriations for
    this program;
        $3.5 million is requested to provide $1.7 billion in surety bond
    guarantees. This compares to the $3.8 million enacted in fiscal year
    1997 for this program; and
        For the Small Business Investment Company program for participating
    securities, $11.6 million is requested to support a $456 million
    program level. This compares to the fiscal year 1997 enacted level of
    $13.5 million for this program.
        Question. What current efforts are being taken to streamline SBA
    programs to provide more access to assistance? Please provide examples.
        Answer. Although the President's fiscal year 1998 Budget for the
    SBA requests $150 million less than was appropriated in fiscal year
    1997, the actual salary and expense portion of the budget is
    approximately the same as in fiscal year 1997. For fiscal year 1998, in
    order to cut costs of our programs, we are looking for ways to have
    those who benefit directly from our programs help pay for them. For
    example, in the Small Business Development Center (SBDC) program we are
    encouraging SBDC clients to pay a fee for the counseling services they
    receive. We believe that by charging reasonable, limited fees, we can
    re-direct the savings captured to extend assistance to other small
    businesses. We will also continue to focus on improving the way we
    manage and deliver our programs. For example, in order to improve
    access to capital, we will continue to improve efficiencies in
    processing, servicing and liquidating loans.
        More specifically, the President's Budget for fiscal year 1998
    incorporates a plan for continued modifications in the way we do
    business. In recent years, SBA's financial and operational environment
    has changed in several ways:
      --For business loans, SBA now almost exclusively extends credit
            through guarantees, not direct loans.
      --Participating lenders under the 7(a) and 504 programs are
            performing more of the loan origination processing, such as
            data collection, financial and credit analysis, collateral
            valuation, and actual loan approval.
      --Participating lenders are performing more of the routine loan
            servicing and liquidation activities.
      --New technology is being introduced into all phases of loan
            administration to allow for the collection, analysis, transfer,
            and use of more information in managing programs.
      --SBA is consolidating more of its routine loan approval and
            servicing functions at centralized locations to rely more on
            technology and gain economies of scale, thus mirroring private
            sector practices.
      --SBA will begin selling its loan assets starting in fiscal year 1998
            in order to free up resources and concentrate more on essential
            lending activities.
        Question. What efforts are being taken to ensure all programs such
    as the Office of Women Business Ownership, Small Business Development
    Centers and Service Corps of Retired Executives are being made a part
    of the decision making processes within the SBA regarding the
    reauthorization of SBA?
        Answer. The SBA Programs focusing on financial assistance (Finance,
    Investment, International Trade, and Surety Bonds) and business
    education and training (Small Business Development Centers, Service
    Corps of Retired Executives, Women's Business Ownership, Native
    American Affairs and Veterans Affairs) are currently incorporated into
    SBA's Office of Economic Development. On April 17, 1997, the
    Administrator notified the Congress of her intention to restructure the
    Office of Economic Development by separating the finance programs from
    the business assistance programs and establish two new organizations
    called the Office of Capital Access and the Office of Entrepreneurial
    Development. This proposal allows for increased attention to the need
    to expand access to the Agency's business education and training
    programs. The consolidation of business education and training programs
    also reflects the Agency's commitment to customer service, more
    efficient utilization of public/private partnerships and better
    integration of intermediary resource partners such as the SBDC's and
    SCORE.
        In addition, each of SBA's program offices participated in the
    fiscal year 1998 budget process, which included the development of
    proposed reauthorization legislation submitted to the Congress on May
    13, 1997. The proposed legislation includes program narratives
    submitted by the Offices of Women's Business Ownership (WBO), SBDC's,
    and SCORE, and contains specific reauthorization language for WBO,
    SBDC's and SCORE, as well as the remainder of SBA's programs.
     section 8(a), the minority small business program and 8(d), the small
                       and disadvantaged business program
                                reauthorization
        Question. Does the SBA propose any modifications to the current
    utilization of SIC codes by qualified 8(a) and 8(d) small businesses
    seeking contracting opportunities?
        Answer. As part of the Agency's review of the 8(a) program to
    streamline its regulations, we will evaluate current policy concerning
    the requirement that 8(a) firms have approved SIC codes prior to
    solicitation of Federal contracting opportunities. It is expected that
    the current standard will be amended to allow Program participants to
    market 8(a) contract opportunities in a manner consistent with the way
    that they market to other public sector agencies and private sector
    business.
        Question. What possible ramifications would be seen if SIC code
    designation were conducted in a self-certification process as opposed
    to the current application process?
        Answer. We do not envision any serious ramifications if SIC code
    designations are conducted as a self-certification process. SBA is
    responsible for the review and approval of any changes to an 8(a)
    firm's business plan. Currently, the addition of SIC codes to the
    business plan is considered to be such a change. Accordingly, SBA must
    now review and approve changes to a firm's SIC code profile.
        While we will continue to review business plans annually, we plan
    to eliminate review and approval of specific SIC code changes and
    additions. If a Federal agency has accepted an 8(a) firm's assertion of
    performance capability under a certain SIC code, then the firm should
    have the opportunity to market and be awarded a contract for this work.
    In essence, by eliminating review of SIC code changes, bureaucratic
    procedures will be removed from the procurement process.
                                  streamlining
        Question. Is the SBA currently attempting to streamline and/or
    standardize the various rules and regulations used by different
    agencies to establish eligibility for minority or disadvantaged
    business to participate in contract procurement? Please provide
    examples.
        Answer. SBA is currently working with the Administration on
    developing a standardized government-wide certification process for
    Small Disadvantaged Businesses (SDB). When the drafting of these
    procedures has been completed, they will be published in the Federal
    Register as Proposed Rules for public comment.
        Question. What efforts are currently being made within SBA to
    identify and eliminate the numerous ``front companies'' which are
    plaguing these programs?
        Answer. In order to preclude entry of ``front companies,'' into the
    8(a) program, SBA carefully reviews the eligibility of firms applying
    for program participation. This is a rigorous process. In fact, the
    statute allows SBA 90 days to complete the application review and
    eligibility determination process. Further, once firms are in the
    program, SBA conducts thorough annual eligibility reviews to determine
    the appropriateness of continued participation in the program, or
    termination or graduation from it.
        SDB status is currently based on a self-certification. In a basic
    sense, competition within the marketplace is intense, and tends to
    ``weed out'' companies through the SDB protest mechanism. SBA is
    working with the U.S. Department of Justice to establish a formal
    certification process for SDB status which will impose additional
    safeguards.
        Question. Does the SBA support an effort to qualify small
    businesses in the 8(a) program which are not owned by a minority person
    but which hires a large percentage of minorities?
        Answer. The 8(a) program is a business development program, which
    is targeted to individuals who are socially and economically
    disadvantaged. (While it is not a targeted employment program, it is
    noteworthy that many minority individuals are employed by 8(a) firms.)
    The program is predicated upon provision of business development
    opportunities to economically disadvantaged entrepreneurs, not upon the
    demographic composition of firms' employment rolls. A change in the
    basis upon which eligibility is determined would require legislation.
        Accordingly, SBA determines the eligibility of small businesses
    based on whether they are at least 51 percent owned and controlled by
    individuals who are socially and economically disadvantaged, not by the
    ethnic makeup of the employees the firm hires. Socially disadvantaged
    individuals are those individuals who have been subjected to racial or
    ethnic prejudice or cultural bias because of their identities as
    members of groups without regard to their individual qualities.
        In the absence of evidence to the contrary, the following
    individuals are presumed to be socially disadvantaged: Black Americans;
    Hispanic Americans; Native Americans; Asian Pacific Americans; and
    subcontinent Asian Americans. Individuals who are not members of a
    designated group must establish their individual social disadvantage by
    providing to SBA a clear and convincing case of social disadvantage.
        Economically disadvantaged individuals are socially disadvantaged
    individuals who have been denied market access. Their ability to
    compete in the free enterprise system has been impaired due to
    diminished capital and credit opportunities as compared to others in
    the same business area who are not socially disadvantaged.
                 subsidy rate on business loans (credit reform)
        Question. Given that in the very recent past, policies were adopted
    that appeared to reduce the subsidy rate from 2.74 percent in fiscal
    year 1995 to 1.06 percent in fiscal year 1996, only to have the subsidy
    estimate corrected upwards to 2.54 percent in fiscal year 1997 (with no
    policy changes). What confidence should we have that the anticipated
    subsidy reductions in the budget are attainable?
        Answer. The estimation of the subsidy rate is a very complex
    process, requiring the analysis of several cash flow elements that
    occur simultaneously. The development of the loan performance database
    in 1995 has enabled the SBA to make great strides in analysis of loan
    performance data for the purposes of subsidy estimation. As a result of
    the inclusion of additional data and refinements in the subsidy models,
    incremental changes to the subsidy rates should continue to decline.
    The fiscal year 1997 subsidy rate is 2.54 percent compared to the
    current services rate for fiscal year 1998 of 2.32 percent. Further
    reductions to the subsidy rate in fiscal year 1998 are reliant on the
    policy changes presented in the budget including expansion of lenders'
    responsibilities in servicing and liquidating loans, deferral of claim
    payments and improved portfolio oversight. The fiscal year 1998 budget
    request includes $18 million to strengthen oversight and monitoring.
        Even with these improved analytical capabilities, SBA acknowledges
    there is still great potential for improvement. The requests for $18
    million, mentioned above, and $1 million for sophisticated econometric
    analysis of loan performance are intended to further improve our
    analytical capabilities and enhance the precision with which subsidy
    estimates are made.
        Question. To what extent has loan performance for the 1996 loan
    cohort improved compared to previous loan cohorts, since the changes in
    law designed to reduce the subsidy rate were implemented?
        Answer. The average loan maturity for a 7(a) guaranteed loan is
    approximately 15 years. With only one year of actual data available for
    the 1996 cohort, assessment of overall performance of the 1996 cohort
    relative to older cohorts would not be meaningful. However, early
    analysis shows that performance, particularly purchase activity, in the
    first activity year of the 1996 cohort does demonstrate improvement
    over the first year's performance in most of the earlier cohorts
    included in the analysis (1986-1995).
                           sba disaster loan program
        Question. You indicate that carryover funding from fiscal year 1997
    will be used to fund SBA disaster loans. What is the estimated
    carryover funding available to SBA for this purpose?
        Answer. Our fiscal year 1998 budget request assumed that $174.3
    million in budget authority would be available in fiscal year 1998.
    However, since fiscal year 1997 activity is now anticipated to be
    higher than the estimate used in the budget, we now estimate that only
    $88.4 million will be available in fiscal year 1998.
        Question. How much in disaster lending did SBA support in fiscal
    year 1996? How does that compare with the estimated level of disaster
    lending anticipated by SBA for the current fiscal year (1997)?
        Answer. Total disaster loan approvals in fiscal year 1996 were $988
    million. After subsequent cancellations in fiscal year 1996, the figure
    was $867 million for a total of $243 million in budget authority. The
    fiscal year 1997 budget estimated disaster lending at $752 million (10
    year moving average, excluding the mega disaster of Northridge), which
    is approximately $236 million less than the fiscal year 1996 disaster
    lending level. However, our recent estimates of fiscal year 1997
    activity are that approvals will approximate $1.1 billion, using $220.2
    million in budget authority.
        Question. Does SBA's estimate of the available unobligated balances
    take into account the expected request for disaster loans to the winter
    flooding in California, Nevada and the Pacific Northwest, or do SBA's
    estimates pre-date these floods?
        Answer. No. Although the estimate of the available unobligated
    balance from fiscal year 1997 in the President's budget was prepared
    prior to the Pacific Northwest floods, it is not based on a specific
    disaster, but was a product of using the 10 year moving average (less
    the mega-disaster of Northridge). However, disasters of the magnitude
    of the Pacific Northwest floods would be encompassed in the 10 year
    average.
        Question. What is SBA's current estimate of the disaster loan
    requirements for these winter floods? Could you provide details of
    these estimates to the Subcommittee at the earliest possible date?
        Answer. The current estimate of the disaster loan requirements for
    the Pacific Northwest winter floods is approximately $150 million.
        Question. The current spring flooding in the Midwest--in the States
    of Ohio, West Virginia, Kentucky, and Indiana--appear to be as
    devastating as the winter flooding of the West. What are SBA's
    preliminary estimates of anticipated disaster lending needs in the
    Midwest?
        Answer. As of May 29, 1997, we had approved more than $153 million
    in disaster loans as a result of the spring flooding in Ohio, Kentucky,
    Illinois, Indiana, Tennessee and West Virginia. The filing period for
    physical disaster losses has closed in all states except Kentucky. The
    filing period for economic injury disaster loans remains open into
    December.
        Question. Would you anticipate additional requirements from later
    spring flooding due to melting of the snowpack, or has SBA built this
    likelihood into its current budget estimate? Should Congress anticipate
    a budget amendment to provide additional disaster aid through SBA? When
    would you expect such a budget amendment to be submitted to Congress?
        Answer. As of May 29, 1996, later spring flooding as a result of
    the winter ice pack had caused Presidential disaster declarations in
    South Dakota (4/7/97), North Dakota (4/7/97) and Minnesota (4/8/97).
    The filing periods for both physical losses and economic injury remain
    open. As of May 29, we had approved loans totaling $89,703,100 in the
    three states and estimate that there will be additional approvals for
    these disasters of $120-$145 million.
        At this time we do not anticipate submitting an fiscal year 1998
    budget amendment for additional disaster lending requirements. The
    requested interest rate changes and contingency funds should enable SBA
    to handle disasters based on the 10 year moving average.
        The President's fiscal year 1998 budget anticipates that $90
    million in subsidy budget authority will be needed to support disaster
    lending requirements of approximately $785 million. With the recently
    projected available budget authority of $88.4 million, plus recoveries
    of $35 million would leave an unobligated balance of about $33.6
    million available for fiscal year 1999.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                      osha's definition of small business
        Question. Your Office of Advocacy sent a letter to OMB last year
    regarding OSHA's rulemaking for methylene chloride. The SBA Advocacy
    Office objected to OSHA's use of size standards for small businesses
    other than that specified by SBA. OSHA defines small business as having
    20 employees or less while SBA uses 500 employees.
        What size standard do you think OSHA should use in defining small
    business?
        Has OSHA made any changes to its rule as a result of the Advocacy
    Office's objections?
        Was SBA consulted by OSHA in the selection of the size cutoff?
        What impact do you think the selection of this lower size cutoff
    would have on OSHA's analysis under the small business fairness
    legislation that Congress passed last year?
        Answer. For purposes of the Regulatory Flexibility Act, all federal
    agencies are required to use SBA size definitions for small entities
    when performing a regulatory flexibility analysis. 5 U.S.C.
    Sec. Sec. 601 et seq.; 13 C.F.R. 121. An agency may use an alternative
    definition for the analysis only after consultation with the Office of
    Advocacy. In comments to the Office of Management and Budget on OSHA's
    use of an alternative size definition for the methylene chloride rule,
    the Office of Advocacy pointed out that OSHA failed to use the size
    definition that is required by law, nor did it consult with the Office
    of Advocacy about an alternative size definition. OSHA did not use the
    appropriate procedure, and failed to perform a regulatory flexibility
    analysis for the entire universe of small businesses. After Advocacy's
    objections, OSHA expanded its analysis to include manufacturing firms
    with fewer than 100 employees. However, the correct SBA definition for
    this manufacturing sector is firms with fewer than 500 employees.
        Using a size definition of less than 20 employees fails to
    recognize that ``small business'' is more than a micro-business and
    that the impact of this regulation, as well as others, can be equally
    or more burdensome to small firms with more than 20 employees.
        A 1994 survey commissioned by the Office of Advocacy documented the
    regulatory and paperwork burdens on small business. Hopkins, A Survey
    of Regulatory Burden, June 1995. The report revealed that the costs of
    regulatory compliance place a disproportionate burden on small firms.
    In fact, firms with 20-49 employees may be the most burdened. They
    reported spending nearly 20 cents of every revenue dollar to pay for
    the paperwork and operating costs attributed to regulations. These
    costs do not include the additional capital investments needed as
    result of regulation. Agencies argue that using a broader definition
    (i.e., the definition required by law) will hide the costs to micro-
    businesses because costs will be averaged. However, effective analyses
    will include the cost estimates for businesses of different sizes in
    order to identify the sectors with the most need for regulatory
    alternatives.
        Using an inappropriate size definition creates two main problems.
    First, the use of micro-business sizes results in underestimates of the
    overall costs of this rule to small businesses. In addition, it
    completely leaves many small businesses out of the analysis. In this
    case, the alternative definitions used encompass a large portion of
    some industry sectors affected by this rule. Therefore, the use of an
    alternative size is less significant in some sectors (e.g., furniture
    strippers).
        Second, and more importantly, OSHA is required to develop
    significant alternatives to the proposed rule to minimize the impact on
    small firms. By using a different size definition, the full impact and
    the need for alternatives were understated. In fact, the feasibility of
    implementing this rule for the small manufacturing, construction and
    industrial paint stripping industries is in question. By using the
    correct definition, OSHA should have recognized that the feasibility
    hurdle cuts across all small business sectors and the need for
    alternatives (besides phase-ins) are critical in some industries.
                           new administrator's goals
        Question. Ms. Alvarez, you have an impressive background in finance
    and managing government financial institutions. Obviously, the budget
    before us today was put together largely before you joined SBA.
        Could you tell us what your goals are for the agency? Are there
    specific programs that you intend to emphasize to change?
        Answer. My vision for the SBA at this early point in my tenure has
    eight components. Five of these components embrace our traditional
    missions and three of these components represent new expanded roles.
        First, the SBA must continue to provide access to credit for small
    businesses, in general, and for small businesses who are underserved by
    traditional lenders, specifically. My own view is that, especially in
    these times of severely constrained budgets, we need to do more to
    figure out exactly who is underserved by private, unsubsidized credit
    markets and then ascertain what are the best products and distribution
    systems to use to reach these populations. We already know that we need
    to redouble our efforts to increase lending to those populations--
    especially women business owners and minority-owned businesses--and
    those places--distressed urban neighborhoods and remote rural areas--
    which are underserved now. Providing access to credit is my number one
    priority.
        I am also committed to exploring ways in which the SBA can increase
    private, unsubsidized lending to small businesses and lower its cost.
    For example, I have already begun to collect information on the
    securitization of small business loans. I believe that small business
    lending could expand, if we can develop standardization and other
    approaches that will allow for increased securitization of small
    business loans.
        Second, I have embraced our mission to create and support
    entrepreneurs through our business education, counseling and
    development programs. The SBA support for the entrepreneurial spirit
    through programs like the SBDC's, the Women's Business Centers, the
    Business Information Centers, and the SCORE volunteers, are fundamental
    to our core mission. I am challenging the managers of these programs to
    open the doors wider to everyone in this society.
        Third, I am very impressed with the role that the SBA plays in
    helping communities recover from disasters. We are the Disaster Bank,
    providing the downpayment on people's futures. I have seen the SBA at
    work helping the recovery. Our employees are doing so much right now
    for the people of North Dakota and Minnesota. Our hearts go out to our
    own SBA employees who have lost their homes.
        The fourth part of our traditional mission that I have made my own
    is to help develop procurement opportunities for small businesses--
    especially small disadvantaged businesses. I am encouraged by the
    efforts to develop new avenues for procurement through technology and
    by efforts to reduce processing time by delegating 8(a) authorities to
    the procuring agencies. In my short tenure here, we have approved a new
    model for 8(a) that allow firms owned by community-based nonprofits to
    qualify. This approach, recently approved for a community development
    corporation in Washington, D.C., will allow firms in distressed
    communities to have an opportunity to compete for federal procurement
    dollars. And, with the CDC's involvement, we have the hope that the
    benefits from the procurement dollars will accrue to the residents of
    the surrounding community. In the area of overall federal procurement,
    our challenge is to increase the number and amount of prime contracts
    that flow to small businesses and to increase small business access to
    subcontracts.
        The government is falling short of a statutory goal of providing 5
    percent of all federal procurement to small women-owned firms. Actual
    performance is at less than 2 percent. I am particularly interested in
    taking action to increase the federal government's performance with
    respect to the women's goal. It is not acceptable that the government
    does not meet this goal.
        Fifth, I must be the spokesperson for small businesses in general.
    As a member of the President's Cabinet, I have the opportunity to bring
    small business issues to the highest levels of decision making in the
    federal government. It is my commitment to make sure that the voice of
    small business is heard.
        On top of these five core missions, I would add the following:
        One: I want to transform the SBA into a 21st century leading edge
    financial institution. A leading edge financial institution is one that
    relies heavily on technology to manage its lending and portfolio
    management activities. It employs fairly sophisticated techniques to
    identify and manage risk. The 21st century leading edge financial
    agency is a cost-effective and efficient organization that delivers
    credit to small businesses in a very short period of time. It is an
    organization that analyzes and develops new innovative credit products
    that serve to meet the various needs of its small business customers.
    And, it is an agency that operates in a safe and sound manner to
    protect the interests of the taxpayer.
        Two: the SBA will take a leading role in the President's Welfare to
    Work initiative. President Clinton has promised the American people
    that he will end welfare as we know it. Last year, the President and
    the Congress passed landmark legislation that is the first step toward
    fulfilling the President's promise to the American people. The next
    step is to ensure that people are moved successfully from welfare to
    work. The SBA must take a leading role in this initiative because we
    represent the work side of the welfare to work equation. Small
    businesses create 75 percent of the new jobs in the economy. We must
    work to find ways to link employees coming off the welfare rolls with
    our small business employers. This will be a mammoth organizing task.
        Finally, we have a challenge to help small businesses cope with and
    benefit from changes in the larger economy. The internationalization of
    capital markets, the rapid pace of change in technology and
    communications, the reconfiguration of major sectors of the economy
    such as utilities and financial services all pose risks for the small
    business sector.
        Yet, if these changes are understood correctly and foreseen, nimble
    small businesses can take advantage of new markets and new
    opportunities. We have a mandate to help guide small businesses through
    these changes. Through a series of conferences over the next several
    years, I want to identify the most important of these macroeconomic
    trends for small businesses and organize conferences that will allow us
    to share knowledge on these important changes in the economy.
                             disaster loan program
        Question. As I understand it, your budget does not request
    additional credit appropriations for the SBA Disaster Loan Program
    because as of February 1, 1997, you had $325 million in obligational
    authority which should subsidize $1.6 billion in disaster loans. Is
    that correct?
        Answer. The total amount of funds available for fiscal year 1997
    was $326 million which provides for $1.6 billion in obligational
    authority. As of February 1, 1997 we had used $63 million to make $311
    million in loans, leaving $263 million to cover remaining fiscal year
    1997 loan needs, administrative expenses and carryover funds to fiscal
    year 1998.
        Question. What are the latest estimates for the flooding in
    California and the Ohio Valley, and the tornadoes in Arkansas and the
    Southeast?
        Answer. Based on our current level of activity in the areas that
    you mentioned along with the recent flooding in the upper Midwest we
    estimate that total disaster loan demand for fiscal year 1997 will be
    about $1.1 billion.
        Question. Are you still confident that you will make it through
    fiscal year 1998 without new appropriations?
        Answer. The fiscal year 1998 budget is based on a substantial
    carryover from fiscal year 1997, now estimated at $88.4 million, plus
    $35 million in recoveries. This amount would still provide
    approximately $1.1 billion in loan authority if Congress adopts the
    proposal to increase the interest rates on disaster loans. If Congress
    rejects the proposal to increase interest rates, available loan
    authority for fiscal year 1998 would be $526 million ($259 million
    below the ten year average).
        Question. However, administrative expenses appropriations for the
    Disaster Loan Program are requested to increase from $108.5 million
    this year to $173.2 million. Why?
        Answer. The fiscal year 1997 appropriation of $108.5 million
    included $22 million from the emergency supplemental for disaster loan
    making, $50.4 million to be transferred to regular salaries and
    expenses to cover indirect costs of the SBA, $0.5 million to be
    transferred to the Office of Inspector General for disaster-related
    activities, $22 million for disaster loan servicing activities, and the
    balance of $13.6 million for additional disaster loan making
    activities. Therefore, the disaster loan making operation received
    $35.6 million in direct fiscal year 1997 appropriations. This was
    supplemented by $18.2 million carried forward from fiscal year 1996,
    plus $50 million proposed to be reprogrammed from prior year loan
    recoveries in the disaster loan program account. The total amount
    available for the disaster loan making activities was, therefore,
    proposed to be $103.8 million for fiscal year 1997. To date, only $38.7
    million has been approved for reprogramming from the disaster loan
    program account by the Congress, providing the disaster loan making
    activity $92.5 million for fiscal year 1997.
        For fiscal year 1998, there are no estimated carry forward funds
    available from fiscal year 1997, and there is no proposed reprogramming
    from the disaster loan program account. Therefore, funding for the
    disaster loan making activity is requested as a direct appropriation.
    This requested level is $98.3 million. The requested level for disaster
    loan servicing activities is $24.9 million. The requested level to be
    transferred to the regular salaries and expenses account to support the
    indirect activities is $50 million. Therefore, the total fiscal year
    1998 appropriation requirement is $173.2 million.
        Question. This year's budget proposes to increase the interest
    rates charged on SBA disaster loans from 4 percent to the cost to the
    Treasury borrowing rate plus one point. Could you explain the proposal
    and why Congress should agree?
        Answer. First, the fiscal year 1998 proposal does not add one point
    to the cost of Treasury borrowing. Under current law the interest rates
    fluctuate according to statutory formulas; a lower rate, not to exceed
    four percent, is available to applicants without credit elsewhere; a
    higher rate, not to exceed eight percent, is charged to borrowers who
    have credit elsewhere. To reduce the subsidy cost of the disaster loan
    program, the budget proposes to increase the interest rate to borrowers
    without credit elsewhere to the cost of U.S. Treasury for securities of
    comparable maturity. For borrowers with access to credit elsewhere, the
    interest rate would be pegged above the Treasury rate. This change
    would reduce the subsidy in the program from 23.46 percent to 11.44
    percent, enabling more loans to be made with the same amount of budget
    authority. An increase in the interest rate would also remove a
    disincentive for potential disaster victims to purchase insurance,
    which is the most desirable method of protection against the financial
    costs of physical disasters. Removing the caps and raising the interest
    rates to the cost of money to the government would encourage more
    reliance on insurance.
                          mbda/sba minority assistance
        Question. For several years this Committee has been trying to
    eliminate duplication and get SBA and the Minority Business Development
    Agency in Commerce to work closer together. In fiscal year 1997 we
    fenced appropriations in both agencies for this purpose. Could you give
    us a status report on where efforts stand between the two agencies?
        Answer. The report language for the fiscal year 1997 Omnibus
    Appropriations Act earmarked $2 million in MBDA funding and $1 million
    in SBA funding for projects jointly developed, implemented, and
    administered in conjunction between the two agencies. MBDA and SBA
    jointly developed a proposal that was submitted to the House and Senate
    Appropriations Subcommittees on Commerce, Justice and State in November
    1996. The proposal would utilize the resources of both MBDA and SBA to
    provide business development assistance to three different categories
    of small disadvantaged businesses and medium sized businesses
    traditionally served by these two agencies.
        The proposed project has been designed to bring to bear the
    resources, resource partners and programs of both agencies, without
    duplication of effort, for the benefit of (1) current eligible Section
    8(a) Program participants in the developmental phase, (2) traditional
    MBDA clients and 8(a) participants about to transition out of the
    program, and (3) former 8(a) participants and other minority-owned
    businesses that are no longer small under SBA's size standards and
    regulations, but still benefit substantially from the transitional
    business development assistance programs of MBDA for which they remain
    eligible. To date, we have not been given a response from Congress on
    the proposal.
                       small business development centers
        Question. Your budget proposes to reduce appropriations for Small
    Business Development Centers from $73.5 million to $57.5 million. Could
    you explain your proposal? Why is the Defense Transition Program zeroed
    out in the budget?
        Answer. The SBA is attempting to increase the reliance of the SBDC
    program on the private sector and make the program more effective and
    self-sufficient by passing a portion of the costs of the program on to
    the clients. SBDC's charge fees for training (in 1996 SBDC's offset
    about $4.8 million in training costs through fees) and its own clients
    value the program at about $686 million. The Agency feels that those
    who use SBDC services should share some of the costs.
        The Defense Economic Transition Initiative, which was initially
    funded in fiscal year 1995 for $3.375 million and continued in fiscal
    year 1996 for $2 million, has always been a Congressional initiative.
    Based on the limited resources of SBA, we believe the SBDC program
    could generate greater economic impact if it remains dedicated to its
    core responsibility of business management training and counseling. We
    have therefore not sought additional funding for this initiative.
                              sba field structure
        Question. For years, this Subcommittee has urged SBA to reduce and
    rationalize its field structure. In 1995, your predecessor, Phil Lader,
    proposed some changes but he was stopped by the House side. Have you
    taken a look at this issue? Have you assessed SBA's field structure?
        Answer. The SBA is continuously looking at its field structure and
    how it fits with the Agency's mission. Over the last 2\1/2\ years, the
    district offices have been reduced in FTE's by 17 percent. Although the
    loan processing and servicing responsibilities are moving away from the
    district offices, lender oversight and training responsibilities are
    increasing. In addition, training and technical assistance required for
    small business constituents continue to increase.
                             loan guarantee volume
        Question. It seems to me that SBA runs the 7(a) program like an
    entitlement. If there is demand for loans then the assumption is that
    the Government has to meet that demand. Do you agree? How do we know
    that Government funding is necessary? I mean, what incentive does any
    bank have to use its own funds when it knows that the Government will
    underwrite 80 percent of the risk?
        Answer. SBA believes that it is appropriate to allow reasonable
    program growth within necessary budget constraints, and has requested a
    slight increase in 7(a) funding for fiscal year 1998 to reflect this
    growth. SBA has not, however, requested authority to broaden the
    category of small businesses for which it may guarantee loans.
    Therefore, for the past several years actual 7(a) loan approvals have
    remained relatively the same. The last time that SBA asked for
    supplemental appropriations to support the 7(a) program was during
    fiscal year 1993. When SBA ran short of appropriated funds again in
    fiscal year 1995, SBA imposed two measures, reducing gross loan size
    and eliminating refinancing, to dampen demand.
        SBA is well aware that budget constraints make it necessary for
    every Federal agency to examine its programs to determine whether they
    represent an appropriate use of taxpayer dollars. You may be interested
    to know that no lender may ask for an SBA guaranty on a loan until it
    certifies that it could not make the loan under the same terms and
    conditions without the guaranty. Based on these certifications, and our
    feedback from small businesses in need of capital, we believe that the
    loans that SBA guarantees are important to the Nation's economy, and
    are not available in the commercial marketplace. SBA's guaranty allows
    lenders to extend credit when it could not normally do so by allowing
    longer maturities, less restrictive collateral requirements and loans
    larger than allowed under some lenders' practices. By selling the
    guaranteed portions of their loans on the secondary market, SBA's
    lending partners are also able to leverage their resources to have
    additional funds to lend to small businesses.

                              subcommittee recess

        Senator Gregg. The subcommittee is recessed.
        [Whereupon, at 2:21 p.m., Tuesday, March 11, the
    subcommittee was recessed, to reconvene at 10 a.m., Wednesday,
    March 12.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                           WEDNESDAY, MARCH 12, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 9:57 a.m., in room SD-138, Dirksen
    Senate Office Building, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Domenici, Hutchison, Hollings,
    Inouye, and Mikulski.

                             DEPARTMENT OF JUSTICE

                         Office of the Attorney General

    STATEMENT OF JANET RENO, ATTORNEY GENERAL
    ACCOMPANIED BY:
            STEPHEN R. COLGATE, ASSISTANT ATTORNEY GENERAL FOR
                ADMINISTRATION
            MICHAEL J. ROPER, DEPUTY ASSISTANT ATTORNEY GENERAL, CONTROLLER
            ADRIAN A. CURTIS, DIRECTOR, BUDGET STAFF

                                opening remarks

        Senator Gregg. I appreciate the Attorney General arriving
    early and the Senator from Hawaii is always early. We are very
    lucky to have such promptness, so we will start a few minutes
    early ourselves. I know the ranking member is going to be
    joining us in a few minutes. I know the Attorney General's time
    is in great demand and we appreciate her taking time out of her
    schedule to come and testify relative to her budget and other
    issues. We welcome you to the committee. It is always a
    pleasure to have your input and thoughts and ideas, and so I
    will open the floor to you. Let me first yield to the Senator
    from Hawaii to see if he has an opening statement.
        Senator Inouye. No, Mr. Chairman.
        Senator Gregg. I open the floor to the Attorney General.

                    Attorney General Reno's opening remarks

        Ms. Reno. Chairman Gregg and Senator Inouye, thank you very
    much for this opportunity. I appreciate your strong support
    that you have consistently given the Department in our efforts
    to deal with the crime problems in this country. During this
    time of fiscal constraint and steadily decreasing amounts of
    discretionary spending, please know that I recognize the
    tremendous effort that has been made by this subcommittee to
    carve out resources for the Department during the past 4 years.
    I know it is no easy task, and I appreciate the difficult
    choices that you have made.

                               prepared statement

        For fiscal year 1998, we are seeking a budget that totals
    $19.3 billion, an $800 million, or 4.9 percent, increase in
    discretionary funding over 1997 levels. These new resources
    will be used primarily to escalate our fight against drugs,
    youth violence, terrorism, and illegal immigration. I
    appreciate your thoughtful approach to many issues, Mr.
    Chairman, and I appreciate the thoughtful way that you
    addressed the issues facing the Department, and I look forward
    to working with you and the entire subcommittee, and I would be
    happy to try to answer any questions.
        [The statement follows:]
                        Prepared Statement of Janet Reno
        Mr. Chairman and Members of the Subcommittee: Good morning.
    Chairman Gregg, Senator Hollings, members of the Subcommittee, it is
    again a pleasure to appear before you to present the President's budget
    request for the Department of Justice. This Subcommittee, under both
    your leadership, has been tremendously supportive of our efforts at the
    Department, and I look forward to working closely with you in this, my
    fifth year.
        For fiscal year 1998, the President is seeking a budget that totals
    $19.3 billion for the Department of Justice, including $5.2 billion in
    resources from the Violent Crime Reduction Trust Fund, and $2 billion
    in funding through a variety of fees and fines.
        During these times of continued fiscal constraint and reduced
    federal spending, the fiscal year 1998 budget request demonstrates the
    Administration's resolve to escalate our nation's fight against drugs,
    youth violence, terrorism, and illegal immigration, by providing the
    Department with an $800 million or 4.9 percent increase in
    discretionary funding over 1997 levels.
                             management initiatives
        If the budget I present to you today is approved, it will mark a 70
    percent increase in Justice Department funding during my tenure as
    Attorney General. Please know that I recognize the tremendous efforts
    that have been made by this Committee to carve out the resources that
    you have made available to the Department of Justice during this time.
    I know it has been no easy task.
        I know, too, of your deep concern over the management of these
    resources, and let me say that I share them. In fact, as a result of
    the hiring problems we had with border patrol officers and our shared
    concern over large-scale automation projects such as IAFIS and NCIS
    2000, I instituted a management initiatives tracking process within the
    Department early last year. The process focuses on results. Like you, I
    am interested in what has been accomplished--how the Department's major
    organizations are implementing critical initiatives, including those
    supported by the budgets approved by this Committee.
        Under the process I have in place, the components and I agree ahead
    of time on the subject areas to be tracked, as well as the measures and
    milestones to be used to demonstrate that a task is completed, on the
    right course, or needs corrective action. I am told this is the first
    time in over twenty years that such a management review process by
    senior level Department of Justice officials has been instituted. The
    components report on their status to me monthly, unless I ask for a
    more frequent update--as is the case with the INS and the FBI. We have
    regularly-scheduled face-to-face meetings to discuss progress and
    actions needed to keep the initiatives on track.
        I will continue with this close management oversight to ensure
    these resources are properly used and that intended results are
    achieved. In addition, we need to strengthen our internal program
    monitoring and evaluation capabilities within each agency. And, your
    recent approval of the INSpect reprogramming is one example of
    improvements we are attempting to make in this regard. Another is our
    request for increased resources to enhance the Office of the Inspector
    General. In the coming months, I hope we can work together to match
    audit and monitoring capabilities consistent with the Department's
    significant growth in funding.
        I want to assure you that I am making every effort to use the
    resources provided by this Committee in the most efficient and cost-
    effective manner possible.
                            fiscal year 1998 request
                       fighting crime and youth violence
        The budget I present to you today builds on the commitment made
    consistently by this Committee over the past four years to strengthen
    our fight against crime, particularly crimes of violence. Our efforts
    to work with communities and local police forces, through programs like
    Community Oriented Policing Services (COPS), are achieving positive
    results. Serious and violent crime dropped for the fifth year in a row
    in 1996, marking the longest period of decline in 25 years. And, the
    number of youths arrested for violent crime dropped by nearly 3
    percent--the first decline in seven years.
                                new initiatives
        However, while overall crime rates are dropping, young people are
    increasingly the perpetrators and victims of some of society's most
    violent crimes. To address the continuing problem of youth violence,
    the budget before you seeks more than $230 million in additional
    resources to target gangs and youth violence, hire new gang
    prosecutors, establish anti-truancy and anti-school violence programs,
    and develop new initiatives to get young people back on the right track
    after they have broken the law and before they stray too far.
        These resources include $100 million to establish the Prosecutorial
    Initiatives Targeting Gang Crime and Violent Juveniles Program,
    designed to provide grants directly to State and local prosecutors'
    offices for new local prosecutors and anti-gang initiatives designed to
    pursue, prosecute, and punish dangerous gang members for their crimes.
    Another $75 million is requested for the ``At-Risk Children
    Initiative.'' Grants will be made to local communities, through the
    States, for anti-truancy, school violence, and other, similar
    initiatives aimed at getting or keeping high risk juveniles on the
    track to success. And, $50 million is requested to establish a Youth
    Violence Court Program that will provide funding for specialized,
    court-based activities--like juvenile gun and drug courts--to more
    effectively handle violent youthful offenders as they proceed through
    the justice system.
        The changing profile of juvenile crime to a more violent and
    destructive phenomenon demands that we develop an aggressive, national
    strategy to effectively address it. The Anti-Gang and Youth Violence
    Act of 1997, which was transmitted to the Congress on February 25,
    contains that blueprint. I believe these new initiatives are the first
    step in developing a coordinated system to stem the rising tide of
    youth violence in America. I urge you to support them.
                  community-oriented policing services [cops]
        Our budget request for fiscal year 1998 also includes $1.4 billion
    to continue our effort to put even more police on the streets of
    communities throughout America. This funding will be used to hire
    approximately 17,000 additional police officers, bringing the total
    number of officers funded to nearly 80,000.
        Police chiefs and sheriffs from across the country are telling us
    the good news--community policing is working. Just two weeks ago, the
    President and I traveled to Boston and saw firsthand what a difference
    community policing can make. We must maintain and strengthen the
    partnerships that we have built with local law enforcement.
        And, we are requesting resources to enhance State and local law
    enforcement recruitment, retention, and education. The budget includes
    $20 million each for the Police Corps program and for law enforcement
    scholarships to increase significantly the number of police officers
    with advanced education and training. The budget also includes $5
    million for police recruitment.
                    prosecutions in the district of columbia
        An increase of $16.6 million is included to provide enhanced
    support for the United States Attorney's work in prosecuting D.C. crime
    before the D.C. Superior Court. Specifically, additional attorney
    resources will be used to expand the community prosecution initiative,
    and to address the rising problem of domestic violence. Additional
    staff will also be used to target and remove violent gangs from the
    streets of the District, and to investigate and prosecute unsolved
    murder cases.
                             violence against women
        Violence against women continues to be a significant problem. To
    combat this crime, the fiscal year 1998 budget includes an increase of
    $52 million--bringing State and local assistance under the 1994
    Violence Against Women Act to $249 million.
        A coordinated, aggressive, and thoughtful criminal justice approach
    employing law enforcement and prosecution, coupled with victim
    services, can help break the cycle of violence and reduce subsequent
    incidents of domestic violence. The expansion of these programs will
    enable States to enhance their efforts to respond to domestic violence,
    sexual assault, and stalking, and further expand access to previously
    under-served American Indian and other minority populations.
                           victim witness assistance
        Responding to the growing concern of Congress and the
    Administration to safeguard the rights of crime victims, and to ensure
    the proper and considerate treatment of government witnesses, the
    Department is also requesting 134 additional victim-witness
    coordinators and advocates to be placed in United States Attorneys'
    offices throughout the Nation.
                        keeping criminals off the street
        For fiscal year 1998, the budget includes $710 million--of which
    $525 million is unearmarked--for State grants to build new prisons and
    jail cells under the Violent Offender Incarceration and Truth in
    Sentencing Grant programs. These monies can support the construction of
    up to 9,000 new prison beds to accommodate State prison populations.
        Of the $185 million in earmarked State prison monies, $35 million
    is for the U.S. Marshals Service's Cooperative Agreement Program (CAP)
    to allow for the replacement of approximately 700 beds provided through
    agreements expiring by 1998, and to purchase additional beds to support
    the projected growth in the Federal unsentenced detention population.
    The remaining $150 million is to augment the $350 million provided for
    the State Criminal Alien Assistance Program (SCAAP)--bringing the total
    available to reimburse States for the costs of incarcerating criminal
    aliens to $500 million in fiscal year 1998.
        To address the steadily increasing federal inmate population,
    estimated to reach 116,762 in 1998, the budget includes program
    increases of $144 million for the Federal Prison System. These
    resources will permit the activation of 1,152 new inmate beds in 1998,
    the construction of another 1,216 beds, and the conversion of dormitory
    style housing into single cells at two U.S. Penitentiaries.
        These resources include $3.6 million to support the activation of a
    medium security facility at the Federal Correctional Complex in
    Beaumont, Texas. It also includes $120.6 million to build a high
    security facility with a minimum security camp at Castle Air Force
    Base, California, and $16.7 million to convert dormitory style housing
    into single cells at the U.S. Penitentiaries at Lewisburg, Pennsylvania
    and Lompoc, California.
        And finally, $1.4 million is included to enhance the Bureau of
    Prison's ability to identify the background of inmates entering the
    Federal Prison System. This initiative will improve prison management
    by collecting information on security threat groups coming into BOP
    institutions and coordinating its intelligence gathering efforts with
    other law enforcement organizations.
                    fighting drug trafficking and drug abuse
        Drug abuse and drug-related crime cost our society an estimated $67
    billion a year and destroy the lives and futures of our most precious
    resource--our children. The budget I present to you today seeks to step
    up our efforts to control the flow of illegal drugs with $288 million
    in new resources targeted at Southwest border interdiction,
    methamphetamine production and distribution, investigation and
    prosecution of drug offenses, and successful drug treatment programs.
        With these additional funds, the DEA will be able to hire 168 more
    agents to identify and assist in the prosecution of major Mexican drug
    trafficking organizations operating along the Southwest border; expand
    its anti-methamphetamine efforts; and continue implementing its five-
    year strategy that targets heroin trafficking within the United States.
        For the FBI, 76 new agents will be added to expend the Department's
    Southwest Border Strategy, investigate public corruption along the
    border, and assist the DEA's Country Attache office in Mexico. The
    United States Attorneys will hire 59 new Assistant U.S. Attorneys to
    work with the FBI and DEA in reducing the availability of illegal drugs
    by investigating and prosecuting internal and multi-jurisdictional drug
    trafficking organizations. They will work together to coordinate
    attacks against international drug organizations such as the Cali
    cartel.
        During the past year, the Department has significantly disrupted
    the flow of cocaine trafficking along the Southwest border; identified
    and assisted in the destruction of four major clandestine laboratory
    sites in Colombia; and successfully prosecuted drug kingpin Juan Garcia
    Abrego. With your help in 1998, we can build on these successes.
        To continue our efforts to break the cycle of drug abuse and crime,
    we have included $45 million in additional funding for Drug Courts,
    bringing the program total of $75 million to assist State and local
    governments in developing specialized drug courts for non-violent
    offenders. Another $33 million is added to increase funding $63 million
    for the Residential Substance Abuse Treatment of State Prisoners
    Program. In both instances, our research shows this kind of coercive
    intervention by the criminal justice system can force offenders to
    change behavior--with a real decline in recidivism being the result.
        And, finally, you will note a change in the presentation of the
    budget request for the Interagency Crime Drug Enforcement Program that
    supports the Organized Crime Drug Enforcement Task Forces (OCDETF).
    Beginning in fiscal year 1998, funding for OCDETF organizations in the
    Department of Transportation and Treasury will be made available from
    appropriations provided directly to those two department. This change
    in funding source will have no effect on the oversight, management, and
    day-to-day operations of the OCDETF program. I will continue to provide
    policy, program, and budgetary direction to the regions, and to all of
    the participating organizations. The centralized management and
    coordination of Organized Crime Drug Enforcement Task Force activities
    is a critical component to the success of the program, and I will work
    to see that it is maintained.
                   fighting terrorism and international crime
        While recent acts of terrorism appear to have been isolated
    incidents, we are seeking increased funding to ensure the safety and
    security of the Government and public from future violent acts.
        We are seeking an increase of $3.1 million and 30 positions for
    United States Attorneys to work with the FBI in the investigation and
    prosecution of domestic terrorism. The Anti-terrorism and Effective
    Death Penalty Act of 1996 broadened the tools available in terrorism
    cases. These United States Attorney resources will be critical in the
    Department's coordinated strategy to respond to incidents when they
    occur.
        We are also requesting $29.5 million for the Counterterrorism Fund
    in fiscal year 1998. As you know, the Fund is used to reimburse Justice
    agencies for costs incurred in support of preventing, investigating, or
    prosecuting domestic and/or international terrorism, and to finance
    reward payments. Further, an additional $14.3 million is requested to
    support 23 FBI agents and 11 support personnel to enhance existing
    Legal Attache offices and open eight new ones. Another $3.1 million
    will allow the Criminal Division to increase its attorney presence
    overseas, expand its ability to critically analyze sensitive
    international law enforcement information coming into the Department,
    and augment international computer crime investigations and
    prosecutions. This funding will also allow the Department to hire staff
    as the United States assumes the Presidency of the G7/P8 in 1997.
        The 1998 budget also includes $17 million to continue the three
    State and local counterterrorism programs established in 1997 that
    provide grants to law enforcement agencies, as well as firefighters and
    emergency services personnel, to enhance their ability to respond to
    terrorist attacks. These monies also support grants for the development
    of technologies that can be used by State and local law enforcement to
    fight terrorism.
                          fighting illegal immigration
        The fiscal year 1998 budget includes $3.6 billion for the
    Immigration and Naturalization Services (INS)--a 13 percent increase in
    funding to strengthen the aggressive efforts we've made to date. These
    resources will enable the INS to further control illegal immigration by
    targeting resources to stop those who want to enter the United States
    illegally, detain and quickly remove those who slipped by, and make it
    harder for illegal immigrants to get jobs.
        These increased resources will strengthen border enforcement in the
    South and West with 500 additional border patrol agents, exceeding the
    President's commitment to a Border Patrol staffing goal of 7,000 agents
    on the line. The funding will also support a program aimed at
    identifying criminal aliens in county jails as well as support INS'
    efforts to expand criminal alien record holdings int he FBI's National
    Crime Information Center (NCIC). And, resources will be used to enhance
    the existing Law Enforcement Support Center to respond to increased
    numbers of queries from State and local law enforcement agencies. To
    reduce the job magnet for illegal entry, the funding will enhance INS'
    interior enforcement initiative in states with high illegal immigrant
    populations, and increase funding to verify the employment eligibility
    of newly-hired non-citizens.
        Last year's immigration bill requires mandatory incarceration of
    aliens involved in crime, pending deportation. The budget request will
    support 1,864 more jail beds in 1998. And, an additional 1,132 bed
    spaces will be available using resources in the new detention account,
    bringing total detention bedspace to over 15,000 in 1998. Specifically,
    the INS will be activating new beds in the Buffalo (NY) Service
    Processing Center, the Krome (Miami, FL) Service Processing Center, and
    in the San Diego, CA area.
                       restoring critical infrastructure
        Once again, the budget before you seeks to address the critical
    infrastructure needs fundamental to the effective enforcement to our
    nation's laws. Without the proper tools to get the job done, current--
    let alone additional--attorneys, agents, and inspectors will be less
    efficient and less effective in performing their duties.
        For the INS, we are seeking $76.2 million for infrastructure
    improvements. These include resources to address the problem of aging
    and overcrowded Border Patrol stations along the Southwest border, and
    additional detention bedspace. These funds will also be used to
    establish a construction management program, strengthen INS' records
    infrastructure, enhance information and analytical services, and
    provide advanced training for INS officers.
        For the FBI, the budget includes $51.6 million to improve its core
    infrastructure. This funding includes items such as renovation of space
    at the J. Edgar Hoover Building; five-year security investigations of
    all FBI employees and contract personnel with access to classified
    materials and facilities; expansion and renovation of the Los Angeles
    Field Office; and equipment to upgrade the capabilities of the FBI's
    National Backstopping Program so critical to FBI undercover operations.
        Another $36.9 million is requested for the DEA. These funds will be
    used to purchase and install advanced computer equipment for the
    establishment of a secure, centralized computer network that will be
    used in conjunction with the FBI and other Department components in
    drug investigations. The funding will also support a multi-year project
    to reconstruct at least five deteriorating DEA field laboratory
    facilities.
                            general legal activities
        As I have stressed in past testimony before this Committee, I am
    deeply concerned that our litigating divisions have sufficient
    resources to cope with national problems that need a coordinated,
    expert approach, such as the defense of federal statutes against legal
    challenges. With the exception of the Criminal Division, the
    Department's litigating components have not had an increase to cover
    inflation for the past three years--yet their workload has continued to
    grow. The 1998 budget request includes funding to address this
    shortfall.
        Specifically, it will allow us to pursue illegal tax protester
    groups, to better enforce the Americans with Disabilities Act, and to
    prosecute hate crimes; to develop strategies for interdicting dangerous
    pollutants, to challenge anti-trust violations, to defend multi-billion
    dollar claims against the Treasury based on cases such as Winstar,
    address other increasing defensive litigation workload, and to speed
    the automation of our Freedom of Information processing system.
                                   conclusion
        Mr. Chairman, I have attempted to outline for you today, the
    principal focus of the fiscal year 1998 budget request for the
    Department of Justice. But, our mission is so vast and varied, I have
    not been able to touch on it at all.
        I appreciate the support you've given to me, and to the Department
    of Justice during the past four years. We've made tremendous progress
    in fighting drugs, violent crime, terrorism, and illegal immigration.
    And now, with your continued support, I am certain we can build on the
    progress we've made and rid America of the violence that has become all
    too commonplace.
        Thank you. I look forward to answering any questions you might
    have.

        Senator Gregg. That may be the briefest opening statement
    that any witness has ever made before this committee. It is
    much appreciated. It is in the New England tradition. I
    appreciate it. Well, I know that the Senator from Hawaii has a
    Defense Appropriations Subcommittee meeting going on at the
    same time, so I will yield to the Senator from Hawaii to ask
    such questions as he may have because I know he has to get
    going.

                                 Juvenile crime

        Senator Inouye. Thank you very much, Mr. Chairman. I do
    have a few questions. General Reno, the aspect of crime that
    concerns, I believe, all Americans would be juvenile crime. It
    has been not only frustrating for many of us, but it has been
    frightening at the level of brutality and the increase. The
    administration has introduced a measure on juvenile crime. Can
    you tell us some of the key points in this measure?
        Ms. Reno. What we have tried to do is build on what we have
    seen as successful in communities across this Nation. We have
    seen the COPS program provide officers for the streets who can
    relate to young people and have had tremendous effect in
    community policing initiatives across the country. Congress and
    the administration have provided more moneys for correctional
    facilities, but we are also trying to focus on this initiative
    with a balanced approach that also provides to prosecutors in
    this first year $100 million to develop initiatives focused on
    youth violence, tailored for the problem in that particular
    community.
        We also provide $50 million for a focused attempt by courts
    to deal with the problem of youth violence. I have worked with
    the State chief justices conference on a regular basis over
    these last 2 years to identify how the courts can participate
    in this initiative since, as you may well know if you talk to a
    juvenile court judge, they say they are just absolutely
    overwhelmed by the caseload, and do not feel that they can do
    justice to the particular youth appearing before them. So this
    will give prosecutors and courts the opportunity to participate
    in the juvenile justice system in a more complete way.
        What the initiative tries to do is to provide a balance
    focused on the serious youthful offenders, provide for
    punishment that is firm, fair, and fits the crime, provide for
    aftercare when they return to the community to give them a
    chance of success, but it also provides for an intervention
    program such as moneys for youth drug courts or youth gun
    courts that can make a significant difference. We provide $75
    million in this budget, a $50 million increase, for at-risk
    children through initiatives such as mentoring, truancy
    prevention, conflict resolution programs, that can give
    children a chance for a strong and positive future. So it is a
    balanced approach. Let us get tough on those serious offenders,
    but let us provide opportunities for programs that keep our
    kids out of trouble in the first place.

                                Crime prevention

        Senator Inouye. So am I to gather that from the debate on
    crime, you opt out more for prevention than for enforcement?
        Ms. Reno. No; as I was clear to point out, we are providing
    enforcement initiatives through prosecution initiatives and
    through the court's initiatives. We are trying to provide a
    balanced approach, Senator, that recognizes that too often
    there is not an adequate punishment, an adequate followup, for
    the serious offender, but at the same time we have seen
    prevention programs that are working across this country, that
    are keeping kids out of trouble, that are reducing the crime,
    where we bring community initiatives together such as mentoring
    and truancy prevention, and programs where community probation
    officers ride with community police officers to keep tabs on
    the youngsters in the neighborhood who are in that probation
    caseload. There is so much that is happening, and this is a
    focus to enable it to happen across this Nation.

                 successful Juvenile crime prevention programs

        Senator Inouye. The State of Hawaii, like all other States
    and communities, has its own juvenile crime program. So I would
    assume that there are literally hundreds, if not thousands, of
    different programs in all of our communities, and I would
    assume that many are successful and many are not. How can we
    get hold of programs that are successful so my community in
    Hawaii can try it out?
        Ms. Reno. What we have tried to do is to identify the
    cities that have been successful, the communities that have
    been successful, in reducing crime. Boston is a classic
    example. They had a significant youth murder rate that has
    declined so that there were no youth murders in a significant
    period of time in this last year. What we did was put together
    a booklet of the programs that have come together in Boston to
    make a difference. We worked with the police commissioner, and
    we are distributing that information across the country, but in
    this initiative, we are also providing moneys for evaluation,
    for research, and for dissemination to the entire country of
    programs that are working.
        You are correct when you point out that there are different
    programs and some work, some do not. Some could work if there
    was just another piece that could fit into the puzzle to create
    a whole approach that can make a difference for a child. It
    does no good to have a marvelous school program, and then have
    no afternoon or evening programs. So in the Department of
    Education's budget, there is a budget request for $50 million
    for after-school and evening programs that can, I think, make a
    significant difference for our children.
        Senator Inouye. General, I thank you very much. Mr.
    Chairman, I have several other questions which I hope I can
    submit.
        Senator Gregg. Absolutely.
        Senator Inouye. So I thank you very much.
        Ms. Reno. Thank you, Senator.

                         FBI/White House confrontation

        Senator Gregg. First, welcome to the ranking member. We did
    forego opening statements, and the Attorney General basically
    did as well.
        Senator Hollings. Very good.
        Senator Gregg. We have gotten right into questions. There
    are a couple of issues which I think we have to address
    preliminarily here because they are of such public
    significance. I had mentioned that we would be addressing them
    to you so that I did not feel that we were being unfair in
    bringing these up, but I would have presumed that you would
    have anticipated we would have done this.
        The most significant, obviously from our standpoint as a
    committee, is this confrontation--I do not think there is any
    other way to describe it--between the White House and the FBI.
    The statement of the White House was initially, if I can review
    the facts, that the two lower-level or mid-level people within
    the National Security Council [NSC] had been briefed by the
    FBI, on the potential for influence by a foreign government
    being asserted by using campaign contributions. That same
    briefing, as I understand it, was given to at least six Members
    of the Senate. When this was disclosed, the White House put out
    a statement that the FBI had advised these NSC individuals not
    to communicate this information with the President.
        The FBI then put out a statement, a portion of which I will
    read: ``the FBI placed no restrictions whatsoever on the
    dissemination up the chain of command at the NSC on any
    information provided to the NSC senior staff''--I said mid-
    level; they were senior; I am sorry--``senior staff by the FBI
    during the June 3, 1996, briefing.'' So the FBI specifically
    contradicted the public statement of the White House.
        Today and since that time, there have been some mitigating
    statements, not coming out of the FBI but coming out of the
    White House, and at least through unidentified sources, coming
    out of the Justice Department. I will quote from a New York
    Times article today that appeared in the Nation section under
    Money and Politics entitled ``Justice Department Rebukes FBI
    for Statements.'' One of the paragraphs says, ``Another Justice
    Department official speaking on the condition of anonymity
    criticized the Bureau for the blunt public statement on
    Monday.''
        There are a number of very significant issues that are
    raised by this obviously. To quote the Washington Post, which
    is not generally my inclination, in the first paragraph of
    their editorial today, ``It is a pretty chilling spectacle when
    you have, as you did on Monday, the FBI, the Nation's premier
    Federal law enforcement agency, flatly contradicting the White
    House, the President himself, on a matter of some considerable
    importance to both. But there were things out of the ordinary
    here.'' This is further down. ``But there were things out of
    the ordinary here, and there continue to be,'' is the essential
    summary of the editorial.
        So it is not necessarily my own view, but the view, I
    think, of a number of people that this spectacle of the FBI and
    the White House contradicting each other is very significant
    and creates major concerns. The concerns which I wish to
    address are the following, and which I would appreciate your
    commenting on. First, have you taken a look at the situation,
    which I am sure you have, and what is your determination of
    what happened? Second, does it not put the Justice Department
    in an untenable position to have the chief investigative arm of
    the Justice Department, which is in the process of pursuing an
    internal Justice Department investigation of campaign funding,
    and specifically, we understand this funding issue as the
    alleged influence of another government or an attempt by
    another government to influence our system through campaign
    funding. Does that not put the Justice Department in an
    untenable position to have its investigative arm in a public
    disagreement with the White House? Public disagreement may have
    been mitigated slightly, but is clearly still there. Does it
    not put the Justice Department in a situation where pursuit of
    an internal investigation through its internal offices as
    versus through an independent office of an independent
    prosecutor creates at least a perception of a conflict of
    interest?
        Ms. Reno. Yes; I have looked into it, and the FBI agents
    who provided the briefing state that they placed no restriction
    on the dissemination of the information up the chain of command
    at the NSC, as you have pointed out. I have been advised that
    the NSC staff members state that they were asked to curtail
    further dissemination, and that the notes of the briefing of at
    least one reflect or suggest something to that effect. What I
    think happened, but we are continuing to review it, is that
    they pointed out that the matter was sensitive and should be
    handled carefully, and I think there was a miscommunication
    with respect to that and a misunderstanding of just what was
    intended. I think the White House has further clarified that by
    an additional statement.
        With respect to an issue of an independent counsel, this
    does not have anything to do with the campaign finance and does
    not in any way trigger the independent counsel statute.

                                  Fundraising

        Senator Gregg. Well, that is technically true. I guess my
    concern, however, is--and I will couple this with another
    question--that recently both your Department and yourself made
    statements reflecting the definition of what would be an
    illegal act within the White House relative to raising funds.
    At the same time, of course, the Department is investigating
    whether or not illegal acts occurred at the White House
    relative to raising funds, at least one presumes they are as
    part of this internal review. Does that create a perception of
    conflict or inconsistency as to the ability to pursue an
    independent investigation when you have the Department which is
    doing the investigation defining the law which has not yet been
    defined judicially and which is in issue? In addition to that,
    is there a conflict when the Department which has an
    investigative arm that does the investigation is in a
    confrontation with the White House? My question goes more to
    the issue of whether or not there is a perception here that the
    Justice Department is putting itself in a position where the
    perception of fairness, the perception of objectivity, and the
    perception that there might be a conflict of interest are all
    raised as to whether they are appropriately being followed?
        Ms. Reno. First of all, I have made no statement with
    respect to the definition of what is legal and illegal, and I
    have specifically said that we are continuing to review every
    allegation, pursue every matter, take every investigative step
    possible, and that it is my policy not to make such
    determinations until the investigation is complete so that we
    do not prejudge it. With respect to the second issue, as to
    whether there is an appearance of conflict, Congress has
    spelled out what that appearance would be in terms of high
    public officials at the White House or otherwise and has
    defined those people. It recognized by that statute that the
    Department of Justice as an institution could carry forward an
    investigation without triggering that statute, and at this
    point, I do not think that I have the conflict that would
    justify triggering the statute. What I have said was that at
    any moment that specific and credible evidence developed that
    would trigger the statute, I will be the first to request the
    appointment.
        Senator Gregg. You make the decision as to when the
    independent counsel should be triggered, which is appropriate
    under the law. The question is, however, whether if in not
    making that decision but yet having all these different ebbs
    and flows of confrontation going on, we are not creating an
    atmosphere where people are going to say that no matter what
    the conclusion the Justice Department reaches, it was not
    independent. The fact that the Justice Department was fighting
    with the White House over what the disclosure was, what they
    told the President, and what was said to the NSC people as to
    what could be said supports this conclusion. There was a clear
    implication that there was a statement from the Justice
    Department--I believe it was from yourself also--that the law
    does not apply to soft money and, therefore, there may not be
    an issue here. The question becomes one of, when does it become
    counterproductive for the Justice Department to hold this in-
    house when there is so much ebb and flow that involves the
    Justice Department itself in the substance of the issues?
        Ms. Reno. The Justice Department has considered these
    issues through both Democratic and Republican administrations.
    Career lawyers have defined and have reviewed issues. Again, I
    have made no statement as to what is legal and illegal, and I
    refrain from doing that until the investigation is complete,
    and we have all the evidence. There is always an ebb and a flow
    in an investigation. Again, Congress has defined the area in
    which we should trigger the statute, and if I triggered it
    without doing so according to the specific provisions of the
    statute, I would have to do so otherwise, and the last time I
    did that and appointed a special counsel on my own, everybody
    said he could not be independent because I appointed him.
        Senator Gregg. Well, every counsel is going to be appointed
    by you, I presume, under the law.
        Ms. Reno. No; under the statute, as Congress has defined
    it, the independent counsel is appointed by a special division
    of the court.

                         FBI/White House confrontation

        Senator Gregg. Oh, I am corrected then. Well, how do we get
    over this hurdle, though, of the FBI and the White House in
    what appears to be a very clear disagreement? There is the
    implication that the White House is trying to blame the FBI, or
    that the FBI, in the alternative, is running as a rogue agency
    because that is what it would be if its statement was
    inaccurate. These are very significant public policy concerns.
    How do we get over that issue?
        Ms. Reno. I think the most important thing for us to do is
    to look at exactly what happened, consider the statements made
    by the White House and the FBI and do everything we can to make
    sure that briefings like this in the future are done with
    precision and that there is no misunderstanding in the
    communication.
        Senator Gregg. Well, I will hold on to the rest of my
    questions. Senator Hollings.
        Senator Hollings. Along that same line, Madam Attorney
    General, I think there has been some miscommunication. We all
    know in the Government that there will be various efforts not
    only by China but other nations to penetrate and to find
    information out. I thought it sort of looked in a way
    questionable when the President of the United States said he
    was not told about China trying to get in. He did not need to
    be told. The President ought to know that as Commander in
    Chief. But, otherwise, I go back to experience. When it really
    counted, I was Governor when we apprehended one of Martin
    Luther King's troops, and we got a call from the FBI and said
    you got to let him go because we have got a wiretap on Martin
    Luther King, and the White House was denying that very fact at
    the time. They said ``No, we do not have any wiretaps on Martin
    Luther King.'' And, in fact, I have read books and histories of
    the situation which confirm that the FBI was doing exactly
    that.
        I happen to know from my own experience. We were contacted
    in South Carolina and told to let the gentleman go because in
    order to really pursue the case, we had to reveal the fact that
    the FBI had a tap on Martin Luther King. So that was
    significant. This here of a briefing received by this office or
    that office and say keep it secure happens all the time. What
    really bothers me, for example, is if they will come with an
    FBI report on an appointee, for example, a Senator, they will
    sit with you and say you cannot take any notes, do not say
    anything, and give the FBI back the report. Yet over at the
    White House they can pile up the reports and keep them.
        So I do not think the FBI is a rogue agency. I think it is
    a miscommunication, and I do not think it is a significant
    miscommunication because--everybody wake up--we have been
    trying--I looked at Herblock's cartoon this morning--we have
    been trying to influence the domestic conduct of affairs in the
    People's Republic of China for a long time. And they will
    continue to try to influence domestic decisions with respect to
    MFN and otherwise here in the United States. We all know it.
    And we do not have to get--do you know of any evidence--rather
    than ask, I am not asking about the evidence--but do you know
    of any evidence given any of us here that actually China is
    trying to get involved in our elections? I listened closely to
    Senator Feinstein. She never was given anything. She just said
    we understand, but I would think that we ought to have some
    kind of evidence rather than making a mountain out of a
    molehill here unless we do have some evidence of that kind. Do
    you know of any evidence?
        Ms. Reno. First of all, with respect to a rogue, if
    somebody is a rogue in this process, let me just point out both
    to the chairman and to you that the FBI was very careful to
    brief. It briefed both committees of the House and the Senate.
    There is nothing rogue about it. They briefed the
    administration, and the administration in the statement it
    makes notes that the NSC staffers elected not to brief their
    superiors about the information although they recognized the
    NSC procedures would have permitted them to do so. So I do not
    think anybody is being a rogue. We are trying to make sure that
    we fulfill our responsibilities for national security and
    foreign policy.
        Senator Gregg. Well, that, of course, was my point, and in
    the alternative, I was pointing out that if the White House is
    right, the FBI would be deemed a rogue agency. I do not think
    the White House was right. I think the FBI was right. The White
    House was wrong in their assessment of what the FBI told them,
    or at least in the way they reported it to be told.
        Ms. Reno. OK.
        Senator Gregg. I am not implying that the FBI is a rogue
    agency. It is just the opposite.
        Ms. Reno. I am delighted to hear that, and I think what
    that then points to clearly is that we must make sure that
    there is clear communication, but with respect to the
    additional question, Senator, I do not think it would be
    appropriate for me to discuss evidence other than as through
    the briefings that we have made.
        Senator Hollings. Well, I understand over on the House
    side--I was watching those hearings, and Chairman Livingston
    and Chairman Rogers were giving you the very dickens for being
    too supportive of the White House. Now you come over to this
    side and you get the dickens for, by gosh, challenging the
    White House on what the fact is.
        Ms. Reno. Well, I got the dickens from them about
    everything the other day, sir. [Laughter.]

                                Campaign finance

        Senator Hollings. Can you tell me, General Reno, on a show
    of the public, that the Justice Department has taken all the
    appropriate steps with respect to these violations of campaign
    finance laws?
        Ms. Reno. Senator, what we have done from the first is to
    make sure that the public integrity section has the staff it
    needs to pursue every lead; that the FBI and the public
    integrity section have all the resources they need to properly
    pursue this. I have directed them to pursue every lead, to let
    me know if they need additional resources, but as importantly I
    have told them that if at any point they develop specific and
    credible evidence that would trigger the statute, that it would
    be, I want them to let me know immediately so that I can take
    appropriate steps.
        Senator Gregg. May I ask a followup question?
        Senator Hollings. Yes, surely.
        Senator Gregg. Can you tell me what the criterion is that
    you deem triggers the statute? I think that would clarify the
    record.
        Ms. Reno. There are two sections. But both sections in
    order to trigger it require specific and credible evidence of a
    violation of law either by covered parties or in situations
    where there is a political, personal, or financial conflict,
    but both require specific and credible evidence.
        Senator Gregg. Thank you.
        Senator Hollings. And have the campaign finance laws been
    broken?
        Ms. Reno. I will not comment on that, Senator, until the
    investigation is complete. I do not want to say anything in
    regards to the pending investigation. What I can say is at this
    point I have not received from the public integrity section,
    from the career lawyers who have handled this issue through
    Republican and Democratic administrations, that they have
    specific and credible evidence of a violation of law by a
    covered person or person with whom I would have a conflict.

                                 Border Patrol

        Senator Hollings. Very good. With respect to the Border
    Patrol school that we instituted at the abandoned Charleston
    naval base, let me state for the record that Ron Myers and the
    rest of the agents in charge are really can-do folks that are
    working and making a fine effort. What happens is we will turn
    out some 1,430 additional Border Patrol agents this year, but
    then I see over on Treasury that they are including $14 million
    for duplicative facilities at the Federal Law Enforcement
    Training Center there at Glynco, GA. They have only been
    operating in Charleston, as you well know, 6 months. I wish you
    would look at that and get some coordination because that let
    us use what we have put money into to fix up and got a going
    school and everything else before we start rebuilding in
    Georgia if we want to save the money. Ultimately, I guess it
    will all go back to Glynco someday. This is not a permanent
    facility, but it seemed to be a waste if we are going to start
    after having refurbished the buildings and class space and
    otherwise to then go and put $14 million over there for new
    buildings for the same effort down in Georgia.
        Ms. Reno. Senator, you made a comment about a specific
    word, and it was certainly true. Can-do. They really performed
    and delivered. That facility has been absolutely indispensable
    in our efforts to put well-trained Border Patrol agents in the
    field, and I think it will continue to be. The Treasury
    Department would not have asked for the money when it is
    ultimately phased out. That would be a DOJ expense. My
    understanding is that Treasury has additional plans that are
    not related to Charleston for the Glynco facility. But we will
    certainly work with that because that facility has been
    indispensable for our efforts, and we just appreciate what has
    been done there.

                            National Advocacy Center

        Senator Hollings. I have colleagues ask about that $8.3
    million budget item for the National Advocacy Center that will
    open April of next year. Now, that ought to be explained by way
    of record here. As the Attorney General, you are a former local
    prosecutor. Can you tell us, this center was the one that
    Attorney General William French Smith recommended after he had
    a task force look at the violent crime problem back then. They
    made this recommendation back in 1981, and we are just now
    about to make it a reality. I think something ought to be
    stated on the record with respect to that $8.3 million, the
    Advocacy Center and its significance.
        Ms. Reno. My experience as a prosecutor is that there is
    nothing more important other than hiring the best people you
    can, nothing more important than training, and what I have seen
    in my experience as a local prosecutor, and now as Attorney
    General, is that it is very important to train Federal
    prosecutors with State and local prosecutors so that we
    appreciate the spirit of federalism, but that we learn how to
    work together, provide for opportunities where we can know what
    is needed in both courts to get a conviction. This Advocacy
    Center can be so extraordinarily important. As you point out,
    it was developed in response to a task force, a bipartisan task
    force, cochaired, as I understand it, by former Attorney
    General Griffin Bell and former Governor of Illinois, Governor
    Thompson, and they made the recommendation that we also provide
    not only the capacity to train Federal prosecutors, but that we
    provide the capacity to train them along with State and local
    prosecutors, and I think that can be so very important.

                                    Staffing

        Senator Hollings. I understand, Madam Attorney General,
    that the Department of Justice is now proposing an additional
    55 attorneys for criminal prosecutions here in the District.
    What has been a particular interest to me is that we really put
    the effort here on 14th Street and within the city itself. I
    say that by way of comparison of your DEA effort, say, down in
    Santa Cruz, Bolivia. You got a big component, and they will
    give you a briefing like Vietnam. We are getting them; we got
    them here; we got them there; we go down the river, and
    everything else of that kind. It is just outrageous nonsense.
    You go up to La Paz, the capital, and people are walking around
    the streets chewing coca. They give you a particular area in
    Bolivia that is bigger than the State of Georgia that is off
    limits. Growing coca is illegal there. I want to bring those
    DEA agents home and put them up on the streets and clean this
    thing up so that the drug smugglers cannot just walk out,
    drugged up, and just shoot the policemen at will. We are just
    not making an effort in this country. We are running all around
    the world in a total wasteful fashion. Can you comment on that?
        Ms. Reno. Yes, sir; I think what we are trying to do is a
    very balanced approach. Senator Gregg can tell you about the
    U.S. Attorney's Office in New Hampshire in terms of working
    with State and local officials, both prosecutors and law
    enforcement agents, providing for prosecutions in Federal court
    when it is appropriate, when everybody agrees, and the impact
    that that has had in New Hampshire. In other areas where we
    have seen increased violence, the DEA MET teams have moved in,
    and worked with State and local law enforcement. They have not
    wanted the credit. They have not claimed the turf. They said
    how can we help you in exchange of information? And I get
    letter after letter from police chiefs in small or large cities
    that say what a difference it has made.
        We have developed an antiviolence initiative focused on how
    we can do this in a comprehensive way across the country, and
    we are dedicated to that. The District of Columbia obviously
    has significant crime problems, and under the leadership of
    Eric Holder, who has been a splendid U.S. attorney, we have
    addressed that, but one of the points that we have got to
    remember with the District of Columbia, when we fund that
    office, we are not only funding a Federal prosecutor's office,
    but we are funding a State prosecutor's office as well. And we
    must be able to ensure that Mr. Holder has the resources that
    the best funded State prosecutors have across the country.
        Senator Hollings. Not only prosecuting attorneys but DEA
    agents out there on the streets.
        Ms. Reno. Well, it will also help, if you notice this
    morning, that the FBI has committed agents to the issue, and
    this is important. What we discover is that crime goes back and
    forth across the District line with Prince Georges County, and
    so we have tried to work with all the officials involved to use
    the Federal jurisdiction to assist, and I think you will note
    in the paper this morning, the commitment of additional Federal
    agents to that effort.
        Senator Hollings. I will yield. Thank you, Mr. Chairman.
    What happens, though, I can just see it if we could take the
    DEA agents down there in Bolivia and just move them up here on
    14th Street, running up and down, we could run all of that
    crowd over into Virginia and into Maryland, and then you would
    see this Congress really act on crime. I can tell you that
    right now. They are not around town. I have lived here now for
    30 years in the city, and it gets worse and worse. Now the
    police force is asking. Do not be so considerate about
    coordinating with the local people. The local people say
    ``Sooey, pig, ya'll come, hurry, we need help,'' because it is
    just unforgivable that they can walk out and just shoot the
    officers in the cars at will.
        Ms. Reno. Senator, what is happening because of
    comprehensive efforts across the country with Federal agencies
    and prosecutors working with State and locals, what is
    happening with the crime, the COPS program, special initiatives
    such as in New Hampshire, is that we have seen crime go down,
    but we cannot rest on those laurels. We have got to continue an
    effort in a balanced way, not only within our borders but
    across the borders. Senator Hutchison knows along the Southwest
    border the problems associated with violence. That is not going
    to be solved just by having DEA agents or Border Patrol agents
    there because they can go back across the border. We have got
    to have an approach that says there is no place to hide, and we
    have got to work on an international scope as well. And I know
    the Senator is very concerned about that area.
        Senator Hollings. Thank you, Mr. Chairman.
        Senator Gregg. Senator Hutchison.

                           Mc Allen, TX/Mexico border

        Senator Hutchison. Well, that was a perfect opening for
    some of my concerns. Let me start with that one. Federal data
    shows that the McAllen sector in Texas is quickly overtaking
    the San Diego sector in terms of numbers of undocumented
    illegal aliens apprehended. Last year McAllen led the Nation in
    marijuana seizures and was second in cocaine finds. In November
    1996, McAllen had only 1,400 fewer illegal alien apprehensions
    than San Diego. Nevertheless, the number of Border Patrol
    agents in 1996 in San Diego was 1,955. McAllen had 501. Now,
    the administration was to have assigned 1,000 new agents in
    1997. As of now, only about 700 have been assigned with the
    remaining 300 to be assigned this spring. In the first 1997
    assignment, McAllen received 159 new agents, San Diego received
    201. It seems that the imbalance between Texas and California
    in the distribution of the added Border Patrol agents is not
    balanced. Are you going to take steps to address that in your
    next assignment?
        Ms. Reno. What we are trying to do in all of this is to
    make sure that we respond. I have long said that we have got to
    watch McAllen like a hawk because I have, as you know, been
    from one end of the border to the other and realize the
    pressures that are brought to bear. What I would like to do is
    perhaps come visit with you, look at the figures, see what we
    can do, but I want to provide as an effective response along
    the entire border with the resources we have to do the job as
    possible and will continue to address that issue.
        Senator Hutchison. I would like for us to be able to talk
    about this because I have communicated with your office for the
    last 2 years on the imbalance. As you know, Texas has 1,200
    miles of border with Mexico. California has roughly 125. And
    much of our problem is in the uninhabited areas, the big
    ranches. Those people are under siege, Ms. Reno. They are
    unarmed. They feel like prisoners in their own home. They can
    walk out into their yard and meet a drug kingpin with an AK-47.
    Now we have got a real problem, and our resources are, I think,
    very imbalanced. I along with Senator Gramm and others worked
    very hard to increase the number of Border Patrol agents. I am
    concerned that only 500 additional agents have been requested
    by the administration in fiscal year 1998, whereas the Illegal
    Immigration Reform Responsibility Act of 1996 requires that you
    increase the number of Border Patrol agents by 1,000, and yet
    the administration is only asking for 500 in 1998. I am very
    concerned about this. Why are you not asking for the full
    1,000? I will ask that question.
        Ms. Reno. I have regularly explained to the committee my
    concern about hiring too fast. As you look at police
    departments across the country, those that hire too fast are
    without adequate supervision because the ratio of supervisor to
    new recruit is so low. It is important that we hire in an
    orderly way. We asked the IACP to conduct a study on Border
    Patrol growth in 1995. They cautioned that a work force with
    too many inexperienced officers and supervisors could pose
    serious risk. The study looked at 3-year growth options and
    concluded that overall growth in supervisory and officer ranks
    of 41 percent over 3 years would threaten operational
    effectiveness.
        Some of these threats included: too many inexperienced
    supervisors overseeing a large number of new agents, threats to
    the organization's systems, and the threat of possible improper
    behavior. The Border Patrol's recent growth in agents has
    resulted in 43 percent of the current work force having less
    than 3 years' experience and 37 percent having less than 2
    years' experience. This growth exceeds the levels cautioned by
    the IACP study, and that is the basis for our recommendation.
        Senator Hutchison. Of only 500 new agents?
        Ms. Reno. That is correct.
        Senator Hutchison. Well, I am in a real dilemma here
    because I worked very hard to get you the equipment you need,
    the Border Patrol agents you need, and yet my State is under
    siege, and the balance of assets is, I think, very, very unfair
    and not tuned in to the realities.
        Ms. Reno. Well, what I would appreciate----
        Senator Hutchison. Let me just reiterate. We have one-third
    of the number of Border Patrol agents in McAllen as you do in
    San Diego, and you continue to increase the number in San Diego
    at a greater rate.
        Ms. Reno. But the number of apprehensions in San Diego has
    significantly exceeded the number of apprehensions in McAllen.
        Senator Hutchison. Not two-thirds more.
        Ms. Reno. We will be happy to work with you and sit down
    with you, look at it, see how we can balance, see what we can
    do. As you know, you are referring to the specifics because you
    have been so helpful in providing sensors and providing the
    equipment, in committing resources. We have, with respect to
    the violence that you talk about--which is primarily in the
    Eagle Pass Area--we have designated that as a hot spot and have
    tried to organize resources around it. With respect to the Del
    Rio sector, it has been designated to receive 52 new agents for
    fiscal year 1997. We will look with you, and I will ask my
    staff to call and arrange an appointment and come see you and
    just look at the balance, look at the figures, and see what we
    can do.
        Senator Hutchison. I really would appreciate it because, as
    you know, I have written you letters and have talked to your
    staff, our staffs have talked together, for over 2 years, and
    we feel that the situation is getting worse, not better, and it
    is going into other remote areas. I have visited out in
    Marathon and Alpine, and these are places that just do not have
    the ability to deal with these kinds of crime issues because
    they are not areas that have had to deal with crime to any
    great extent in the past, and they are very underforced. So I
    would love to talk to you more about it, but I would like to
    see more action and more relief for this 1,200 mile border area
    with the resources that you have, and I must say that when you
    have the ability to hire 1,000 and you are only requesting 500,
    not only the ability but the direction to add 1,000 agents, and
    you are only asking for 500, I have to say that I am
    unconvinced that we are doing everything we can.
        Ms. Reno. It is one of the more difficult issues that one
    has in trying to prepare. I have been through that experience.
    A community that I love very much, beginning in the late
    1970's, experienced an assault of trafficking from outside our
    borders that is as stiff a threat as any community in this
    Nation received. The police department and the prosecutor's
    office hired as rapidly as we could, and it produced problems.
    It is something that is a very difficult issue to judge, but we
    will be happy to work with you in every way that we can to
    address the issues in the most responsible manner possible.

                                Citizenship USA

        Senator Hutchison. Let me move on to a slightly different
    subject, but one that will bear again on the criminality in our
    country, and that is the thousands of immigrants with
    apparently criminal records that were cleared for citizenship
    in 1996. I would like to ask you why the INS had such pressure
    to clear immigrants for citizenship before all of the normal
    processes had been accomplished?
        Ms. Reno. The INS inherited, or this current leadership in
    the INS inherited, a system whereby the system that had been in
    place for processing naturalization requests extended back to
    1982. In 1995, they received a significant number of requests
    and had anticipated a significant increase in applications for
    naturalization because of the amnesty granted during the
    1980's. In addition, they found that there was an additional
    increase over and above what otherwise would have been
    anticipated because of the concerns created by proposition 187
    and so people who had been eligible for naturalization were
    seeking to naturalize. Beginning in 1995, they began to prepare
    for this increase and to prepare to address it.
        Senator Hutchison. Ms. Reno, let me just ask you, are you
    going to try to make the case that the procedures were not
    short circuited in 1996?
        Ms. Reno. No.
        Senator Hutchison. Why were they short circuited in 1996?
        Ms. Reno. Because there was a system in place that did not
    work very well. In 1994 the inspector general had recommended
    some changes. INS was in the process of putting those changes
    in place, but some of it required automation. They still had
    not gone far enough, but they were not seeking to bypass or to
    shortchange procedures that had been in place.
        Senator Hutchison. Why would you not just continue or why
    would not INS just continue the procedures? Why did it have to
    be done on such a haphazardous basis and particularly in the
    area of criminal record checks?
        Ms. Reno. As I am pointing out, the system had been in
    place. I do not think much of the system, but they were not
    trying to shortchange anything or short circuit what had been
    in place. What is important now is to identify the steps that
    have got to be taken, and I have tried to do it in terms of
    what we need to do to move forward and make sure that the
    system is in place and operating correctly.
        Senator Hutchison. Are you not going to check the records
    of those who have already been naturalized and try to enforce
    the ban of people with criminal records becoming citizens?
        Ms. Reno. I am checking that right now, as I am saying. As
    I have learned of this process, I am trying to do everything I
    can to make sure that the process works like it should and that
    we review what has been done to correct any errors. Let me
    describe to you what we are doing. INS field offices have been
    instructed to confirm that the FBI fingerprint check is
    completed and that any FBI criminal history information is in
    the applicant's file before naturalization proceedings are
    completed.
        Senator Hutchison. Let me just ask you this question
    because I have one other area that I need to cover, and I only
    have 2 minutes. Are you going to try to reverse the process if
    people were naturalized in this 1996 group with criminal
    records?
        Ms. Reno. That was the last point I was going to make.
        Senator Hutchison. Thank you. Could you?
        Ms. Reno. Yes; we are going to revoke, take steps to revoke
    all citizenship improperly granted, and let me use my 2 minutes
    just to explain to you----
        Senator Hutchison. I am afraid that it will be my 2
    minutes.
        Ms. Reno. OK. I will not take your 2 minutes, but I will
    explain if, Mr. Chairman, you will give me.
        Senator Gregg. Well, we are going to get into that issue
    later on.

                     Val Verde County military voting issue

        Senator Hutchison. OK. Let me ask one more question then on
    my 2 minutes because that is another area of concern, and that
    is the Val Verde County military voting issue. I am very
    concerned that the Justice Department has taken a we-will-
    monitor-it-closely attitude to standing up for the rights of
    our military voters who have really been harassed in a case
    that was brought to disallow two people elected in Val Verde
    County because there were 800 military absentee votes. And I
    would just like to ask you if you are going to stand up for the
    rights of military voters because you are the legally
    designated counsel for the military personnel in this type of
    case?
        Ms. Reno. I am going to, and let me give you some evidence
    of what we are trying to do. This is a letter signed by the
    Joint Chiefs of Staff, all six of them:

        Madam Attorney General: This is to express sincere
    gratitude for your efforts regarding the lawsuits filed in
    Texas challenging military absentee ballots. The voting rights
    of the men and women serving our great Nation in uniform, as
    well as their families, must not be diminished because of a
    military assignment outside their State of residence. We
    understand your Department is closely monitoring these cases
    and has had frequent contact with State and Federal officials.
    We greatly appreciate your personal involvement in protecting
    the voting rights of our people and their families. Please do
    not hesitate to call us if we can provide any assistance.

        Senator Hutchison. Madam Attorney General, I am pleased
    that they have thanked you for your efforts, but when the
    Justice Department filed an unsolicited amicus brief in the
    ninth circuit in California opposing proposition 209 to make it
    illegal to discriminate against any citizen in their right to
    vote, and yet you have taken a wait and see attitude on Val
    Verde and refuse to intervene on behalf of the our military
    personnel, I am very concerned that they are not going to have
    proper representation.
        Ms. Reno. The Federal matter has been on March 11. Just
    recently, we participated in a conference call with the Federal
    judge who reiterated that the case before him was stayed and
    that the answers to the questionnaires would not be required.
    We are pursuing every opportunity that we can to properly
    protect the rights of the servicemen involved.
        Senator Hutchison. How about an amicus brief?
        Ms. Reno. I am not aware of an amicus brief filed in the
    Texas case because there is not a matter pending. The Federal
    proceeding has been stayed.
        Senator Hutchison. Thank you, Mr. Chairman.
        Senator Gregg. Did you want to make that comment now--we
    are going to go back to this whole immigration issue and how
    you plan to address it.
        Ms. Reno. Why do we not just do it in an orderly way.
        Senator Gregg. OK. Senator Domenici.
        Senator Domenici. Mr. Chairman, I was not present when you
    established the ground rules. Are we on 5 minutes?
        Senator Gregg. We are basically working on about a 10-
    minute, fairly flexible questioning period.
        Senator Domenici. I have an awful lot of questions. I am
    going to make sure that they are submitted for the record. I
    have to be at a markup and another hearing that I am presiding
    at, so I will give you about 12 questions. You can just give
    them to the Attorney General. I would appreciate answers as
    soon as possible.

                 special immigrant status for certain Juveniles

        I want to ask about a certain issue that has been brought
    to my attention that is bothering me as what may be the
    improper use of our immigration laws. Madam Attorney General,
    let me just cite a couple of factual cases to make a point and
    then ask you what you think about this. In 1990, the Congress
    enacted a provision entitled, and I quote, ``Special Immigrant
    Status for Certain Juveniles Declared Dependent on a Court.''
    That was the name of the act. This section was intended to be
    reserved for certain juveniles who were abused, neglected, or
    abandoned.
        For example, in 1991, after that act, a small child was
    brought illegally from Mexico by her parents. The child was
    sexually abused and beaten by the parents. The Department of
    Health and Human Services in New Mexico took custody of the
    child and petitioned on her behalf for the appointment for
    special immigrant status under that statute. She was granted
    permanent resident status. The parents were deemed to be unfit
    parents, and the child was placed into foster care and
    eventually was adopted by U.S. citizens who became adoptive
    parents.
        The child was 11 years old when she was granted this
    permanent status. Clearly, this was the type of case that the
    special immigrant status was designed to protect.
    Unfortunately, in New Mexico, we have found that the special
    immigrant status provision is being used for some other cases
    that I believe are clearly an abuse. For example, in February
    1996, a petition for a permanent guardianship was filed by a
    relative of a juvenile with the court in New Mexico. The
    juvenile, who was on her way to college under a nonimmigrant
    student visa, did not even arrive in the United States until
    March of the same year. The juvenile, who was just 8 days shy
    of her 18th birthday, the age of majority in New Mexico, was
    later granted eligibility for special resident status.
        In another case, a 20-year-old Mexican male entered the
    United States as a foreign student. Guardianship was given to
    his uncle by consent of his parents in Mexico. The 20-year-old
    became a resident because the court determined in a petition
    granting guardianship to the uncle that the boy was quote
    ``eligible for long-term foster care,'' the words of art
    required by the statute granting that special quality.
        Finally, in another case, an 18-year-old Venezuelan male
    received permanent resident status by way of the special
    immigrant status provision. He was studying in the United
    States as a foreign student. A petitioner of unknown
    relationship went to the court and petitioned for permanent
    guardianship. The attorney stated that the parents in Venezuela
    had failed to respond to a notice that they were provided. On
    that basis, the court declared the Venezuelan male a dependent
    of the court allowing him to seek permanent resident status.
    Now I don't know how many more of these cases there are, but I
    might ask if you would agree with me that special immigrant
    status should not be given to the individuals described above
    who are neither abused, neglected, or abandoned, and who in
    these cases came here to attend our universities and either
    were attending or planned to attend when the petitions were
    filed? And if you do not have an answer to that yet, would you
    work on it? It seems to this Senator that this is a giant
    loophole. When the lawyers find this, every visiting student
    from overseas can have a petition filed in a State court
    declaring that they are a ward and in need of foster care. It
    is ex parte from what I can tell--I looked at these petitions--
    and the courts are only interested in whether there is any
    burden on the State, and since there is none, they are granting
    them. Should we do something about this?
        Ms. Reno. We certainly should, Senator, and when you raised
    the issue with me several days ago, I immediately started
    checking. We are going to review all this area to see what can
    be done, whether we need legislative changes, what we can
    undertake through investigation to undo it, and if I may I will
    ask my staff to contact your staff, get the specifics that you
    have, and we will continue to report back to you on what we
    find and work with you if legislative efforts are necessary to
    correct the loophole.
        Senator Domenici. I would hope that as your people in the
    field review these cases and find them, that they would be
    called to your attention specifically because I think in some
    cases there could be a serious misleading of the court. We have
    one where the student has not yet entered the country when the
    petition is filed, and the petition seemed to have been filed
    to avoid that person reaching the age of majority.
        Ms. Reno. That is what I have asked for because I want to
    investigate each instance to see whether there is a prosecution
    that should result because of false statements made or false
    statements made through the INS procedure. We will work with
    local prosecutors, but we intend to followup on it, and I
    appreciate your noting it for me.
        Senator Domenici. Thank you, Mr. Chairman.
        Senator Gregg. It might also be helpful if you find that
    there is a problem if you could give us some language which
    would correct it so that we could put it in the bill even
    though we may be limited in our language.
        Senator Domenici. You will give us a legislative fix if we
    need it?
        Ms. Reno. Absolutely.
        Senator Domenici. All right. Mr. Chairman, I yield back my
    time and thank you for your generous time.
        Senator Gregg. Thank you. The Senator from Maryland.
        Senator Mikulski. Thank you, Mr. Chairman, and I cannot see
    any lights or anything.
        Senator Gregg. No; it is a very casual 10 minutes.
        Senator Mikulski. Thank you. And if I am approaching my
    time, I ask the Chair to remind me.
        Senator Gregg. It is very much a flex time.
        Senator Mikulski. First of all, good morning, Madam
    Attorney General. It is delightful to be here with you, and I
    am a new member to this subcommittee and really look forward to
    an active participation and working with you, Mr. Chairman. We
    have worked on the Subcommittee on Aging and also Treasury and
    General Government. It is amazing how our careers go.

                                  COPS program

        Madam Attorney General, ultimately, fighting all crime is
    local, and I have a series of questions about the COPS program,
    but also we in Maryland have a very unique situation because so
    much of the crime impacting our suburbs adjacent to Washington
    are what we would call interstate crime. First, there is I-95
    which is almost like a corridor of death, with illegal drugs
    and illegal guns and so on. We know we have the HIDA program,
    the high intensity effort. I visited that. Remarkable job that
    they are doing there. But at the same time, people get off, and
    they are in Montgomery and Prince Georges Counties.
        Also, we have people leaving the District of Columbia and
    committing crimes in the suburbs and going back and forth
    again. My question to you is, what thoughts do you have for
    addressing this issue? We note that you have through the
    concurrence with the head of the FBI deployed a significant
    number of agents to Prince Georges County for a crime blitz. We
    are enormously grateful for that, and I speak for the county
    executive and all the residents for that. But that is a nice
    blitz to come in and get the most violent criminals, but I
    wonder if you have given thought to some type of regional
    agreement that would involve both Federal officials and local
    officials because we are in an interstate crime network? Did I
    make my question clear?
        Ms. Reno. Yes.
        Senator Mikulski. So we thank you for this FBI blitz. It
    will have a significance. But after they leave, we are looking
    to put in place a structure to be able to deal with the
    interstate consequences, whether it is hot pursuit with the
    District of Columbia, or the appropriate use of Federal law
    enforcement in local jurisdictions.
        Ms. Reno. First of all, I am delighted you are on the
    subcommittee. I have been here for 4 years now. It is 4 years
    ago today, and I think this was the first subcommittee, first
    congressional committee other than confirmation that I appeared
    before, so I feel a bit at home here. What we did, I worked
    with the chief of police of Prince Georges County back in Dade
    County, and he described to me the problems that he saw with
    people going back and forth.
        Senator Mikulski. So you know Farrell from Florida?
        Ms. Reno. Yes; going back and forth across the line. Many
    months ago after he had gotten here, I called Director Freeh,
    U.S. Attorney Eric Holder, DEA Administrator Tom Constantine,
    and the Director of the Marshal Service, Eduardo Gonzalez, and
    said it is important that we enhance our efforts. We already
    have an antiviolence initiative, which I referred to earlier in
    discussions with Senator Hollings, in which we have tried to
    reach out to State and local prosecutors and law enforcement
    agents and form a real partnership, but I said it is imperative
    that we address this issue in a comprehensive way.
        Lynne Battaglia in Baltimore I have asked to reach out to
    local prosecutors to determine what is the appropriate Federal
    role. We do not want to take credit. Sometimes it may be just
    exchanging information, but we want to do everything we can in
    terms of an antiviolence initiative that will utilize Federal
    prosecutors the right way to assist, and we are continuing that
    effort. I was not aware that they were going to announce
    something like this.
        Senator Mikulski. It was in the Washington Post. I did not
    announce it. I wish I had the chance, too. [Laughter.]
        Senator Gregg. Next time.
        Senator Mikulski. But that is neither here nor there.
        Ms. Reno. And Mr. Holder has got both hats on with respect
    to this area, but he and Lynne Battaglia coordinate as between
    the District.

                         Baltimore-Washington corridor

        Senator Mikulski. What I am wondering, Madam Attorney
    General, you have got two U.S. attorneys, you have got FBI, you
    have local government, we have DEA, we have BATF, we have a lot
    happening. Do you see some type of coordinating mechanism or do
    you prefer these bilateral negotiations--bilateral arrangements
    as they are going on?
        Ms. Reno. What I have asked in all these situations is that
    the U.S. attorneys serve as the coordinators, and I think it
    has proven very effective rather than just proliferating task
    forces, and then they assign based on what is important. It is
    interesting to note that it is not just this area, but you take
    the Eastern District of Virginia and you see the connections
    between Maryland and the Eastern District of Virginia. I think
    the coordination mechanism is appropriately in place.
        Senator Mikulski. Well, then how do we deal with that,
    though, between--and I appreciate that--between U.S. Attorney
    Battaglia and U.S. Attorney Holder? Do they have like a
    cochairmanship?
        Ms. Reno. My understanding is that they have a close
    working relationship, but what I will do is, when I leave here
    today, I will call both of them and Helen Fahey from the
    Eastern District of Virginia and see if further coordination is
    necessary.
        Senator Mikulski. And if they need to essentially have a
    formalized arrangement where at least there is a monthly
    meeting maybe between the big guys, and maybe there really are.
        Ms. Reno. My experience from these meetings, I have tried
    to let each district coordinate with others in the best manner
    possible. In Senator Gregg's district, there is one initiative
    underway that the U.S. attorney has led. In others, it may be a
    different situation. One of the things I used to see in Miami,
    though, is that we would have formal meetings every month, and
    it would be a dog and pony show. Where the work really gets
    done is between people who have got the day-to-day
    understanding, the communication in place, and that is what we
    are striving for here in the Baltimore-Washington corridor. I
    will go back and review it.
        Senator Mikulski. Well, I would like to be able to talk to
    you or your staff further about it. Let me then go to the next
    part of cops on the beat and thank you for the community
    policing effort. It has had a big impact certainly in my own
    State and particularly in urban suburbs as well as Baltimore
    city. This then gets me to what I call the techno cops. In
    meeting with my police chiefs, what they tell me is that now
    not only are courts backing up, but the whole issue of the need
    for greater forensic laboratory capability, the kinds of stuff,
    if you will, technological stuff that both maximizes police
    officers, the role of the laptop computer in the police car has
    been terrific, but also other things related to. For example,
    crime laboratory forensics so that a lot of the evidence that
    is now gathered is not only gathered from eye witnesses, but
    through technological gathering which is in some ways superior.
    Those little plates in a crime lab are not afraid to come
    forward, they do not need a witness protection program, and
    their memories do not fade. So what I am asking, having said
    that, do you see an extension and does it require statutory
    authority to also beef up our police departments, not in terms
    of bells and whistles and techno-gadgets, but really the use of
    both information technology and now in enhancing and amplifying
    their forensic laboratories?

                             Information technology

        Ms. Reno. First of all, let me address the information
    technology.
        Senator Mikulski. Which has really been astounding.
        Ms. Reno. And it is incredible. When a man can sit in the
    kitchen in St. Petersburg, Russia and steal from a bank in New
    York or a bank in Carroll County or someplace like that, you
    understand the challenges faced by State and local law
    enforcement. We have developed within the Justice Department,
    the Criminal Division, the National Institute of Justice, as
    well as the FBI, a working group that is trying to reach out to
    State and local law enforcement to provide the expertise, the
    training, and a plan with respect to equipment, because in this
    whole information technology area, we run into the situation of
    the technology changes so rapidly that equipment purchased 1
    year ago becomes obsolete, and how can we share it? So we are
    making, I think, some progress in that regard, and I feel
    comfortable with that.

                               Crime laboratories

        With respect to laboratories, we have a problem of that
    whether it be in Indian country where we are the first
    responder, if you will, and this is something that we are
    trying to address through a more comprehensive development and
    sharing of forensic services so that we have, if you will, a
    seamless web across the country. It is going to be so exciting
    in about 5 years, Senator. You are going to be able to have a
    lab tech go to the scene of a crime, take fingerprints at the
    crime, and immediately match them with a data base across the
    country that can provide instant identification of the subject.
        You will also have, and they estimate it will be about 5
    years, you can do a DNA test at the scene of the crime and
    immediately match it with the data base that it is developing.
    In these last weeks, we have had two significant matches made
    through the DNA data base. It is just an exciting opportunity,
    a great challenge, but I am trying to work with the sheriffs,
    with the State law enforcement authorities, and with police
    chiefs to make sure that we share the information the right
    way.

                            exchange of Information

        The third problem is that with the exchange of
    information----
        Senator Mikulski. The third?
        Ms. Reno. The third problem is--not problem but challenge--
    is that with computers we can now identify information and
    correlate it so that we identify evidence that can lead us to
    the right person far more quickly. It used to be if we had a
    convenience store robbery in Miami and there were five
    different convenience store robberies with a green automobile
    with a dented right fender, you never found it because there
    were 26 different police agencies. Now, we can begin to match
    these crime reports as they come in and make these
    identifications. We are going to be able to give tools to law
    enforcement that stagger the imagination, but it is important
    that we work together, and I would like to work with this
    committee in the years to come to make sure that our budget is
    reasonable and that it addresses this issue.
        Senator Mikulski. Well, this is exactly one of the areas I
    think we need to focus on. It is really great to go back into
    your local community and announce more cops on the beat, and I
    believe that there is no substitute for a police officer, a
    trooper, a State trooper, or an agent of the Federal
    Government. But they need to be backed up and amplified,
    enhanced, and in many instances, even their own lives protected
    because of technology, either information or biological. So I
    want to work with you, and that is why I did not know if you
    needed new statutory authority, whether there were particular
    lists within the budget, what line items this comes in so that
    we can really have a plan, where we are this year, how we can
    build on it for next year, et cetera, to get you to that 5-year
    goal, and that each year we accomplish something and do not end
    up with the kind of boondoggle they have over at IRS with their
    computers. I will not draw you into that, but we are enormously
    frustrated. We appropriate money to bring agencies into the
    modern age, and then we are embarrassed by it.
        Ms. Reno. The Senator and I are smiling because we have got
    our own problems.
        Senator Gregg. A little bit, and we are attempting to avoid
    that, although we have already had that problem.
        Senator Mikulski. I am not blaming that on you.
        Ms. Reno. No, no, but the Senator knows this is one of the
    most important issues that we face in the Justice Department,
    in the Federal Bureau of Investigation: How do we move into an
    age of technology that law enforcement never dreamed of 15
    years ago, and do it the right way within cost estimates on
    time? And I am dedicated to trying to do that because I have
    been faced with issues of overruns in the IAFIS system. I am
    working with the FBI. I am trying to work with the chairman to
    identify issues where we can, and we have developed time lines,
    and I monitor on a regular basis these issues, so you do not
    have to draw me into the IRS problem. I deal with my own.
        Senator Mikulski. Well, not to take the time of the
    committee, but see what happens is very often the people who
    buy it, it is like buying automatic weapons and everybody likes
    the latest gizmo or little hot-dog bell and whistle, and they
    are seduced by this green light or this little cute software
    program. We face it in politics where you have no idea how
    everybody will come in and give you the software program that
    will guarantee you a 92-percent victory. And it turns out to be
    folly, an expensive folly. So there is a difference between
    substance and salesmanship.
        Ms. Reno. You are singing to the choir, Senator.
        Senator Mikulski. OK. Having said that, if I could ask the
    indulgence for one other question. I know that you are focusing
    on juvenile justice and antigang initiatives, and, therefore,
    what I wonder is what you are advocating and also if part of
    the President's initiative is what you have in mind for
    prevention? I am a big believer in prevention, but as you know
    when we are involved in political debates and discussions, it
    is viewed as sissy, it is viewed as wimpy, it is viewed as
    ineffective, it is viewed as something better done by the
    Salvation Army, which I believe also is the right part of that,
    and, therefore, why are we in it? We get embroiled in trivial
    discussions like are we bankrolling midnight basketball? We are
    getting ready for this, and I am going to have a serious
    discussion on prevention. I wonder what you could share with us
    on that?

                           Juvenile crime prevention

        Ms. Reno. As you know, Senator, when I testified before the
    Senate Judiciary Committee 4 years ago, I said that youth
    violence was one of the single-greatest crime problems that we
    faced. But after serving for 15 years as the State attorney in
    Miami, I recognized that we could not jail our way out of it;
    we could not prosecute our way out of it; we had to provide
    stiff sentences for the serious offenders, for those that
    committed crimes, so that they knew that there was a
    consequence for what they did, but we had to engage in far more
    effective prevention efforts than we had undertaken.
        I think most Americans agree with that, but what they do
    not know is what is working and what does not work, and what
    also happens is there may be a wonderful prevention program for
    8-, 9-, and 10-year-olds, and then nothing when they move into
    middle school. There is not a comprehensive effort underway in
    the community. So what we have tried to do since taking office
    is to work with communities. They have a program in Montgomery
    County now where we focus with the community in building a
    comprehensive effort with police, others working together, as
    in Boston. Prevention is working now.
        Senator Mikulski. Well, what are some of those examples?
        Ms. Reno. It is the chief of police and it is the sheriff
    who is saying the prevention programs are working. Let me
    describe to you Boston. Commissioner Paul Evans is the police
    chief of Boston. He has worked together with the private
    sector, with religious leaders in Dorchester and Roxbury, with
    the probation service, with the courts, with the local
    hospital, with community activists in developing a
    comprehensive effort focused both on the serious offender but
    on preventing the crime in the first place, and it is exciting.
        Senator Mikulski. What do they do? You told me who it is,
    but what is it?
        Ms. Reno. Let me give you different examples.
        Senator Mikulski. Do they have after-school programs?
        Ms. Reno. They have after-school programs. They focus on
    conflict resolution. They have mentoring programs. One of the
    major insurance companies has a summer program where they bring
    youngsters in and teach them how to get job ready and teach
    them the responsibilities of jobs. They have the local hospital
    intervening with children who are victims of crime because they
    found out that the 12-year-old that gets shot may oftentimes be
    the shooter next time, thus interrupting the cycle of violence.
    They are using domestic violence money from the VAWA grants,
    realizing that that is one place, if you can stop violence in
    the home, you are going to make a difference.
        They have community probation officers riding with
    community police officers, getting to know the neighborhood as
    a whole and working to get the kids out of trouble and to keep
    the kids out of trouble. It is an exciting program. In
    Jacksonville, FL, the State attorney is working with the local
    sheriff in focusing on the serious offender but developing
    prevention programs for youngsters, again along the lines of
    those in Boston. These programs can work when a community comes
    together and when we use our resources wisely. And it is the
    police chiefs and the sheriffs that are talking about it so I
    do not think anybody can call it wimpy anymore.
        Senator Mikulski. No; that is not my phrase.
        Ms. Reno. I understand that.
        Senator Mikulski. You know I am a supporter of prevention,
    but that is often the way it has been portrayed. Thank you, Mr.
    Chairman. You have been very generous with the time. We could
    have these interesting conversations all day, but I yield and
    thank you for the courtesy.
        Senator Gregg. Thank you.
        Senator Mikulski. Thank you very much, Ms. Reno.
        Senator Gregg. It is certainly nice to have you on the
    committee, and both the issues which you raised are issues
    which this committee has spent a considerable amount of time
    addressing, and we will look forward to your input. We did put
    together a prevention package last year. Senator Campbell
    played a major role in it, as did Senator Kohl, and so we will
    look forward to getting your input on that also.

                                 Investigations

        There are a number of issues which I would like to talk
    about in addition to what we have discussed already. Just to go
    back to the issue which is obviously the testiest, and which
    causes the most consternation--let me outline for you my
    concern--I do not know that you need to comment on it
    additionally but just in a rhetorical way outline it. It deals
    with the Public Integrity Division internal investigation that
    is going on relative to this issue that we see everyday dealing
    with elections and the Chinese connection, for lack of a better
    term. Now we have the FBI and the White House at opposite ends
    on how that was briefed. I presume it is also addressing the
    fundraising within the White House that occurred, especially
    the Vice President's most recent statements, and now we have
    the Justice Department presenting the statute in its scope of
    coverage. At least that is the way I perceive it.
        I presume the Public Integrity Division is also looking at,
    or should be looking at, the issue of this immigration question
    and whether the acceleration occurred as a result of any
    political pressure for the election because that has clearly
    been in the public domain and involves election law questions,
    and even possibly, I presume, the Integrity Division, which, of
    course, is an INS issue, which is under the jurisdiction of the
    Justice Department. And I also presume that the Justice
    Department is looking in the Public Integrity Division relative
    to the elections into the issue of why Webster Hubbell was
    given hundreds of thousands of dollars to be an advocate when
    he was in the process of losing his license to practice law.
    Webster Hubbell was a former Justice Department official. The
    question it raises for me, is the issue of the perception as to
    the effectiveness of an internal Justice Department review and
    its objectivity.
        I have the highest regard for the Justice Department, for
    the Attorney General, and for the FBI, and I do not want to see
    that credibility in any way eroded. So I just raise it as a
    point that I think that this is creating problems. It is
    creating problems in the public perception, and maybe it is an
    unavoidable event because of your portfolio of responsibility
    that you are going to have to confront these types of
    conflicts. The fact is that conflicts are building, and as a
    result, I think they are undermining the capacity of the public
    to have confidence in the activity that an internal
    investigation would bring forward, the information it would
    bring forward, and the decisions it would make--not necessarily
    determinative, because I still think that everybody has a lot
    of confidence in the Public Integrity Division. It is a very
    strong division. It does aggressive work, and everybody knows
    that they tend to take no prisoners and do their job
    effectively.
        But there is the issue of perception that I am concerned
    about, and I think the issue of perception is being raised, and
    it continues to build. And so that is just a statement of
    thought on the issue, and if you want to respond to it, you
    can. If you do not, that will not bother me either.
        Ms. Reno. Let me thank you for the nice comments that you
    made and just tell you that I share your deep concern. The
    Department of Justice is an institution that I cherish, and I
    do not want to do anything that will cause problems for its
    reputation or for it as an institution. At the same time, I
    discovered long ago that the chief prosecutor is damned if you
    do and damned if you do not. And the best thing you can do is
    just take the evidence and the law and do it as best you can
    according to what you think is right. I am so mindful of your
    concerns. I continue to address that issue on a regular basis,
    and I appreciate your thoughtful comments.

                             FBI/White House issue

        Senator Gregg. OK. We will move on to something else. Let
    me just throw in a further thought. I think there was some
    confusion about my representations, though, as to the FBI. My
    view is that if it is a contest between the FBI and the White
    House as to who I am going to believe, that it is not a
    contest. That is a personal and political statement, and I have
    a great respect for what the FBI does and for their integrity
    in their law enforcement activities, as I do the Justice
    Department.

                                  Immigration

        Now on this issue of immigration, we know we have got about
    10,000 felons that went through the system. It appears that
    there are about 170,000 or 180,000 people whose fingerprints
    could not be reviewed because they came through the system too
    quickly or the fingerprints were not capable of being reviewed.
    There may be, as I understand it, about 171,000 who have
    potential misdemeanors or felony arrests, but for whom we are
    not sure, and in that 171,000 there is 10,000 which we are
    pretty sure are felons. These are staggering numbers of people
    that went through the system who we have not had a chance to
    verify their status and some of whom we clearly do not want in
    our country.
        My concern is this: the appeals process for getting
    revocation of naturalization status is long and interminable
    and incredibly expensive. I suspect we are going to find that
    if we can ever get a handle on those other 179,000 fingerprint
    cards or even the 71,000, we may find that this 10,000 number
    is a very low-ball number of the people we want to throw out of
    the system who got through. The appeals process is complicated.
    The investigative process of getting to the point of actually
    filing the decertification for these individuals is extensive,
    and then there are problems just finding these people. I mean
    if they are felons, obviously they are going to be smart enough
    to realize they are not going to walk into the office and say,
    ``Oh, I am sorry, I got my naturalization papers incorrectly,
    here they are back.'' These folks are going to disappear and be
    extremely hard to find. I mean just tracking them is going to
    be a very expensive undertaking.
        I know there is a $10 million estimate on costs, but I
    think that is incredibly low, and it seems to me that we are
    looking at a huge cost to track these people. Obviously we have
    to. We have no choice. We have to find them. We have to take
    away their citizenship, take away their status and get them out
    of the country. But, No. 1, what is a realistic estimate here
    and, No. 2, where are we going to take those resources from? I
    do not want to see the basic enforcement activities of the
    INS--as you and Senator Hutchison pointed out, there is a lot
    still to be done on the Texas border and other places--be
    undermined by having to reorient resources to address this
    situation here which has gotten away from us.
        So, two questions: one, how much is it really going to cost
    us in your estimation; and two, where are we going to find the
    money?
        Ms. Reno. I think it is very important. First of all, I do
    not know what the cost will be in terms of revocation because
    we now have the capacity for administrative revocation. You are
    quite correct that there will be investigations involved, but
    let me just point out to you because you used some figures, and
    I would like to clarify the figures. There were 71,000
    identified as having some record; 34,700 of those were
    administrative violations which are not disqualifying; 25,500
    were misdemeanors; and 10,800 had felonies.
        Senator Gregg. Now can I ask one question on those numbers?
        Ms. Reno. Yes.
        Senator Gregg. Was there not also 179,000 whose
    fingerprints were not clear enough to make an assessment?
        Ms. Reno. I am coming to those in just a minute. But of the
    10,800 that were determined to have felony records, only 168
    have been determined to be presumptively ineligible; 2,800 need
    further action for review and were in the process. You are
    quite correct in pointing out that approximately 179,000 we
    still have to pursue and we are in the process of doing that.
    And we will. Ms. Meissner and I will continue to work with you
    as we identify the sources of funds to correct the situation
    and try to keep you as advised as possible of the steps being
    taken by Peat Marwick.
        Senator Gregg. Well, I really would like to get a more
    realistic estimate of what this is going to cost because I do
    not think the estimates we have----
        Ms. Reno. What I would like to do, and what I have done
    from the beginning since I have determined what the situation
    is, is I asked Peat Marwick to report back to Mr. Colgate, the
    Assistant Attorney General for the Justice Management Division,
    on a regular basis any new developments, any new problems. I
    have tried to keep the relevant staff of the appropriate
    committees advised, and we will try to do that for you, as
    well, on a very regular basis and try to keep you as fully
    informed as possible.
        Senator Gregg. Could you also advise us as to what the
    first cut is on how many of these 10,800 known felons we can
    identify where they are?
        Ms. Reno. Yes; I will.
        Senator Gregg. I mean can we find them?
        Ms. Reno. Yes.

                             FBI fingerprint issue

        Senator Gregg. In addition, as I understand it, the way
    this worked was that the INS mailed the fingerprints over to
    the FBI post and that was one of the major delays in paperwork
    problems. Is that true?
        Ms. Reno. I think there were a number of different
    problems, and what I have asked Mr. Colgate to do on an ongoing
    basis--I think one of the problems that developed is that INS
    and the FBI did not talk together at a level that fully
    addressed in terms of a systems problem what was necessary to
    do it the right way. Mr. Colgate now has regular meetings with
    the representatives of both agencies at a sufficiently high
    level, and I think much progress has been made in streamlining
    it. I hear different comments. Both Mr. Colgate and Peat
    Marwick, I think, could give you more specifics, and what I
    would ask Mr. Colgate to do is to followup with you and make
    sure that Mr. Morhard has the information that you need on what
    caused it in the first place. I have also asked the inspector
    general to review the whole matter to determine who is
    accountable for it so that I can take appropriate action.
        Senator Gregg. I am presuming that INS gets tied into
    IAFIS? You have got this all running, right?
        Ms. Reno. One of the concerns that has been raised is how
    does IDENT and IAFIS come together, and Mr. Colgate is focusing
    on that as well as trying to determine how we use these
    resources as wisely as possible in developing an IAFIS system
    that has no duplication--that this is one of the issues being
    addressed by the group that he is chairing.

                                 FBI laboratory

        Senator Gregg. Another issue, we have had these reports
    about the lab problems at FBI. When we get the lab going, which
    will, hopefully, be fairly soon--obviously it is going to take
    a few years, but is it presumed from what I have heard--I would
    just like to have you put it on the record--and from what I
    have asked and what I have been told, the FBI has put into
    place protocols, and they have put in place an outside review
    process, and by building the new lab, they will have addressed
    the basic issues of concern. Is that your understanding?
        Ms. Reno. The FBI had already started to institute changes
    in the lab under Director Freeh's leadership. They have now
    been provided with the report from the inspector general. As
    you know, the inspector general brought in outside expert
    scientists who were some of the best in the field. I have had a
    chance to meet with them. And Director Freeh has now had the
    draft of that report and I know will build on any additional
    recommendations in that draft. In addition, he is doing a very
    extensive and very thoughtful and very methodical nationwide
    search for a leader for the lab that will represent the best
    possible person in terms of science and supervisory abilities.

                            Laboratory consolidation

        Senator Gregg. Now I know DEA has, I think, 10 labs around
    the country and ATF has 3 or 4. DEA has a legitimate reason for
    having these labs, I think and a need for immediate review.
    This is not complicated stuff that they are working with in the
    way that the FBI often gets into extremely complex lab
    activity. I am sure that DEA's is complex, too, but not at the
    same level. But should we not be taking a look at whether ATF,
    and, of course, it is not your agency, but whether their lab
    should not be tied in to the FBI and whether or not we need all
    10 of these DEA labs?
        Ms. Reno. I think it is important for all of us, I asked
    the DIAP and Director Freeh to review the Justice Department
    laboratory facility's layout to see whether duplication was
    necessary, and as you point out, the working group issued its
    report in 1995, finding that the missions of the different labs
    were very specialized, and that it was important as they were
    cited to maintain the system as it was. I am constantly
    reviewing, in light of some of the concerns raised by Senator
    Mikulski, how we put these precious resources out across the
    country in the most comprehensive manner possible, both as
    between Federal agencies and between State and local and
    Federal agencies. I am constantly working with Ray Kelley, the
    Under Secretary of Treasury, to address what we can do to avoid
    duplication, to ensure the most comprehensive coordination.
        Senator Gregg. Do you work at all with the ATF people?
        Ms. Reno. We have meetings, and you remind me I need to
    have another meeting shortly. We have had regular meetings with
    Treasury officials on issues of mutual concern, and I know
    Director Freeh and Mr. McGaw meet on a regular basis.
        Senator Gregg. Should not the ATF be under the FBI?
        Ms. Reno. I made a determination long ago in Miami and
    certainly after I came to Washington that if I kept pulling at
    other people's turf, I was going to spend an awful lot of time
    doing that. What I try to do--what I have tried to do these
    last 4 years--is not worry about the turf. Just make sure that
    I do everything possible to make sure that people talk together
    and share information.
        Senator Gregg. I am going to take that as a yes.
    [Laughter.]

                                Counterterrorism

        On another issue, which is this question of coordination on
    terrorism, which you know is one of my pet----
        Ms. Reno. Can I just put in a little--that my silences
    should not be accepted as confirming your yes.
        Senator Gregg. I recognize that. On this issue of terrorism
    and coordination of terrorism, can you sort of bring me up to
    speed as to what sort of relationship you have with the
    Secretary of State, the Secretary of Defense, and the Director
    of the CIA in a formal structure as versus an informal
    structure to coordinate the anticipation of a terrorist act
    from overseas as versus the execution of addressing a terrorist
    act that occurs here?
        Ms. Reno. Since Secretary Cohen and Secretary Albright have
    come into office, I have not had formal meetings with them.
    With Secretary Christopher and Secretary Perry, we had
    developed a very good working relationship. I was told by
    people in both Departments that the working relationship with
    the State Department, in which we had put a lot of time and
    effort, was the best it had been on the issues of law
    enforcement. And I think we had comparable coordination with
    the Department of Defense. We spent--the Deputy Attorney
    General and the Director of the FBI--spent many, many hours
    working with the DI and with people at the agency to try to
    develop the closest coordination possible, and I think we have
    made real progress in that regard.
        We have a coordinated CSG working group which really
    operates under the NSC and works together in a coordinated
    way--that it is the coordination subgroup, which is
    representatives of each Department working under the deputies;
    the deputies then have regular meetings as issues arise, and
    then when the deputies cannot agree, it is taken up to the
    level of the principals. But I have not had a principals
    meeting on a major issue with the new secretaries.
        Senator Gregg. We are going to have a counterterrorism
    hearing in this committee, and in anticipation of that,
    hopefully, we can sit down and talk with you about
    coordination.
        Ms. Reno. I would welcome that opportunity because I
    appreciated the opportunity that we had to have some
    discussions last fall, and it would be extremely helpful for me
    to be able to share with you what we have done to get the
    benefit of your thoughts, and I would welcome that opportunity.

                             Federal prison system

        Senator Gregg. Now, in the prison area, as I understand,
    the Federal system is about 25 percent overcrowded right now,
    and yet the number of dollars for new beds is cut. Can you give
    us your thoughts on how you are going to handle what is an
    exploding prison population with fewer beds?
        Ms. Reno. I would ask Mr. Colgate to correct me if I am
    wrong, but the latest figures that I have seen, much of the
    forecast for prison construction was of a greater increase than
    has occurred, and I work regularly with Dr. Hawk to make sure
    that our requests match her needs for properly controlling
    against unwarranted overcrowding while at the same time
    ensuring that we have the capacity to make sure that we have
    truth in sentencing, and that the full sentences are served. In
    my more recent meetings with Dr. Hawk, I think we are on target
    in that regard, and I think she feels comfortable with the
    request that we have provided.
        Mr. Colgate. I would just add also we are dealing with the
    fact that buildings and facilities is no-year account, and you
    are really starting to see prior year appropriations, those
    institutions being completed, and constructed, so you are
    starting to see the activation curve of institutions that have
    been previously appropriated. So that is why, you know, our
    overcrowding is going down, but you do not necessarily see new
    budget authority requests in the out-years because of the
    significant resources that had already been provided in that
    no-year account.
        Senator Gregg. So we are not going to hear in 3 to 5 years,
    when we would not be able to respond in a timely fashion, that
    we need dramatic increase in prison space for an immediate
    problem of overcrowding?
        Ms. Reno. Not for the immediate problem of overcrowding.
    Let me caution you, though, because I used to deal with this
    situation at home, and I thought--the legislators would tell me
    you do not need any more prosecutors now, do you? And I would
    say no, and then 2 years later a crack epidemic would hit with
    a substance that nobody knew about and cause an escalation in
    crime. I am trying to monitor it very carefully to understand
    patterns, to do it as wisely as possible and to make sure that
    our requests for dollars are based on just what is happening,
    and we will continue to work with you, sir, if we may, and try
    to keep you advised of trends or problems that we foresee. But
    at this point, based on what we know now, and the information
    available to us, this seems to be a reasonable request.
        Senator Gregg. Well, this committee is not adverse to
    adding more prison construction----
        Ms. Reno. I appreciate that.

                         Additional committee questions

        Senator Gregg [continuing]. If that is what you need, or
    support for. Well, we certainly appreciate your time. You have
    given us a considerable amount of your day, and thank you for
    it. There is unanimous consent that a number of questions from
    various Senators be submitted to you, and I will honor that,
    and so you will be receiving a packet of questions.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                Questions Submitted by Senator Pete V. Domenici
                           southwest border staffing
        Question. Ms. Reno, you know I have been following with interest
    the Department's deployment of both funding resources and personnel
    along the Southwest border. I remain concerned that the two large
    neighbors to the west and east of New Mexico (California and Texas)
    could consume most of our border law enforcement resources leaving gaps
    in states such as New Mexico and Arizona.
        I must thank the distinguished Subcommittee Chairman and his staff
    for assisting me in monitoring this ongoing situation. I also thank
    you, Ms. Reno, for the detailed responses you gave to my several
    questions on this issue last year.
        I know that the Department is currently undergoing the deployment
    of additional Border Patrol agents and other law enforcement and
    support personnel along the border. The interim plan now being
    implemented also redeploys some 200 Border Patrol agents to the
    Southwest border.
        Ms. Reno, could you give the Subcommittee a brief review of the
    interim deployment plan for Border Patrol agents and support personnel?
        Answer. The INS is in the process of deploying 714 Border Patrol
    agents and 100 support staff of the new personnel received in fiscal
    year 1997. The deployment plan for the remaining 286 Border Patrol
    agents will be completed by the end of April. Chart A provides a list
    of the interim deployment locations by Border Patrol Sections and
    Stations.
        Question. Of the 1,000 new agents approved for fiscal year 1997,
    how many have actually been deployed?
        Answer. Of the 1,000 new Border Patrol agents, Congress has
    approved the deployment plan for 714 Border Patrol agents.
        Question. How many of these agents are being sent to the El Paso
    Sector for New Mexico?
        Answer. The El Paso Sector received 73 of the 714 Border Patrol
    agents; 52 of the 73 were deployed to New Mexico stations.
        Question. How many Border Patrol agents, investigators and support
    personnel are currently deployed in New Mexico? Would you please
    provide this information by station?
        Answer. As listed in Chart A, 52 Border Patrol agents were deployed
    to 3 New Mexico stations (Deming 13, Las Cruces, 13, and Santa Teresa
    26). Las Cruces, NM Station received 2 of the 7 support positions
    deployed. There are no new investigator or support staff positions
    deployed to New Mexico. Filled positions as of February 15 are:

    ------------------------------------------------------------------------
                                         BPA      Investigators    Support
    ------------------------------------------------------------------------
    Lordsburg......................           28  .............            1
    Truth or Consequences..........           12  .............            1
    Las Cruces.....................           80             4             6
    Alamogordo.....................           53  .............            2
    Carlsbad.......................            8  .............            1
    Deming.........................           85  .............            3
    Silver City....................            2  .............  ...........
    Albuquerque....................            4  .............  ...........
    Santa Teresa...................           87  .............           15
                                    ----------------------------------------
          Total....................          359             4            29
    ------------------------------------------------------------------------

             CHART A.--DEPLOYMENT OF FISCAL YEAR 1997 BORDER PATROL AGENT (714) AND SUPPORT (100) POSITIONS
    ----------------------------------------------------------------------------------------------------------------
                                                                                  Border
                           Sector/station                            State        Patrol      Support       Total
                                                                                  agents
    ----------------------------------------------------------------------------------------------------------------
    Del Rio:
        Bracketteville.........................................           TX             5  ...........            5
        Carrizo Springs........................................           TX             5  ...........            5
        Eagle Pass.............................................           TX            27            1           28
        Sector HQ..............................................           TX   ...........            5            5
                                                                ----------------------------------------------------
          Total................................................  ............           37            6           43
                                                                ====================================================
    El Centro:
        Calexico...............................................             CA          24  ...........           24
        El Centro..............................................             CA          12  ...........           12
        Sector Headquarters....................................             CA ...........            3            3
                                                                ----------------------------------------------------
          Total................................................  ............           36            3           39
                                                                ====================================================
    El Paso:
        Deming.................................................           NM            13  ...........           13
        Las Cruces.............................................           NM            13            2           15
        Santa Theresa..........................................           NM            26  ...........           26
        El Paso................................................           TX            21  ...........           21
        Sector Headquarters....................................           TX   ...........            5            5
                                                                ----------------------------------------------------
          Total................................................  ............           73            7           80
                                                                ====================================================
    Laredo:
        Laredo North...........................................           TX            18  ...........           18
        Laredo South...........................................           TX            16  ...........           16
        Sector Headquarters....................................           TX   ...........            6            6
                                                                ----------------------------------------------------
          Total................................................  ............           34            6           40
                                                                ====================================================
    McAllen:
        Brownsville............................................           TX            81            1           82
        Harlingen..............................................           TX            30  ...........           30
        McAllen................................................           TX            28  ...........           28
        Mercedes...............................................           TX            20  ...........           20
        Harlingen..............................................           TX   ...........            2            2
        Kingsville.............................................           TX   ...........            1            1
        Sector Headquarters....................................           TX   ...........           12           12
                                                                ----------------------------------------------------
          Total................................................  ............          159           16          175
                                                                ====================================================
    Miami: Miami Station.......................................           FL   ...........            1            1
    Detroit: Sector Headquarters...............................           MI   ...........            2            2
    New Orleans: Sector Headquarters...........................           LA   ...........            1            1
    Ramey: Ramey...............................................           PR             8            1            9
    San Diego:
        Brownfield.............................................             CA           7  ...........            7
        Campo..................................................             CA           6            1            7
        Jacumba................................................             CA ...........            1            1
        Chula Vista............................................             CA           7  ...........            7
        El Cajon...............................................             CA           6            1            7
        Sector HQ \1\..........................................  ............          175           26          201
                                                                ----------------------------------------------------
          Total................................................  ............          201           29          230
                                                                ====================================================
    Tucson:
        Douglas................................................           AZ            90            3           93
        Nogales................................................           AZ            76            2           78
        Naco...................................................           AZ   ...........            1            1
        Wilcox.................................................           AZ   ...........            1            1
        Sector Headquarters....................................           AZ   ...........            9            9
                                                                ----------------------------------------------------
          Total................................................  ............          166           16          182
                                                                ====================================================
    HQ:
        Charleston Training Facility...........................            SC  ...........            5            5
        National Firearms Unit.................................           PA   ...........            1            1
        El Paso Flight Operations..............................           TX   ...........            2            2
    Blaine: Blaine Sector Headquarters.........................           WA   ...........            2            2
    Yuma: Yuma Sector Headquarters.............................             CA ...........            1            1
    WOR: Regional Office.......................................             CA ...........            1            1
                                                                ----------------------------------------------------
          Servicewide Total....................................  ............          714          100          814
    ----------------------------------------------------------------------------------------------------------------
    \1\ All trainees will EOD at San Diego Sector HQ and further be assigned primarily to the mainlinestations.

        Question. Of the remaining agents to be deployed (286), how many do
    you anticipate will be deployed to New Mexico?
        Answer. During April, INS will re-evaluate each sector's
    operational needs and make final recommendations to the Appropriations
    Committees on the 286 Border Patrol agent positions remaining to be
    deployed. Under the original deployment proposal, New Mexico stations
    would have received another 24 Border Patrol agent positions.
        Question. The Border Patrol Deployment Plan is scheduled to be
    finalized in April. Is the Department on schedule to complete that in
    April? Will you give us your commitment to work with the Subcommittee
    as the deployment plan is finalized to ensure that there is a equitable
    distribution of these important law enforcement resources?
        Answer. The INS will submit a proposed deployment plan for the
    remaining 286 Border Patrol positions to the Appropriations Committees
    in early April. Congress worked closely with INS on the deployment of
    1,707 new positions. The Department of Justice is committed to an
    equitable distribution of these law enforcement positions and INS will
    work closely with the Subcommittees on the finalization of the
    deployment of the remaining 286 Border Patrol agents.
        Question. Could you please provide the Subcommittee with the final
    distribution of the 200 redeployed Border Patrol agents including where
    they were transferred from and where they were actually redeployed?
        Answer. The INS reached an agreement with the Appropriations
    Committees in July 1996 to change the mix of enforcement staffing at 32
    Border Patrol stations and to change work assignments within the Border
    Patrol sectors to conduct more uniformed, border control duties and
    less investigative activities. Under the approved plan, INS has moved
    73 Border Patrol positions to the Southwest border and an additional
    127 workyears are being redirected to border control activities. The 73
    redeployed positions and 127 redirected workyears combined will have
    the effect of improving the overall border control capability of the
    Border Patrol by 200 agents. Chart B provides the locations of
    redeployment.

         CHART B.--REDEPLOYMENT OF BORDER PATROL AGENTS--NEW AGENTS AND
                              REDIRECTED WORKYEARS
    ------------------------------------------------------------------------
                                                   Positions
         Border Patrol sector        Redirected   deployed to      Total
                                     workyears       border
    ------------------------------------------------------------------------
    Buffalo, NY..................            0.4  ...........            0.4
    Detroit, MI..................            1.5  ...........            1.5
    El Paso, TX..................           21.6            4           25.6
    Marfa, TX....................           12.4  ...........           12.4
    McAllen, TX..................            4.2           29           33.2
    Havre, MT....................            3.3  ...........            3.3
    Miami, FL....................            3.8  ...........            3.8
    New Orleans, LA..............            1    ...........            1
    Tucson, AZ...................            6.8            9           15.8
    Yuma, AZ.....................            9.6  ...........            9.6
    Houlton, ME..................             .8  ...........             .8
    Swanton, VT..................  .............  ...........  .............
    Del Rio, TX..................           10.9  ...........           10.9
    Laredo, TX...................            7.1  ...........            7.1
    El Centro, CA................            6.6  ...........            6.6
    San Diego, CA................            4.6           31           35.6
    Livermore, CA................           20    ...........           20
    Mayaguez, PR.................             .3  ...........             .3
    Spokane, WA..................            7    ...........            7
    Blaine, WA...................            4.2  ...........            4.2
    Grand Forks, ND..............             .9  ...........             .9
                                  ------------------------------------------
          Total..................          127             73          200
    ------------------------------------------------------------------------

        Question. Has the Department ``backfilled'' the positions as it
    committed to do when the Border Patrol agents were transferred to the
    front lines of the border? What is the status of this initiative?
        Answer. The INS assigned 93 investigative positions to 30 locations
    as backfill for the investigative functions previously performed by
    Border Patrol agents in the Redeployment Plan. Vacancy announcements
    for the investigative positions were announced in the first quarter of
    fiscal year 1997. Selections were made for 76 positions, with the
    balance to be selected shortly. Of the 76 selections, 57 (75 percent)
    were Border Patrol agents from the interior locations.
        Question. What is your current assessment of the law enforcement
    staffing situation in New Mexico?
        Answer. The table below provides a summary of the current estimated
    law enforcement staffing levels for fiscal year 1997.

       DEPARTMENT OF JUSTICE LAW ENFORCEMENT STAFFING IN THE STATE OF NEW
                                     MEXICO
    ------------------------------------------------------------------------
                                             Fiscal year 1997 Estimate
                                      --------------------------------------
                Component                Agents/
                                        Attorneys     Support       Total
    ------------------------------------------------------------------------
    FBI..............................           91           71          162
    DEA..............................           75           85          160
    INS..............................          363           29          392
    USA..............................           23           10           33
    USMS.............................           24           10           34
                                      --------------------------------------
          Total......................          576          205          781
    ------------------------------------------------------------------------

        Question. How would the additional Southwest border resources
    requested in the President's budget affect New Mexico and your
    assessment of the law enforcement situation in New Mexico?
        Answer. The Federal Bureau of Investigation (FBI) estimates that an
    additional 12 positions (7 agents, 5 support) would be allocated to the
    State of New Mexico. The Immigration and Naturalization Service (INS)
    proposes to assign an additional 50 Border Patrol agent positions to
    New Mexico in fiscal year 1998. The Drug Enforcement Administration
    (DEA) and the United States Attorneys (USA) have not yet determined how
    fiscal year 1998 requested enhancements would be allocated, however,
    any enhancements allocated will be based on the regional drug threat
    and/or their ability to demonstrate a direct and significant nexus to
    illegal immigration or drug activity emanating from the Southwest
    border area. In all likelihood, the State of New Mexico will receive
    additional resources from both DEA and USA.
        The Department of Justice recognizes that due to the proximity of
    New Mexico to the country of Mexico, there is a need for a strong law
    enforcement presence and effort in the State. With the increases in
    drug trafficking, drug related violence and public corruption along the
    southwest border, law enforcement is and must continue to work together
    to thwart the threat of these acts. Some highlights of this cooperative
    law enforcement effort are summarized below.
      --The FBI currently has three task forces operating within the
            Albuquerque field office, all of which have Federal, State and
            local law enforcement participation. The task forces include:
            New Mexico Violent Fugitive Task Force; Gang Task Force; and
            Joint Drug Intelligence Group.
      --The DEA and the New Mexico State and local law enforcement agencies
            have maintained an excellent working relationship. During 1996,
            through Operation Pipeline, DEA and the New Mexico State Police
            were involved in a total of 69 road stops resulting in the
            seizure of 3,213 kilograms of marijuana, 307 kilograms of
            cocaine, 10 kilograms of methamphetamine, and $55,000 in U.S.
            currency.
        Albuquerque Diversion Group continues to be an active participant
    in the New Mexico Health Care Fraud Task Force along with many other
    Federal and State agencies.
      --The USA has been a key participant in working with the other
            Federal, State and local law enforcement agencies to foster
            greater prosecutions, convictions, and incarcerations. Over the
            last few years, greater numbers of immigration and violent
            crime cases have been prosecuted in the District of New Mexico.
      --For example, the number of immigration cases filed in the District
            increased from 103 in fiscal year 1995 to 162 in fiscal year
            1996, a 57 percent increase. Of the immigration defendants
            whose cases were closed in fiscal year 1996, 93 percent were
            convicted, with 78 percent of the convicted defendants
            sentenced to prison.
      --Regarding violent crime cases, a total of 155 cases were filed
            against 172 defendants, representing a 22 percent increase in
            case filings and a 25 percent increase in defendants charged
            when compared to fiscal year 1995. Of the violent crime
            defendants whose cases were terminated in fiscal year 1996, 88
            percent were convicted, with 82 percent of the convicted
            defendants sentenced to prison.
                            special immigrant status
        Question. Madam Attorney General, in 1990 the Congress enacted a
    provision entitled ``Special Immigrant Status for Certain Juveniles
    Declared Dependent on a Court.'' This section was intended to be
    reserved for certain juveniles who were abused, neglected or abandoned.
        For example, in New Mexico, in 1991 a small child was brought
    illegally from Mexico by her parents. The child was sexually abused and
    beaten by the parents. The Department of Health and Human Services in
    New Mexico took custody of the child and petitioned on her behalf for
    Special Immigrant Status. She was granted permanent resident status.
    The parents were deemed unfit parents and the child was placed in
    foster care and eventually was adopted by her U.S. citizen foster
    parents. The child was 11 years old when she was granted permanent
    resident status.
        Clearly, this was the type of case that Special Immigrant Status
    was designed to protect. Unfortunately, in New Mexico we have found
    that the Special Immigrant Status provision is being abused by certain
    juveniles.
        For example, in February of 1996, a petition for permanent
    guardianship was filed by a relative of the juvenile with a court in
    New Mexico. The juvenile, who was on her way to college under a
    nonimmigrant student visa, did not even arrive in the United States
    until March of the same year. The juvenile, who was just 8 days shy of
    her 18th birthday (the age of majority in New Mexico), was later
    granted eligibility for Special Resident Status.
        In another case, a 20 year old Mexican male entered the United
    States as a foreign student. Guardianship was given to his uncle by
    consent of his parents in Mexico. The 20 year old became a permanent
    resident because the court determined in the petition granting
    permanent guardianship to the uncle that the boy was ``eligible for
    long-term foster care.''
        Finally, in another case, an 18 year old Venezuelan male received
    permanent resident status by way of the Special Immigrant Status
    provision. He was studying in the United States as a foreign student. A
    petitioner of unknown relationship went to the court and petitioned for
    permanent guardianship. The attorney stated that the parents in
    Venezuela failed to respond to the notice they were provided. On that
    basis, the court declared the Venezuelan male a dependent of the court
    allowing him to seek permanent resident status.
        General Reno, would you agree with me that Special Immigrant Status
    should not be given to the individuals just described above, who are
    neither abused, neglected, or abandoned?
        Will you commit to working with me and with this Subcommittee to
    fashioning a solution to close this loop-hole so that Special Immigrant
    Status continues to be reserved for those abused, neglected or
    abandoned children that the statute was designed to protect, while at
    the same time prohibits the practices we are observing in New Mexico
    from occurring?
        Answer. Yes. I agree with you that individuals like those described
    in the examples provided by you should not be granted Special Immigrant
    Status. I have directed the INS to evaluate its implementing regulation
    and procedures to determine what necessary administrative steps can be
    taken to correct the loophole. Should we determine that this loophole
    can only be closed through a legislative action, we will submit
    recommended legislative language to you and the Subcommittee for
    consideration.
        Regarding the three cases that you cited, the INS contacted your
    office and obtained redacted court records on each case. These records
    do not contain enough data (i.e., name, date of birth, social security
    number, etc.) that will allow INS to thoroughly investigate the case.
    The INS contacted the 2nd Judicial District Court in New Mexico and was
    informed that records appointing guardianship are ``sequestered and not
    available to anyone other than the persons named in the order.''
    Therefore, we are unable to investigate further.
                                 juvenile crime
        Question. There currently are several juvenile crime legislative
    proposals which have been introduced, both by the President and Members
    of the Senate on both sides of the aisle. Juvenile crime seems to be at
    the top of everyone's agenda.
        What do you believe are the most important issues we should address
    in juvenile crime legislation this year?
        Answer. Youth violence is a problem affecting us all. We must give
    communities the tools and resources they need to take back their
    streets and schools, and to reestablish a sense of security in our
    country. The President's legislation, S. 362, ``The Anti-Gang and Youth
    Violence Act of 1997,'' offers a balanced approach to fighting juvenile
    crime. This legislation proposes new laws and new resources to target
    gangs, gun crimes, illegal gun markets, and drugs. In addition, the
    bill invests substantial new resources in anti-truancy, school
    violence, and other similar initiatives aimed at getting or keeping
    young people on the track to success. We believe what is needed is a
    balance of sanctions, early intervention, and prevention if we are
    going to be successful in arresting juvenile violence.
        Question. Would you agree with me that the current federal rules
    related to ``sight and sound'' separation of juveniles in state
    facilities are too rigid and difficult for many communities,
    particularly rural ones, to implement? How can we alter the ``sight and
    sound'' mandate in the federal Juvenile Justice and Delinquency
    Prevention Act to better meet the needs of rural communities?
        Answer. The current Federal rules relating to sight and sound
    separation were modified by regulations taking effect in December, 1996
    by the Office of Juvenile Justice and Delinquency Prevention (OJJDP)
    with an eye toward the needs of rural jurisdictions.
        Specifically, section 223(a)(13) of the Juvenile Justice and
    Delinquency Prevention (JJDP) Act provides that accused and adjudicated
    delinquent, status offender and nonoffender juveniles shall not have
    contact with incarcerated adults. It is important to maintain a
    separation requirement to protect juveniles from harm and influence by
    adult offenders. However, it was clear that changes could be made in
    the regulatory and statutory requirements that would help rural
    communities having difficulty meeting the requirements of the JJDP Act,
    while at the same time maintaining protection of vulnerable young
    offenders.
        Steps have been taken to address the concerns of rural communities
    through regulatory changes and the Administration has proposed
    additional flexibility in the Anti-Gang and Youth Violence Act, H.R.
    810/S. 362. In 1996, the Office of Juvenile Justice and Delinquency
    Prevention (OJJDP) undertook a comprehensive review of its Formula
    Grants Regulation, 28 CFR Part 31, which guides States' implementation
    of the Formula Grants program. Based on public comment, including input
    from public interest groups and professionals in the juvenile justice
    field, a revised regulation was published on December 10, 1996. It
    provides enhanced flexibility to State and local governments in
    implementing the core requirements of the Formula Grants program,
    including the separation requirement.
        The prior regulation required that while juveniles were in secure
    custody in an adult facility, any ``sight or sound'' contact with
    adults was a reportable violation. In reexamining the regulation, it
    became apparent that the States needed clearer guidance with regard to
    the definition of ``sight'' and ``sound'' contact. Therefore, sight
    contact was defined in the new regulation as clear visual contact
    between incarcerated adults who are in close proximity to juveniles,
    and sound contact was defined as direct oral communication between
    incarcerated adults and juveniles in secure custody. While separation
    may be provided through either architectural or procedural means, the
    revised regulation provides that ``sight or sound'' contact that is
    both brief and inadvertent or accidental must be reported as a
    violation only if it occurs in secure areas of the facility that are
    dedicated for use by juveniles, including any residential area. It
    further provides that the separation requirement of the JJDP Act no
    longer applies in instances in which an alleged or adjudicated
    delinquent offender has reached the age of full criminal responsibility
    and has been transferred, pursuant to State law, to a facility where
    the delinquent has contact with adult offenders.
        Additional flexibility for rural areas has also been provided in
    instances where the locality desires to collocate a juvenile detention
    facility on the same grounds or in the same building as an adult jail
    or lockup. The prior regulation required that to collocate a juvenile
    detention facility with an adult jail or lockup, the two facilities
    could not share the same program space (such as recreation areas or
    classrooms). The JJDP Act provided that the two facilities could not be
    served by the same direct care or security staff. OJJDP's December 1996
    regulatory change eliminated the separate program space requirement,
    permitting the shared use of nonresidential areas of collocated
    juvenile and adult facilities, provided that time-phased use maintains
    ``sight and sound'' separation between juveniles and adults.
        The Administration's pending bill (H.R. 810/S. 362) further
    proposes to eliminate the separate direct care and security staff
    requirement, provided that all security staff serving the juvenile
    population are trained and certified by the State to work with
    juveniles. The Administration's bill also provides additional
    flexibility for rural areas by extending the authority for adult jails
    and lockups in these areas to hold an alleged delinquent from the
    current 24-hour exception to 48 hours, exclusive of weekends and
    holidays. Further, it removes the condition that, in order to use this
    exception, a State has to provide an initial court appearance for every
    juvenile in secure custody within the exception time-frame--a condition
    in the statute that has prevented many States from using the rural
    exception. Finally, the Administration's bill provides that a juvenile
    may be held (separated from adult offenders) for any length of time
    authorized by State law in a rural adult jail or lockup, with the
    consent of the juvenile, the juvenile's parent or guardian, and
    concurrence of counsel, and with the approval and oversight of the
    judge of the court of jurisdiction. We believe that the regulatory
    changes and the modifications proposed in the Administration's bill
    will enable all communities to meet the separation requirement, while
    continuing to protect the safety and due process rights of juvenile
    offenders.
                 out-year needs of justice department programs
        Question. Attorney General Reno, the President's Budget includes
    about $5.5 billion for Violent Crime Trust Fund programs in 1998 and
    then about $5.8 billion in 1999. However, the President's Budget cuts
    Violent Crime Programs from the 1999 level by $1.3 billion in 2000,
    $1.4 billion in 2001 and $1.3 billion in 2002. Included in the Violent
    Crime funding are ongoing personnel costs for programs like the FBI,
    DEA and the Attorney Generals. The Budget would increase spending on
    these personnel costs in 1998 and 1999, then potentially force these
    agencies off the cliff after 1999.
        Presumably some of the additional funds would go to the Federal
    agencies. Could you provide for the subcommittee more detail of how the
    funds for the Department of Justice will be allocated in the outyears?
    Or if you cannot provide that detail, can you tell the subcommittee
    what programs will no longer be needed in 2000?
        Answer. The Department of Justice (DOJ) Violent Crime Reduction
    Trust Fund (VCRTF) totaled $5.179 billion in the fiscal year 1998
    President's Budget, the remaining $0.321 billion is requested for other
    agencies. The DOJ VCRTF includes: $0.423 billion in Prevention Programs
    (e.g., Violence Against Women; Drug Courts; Substance Abuse Treatment
    Programs, etc.); $3.312 billion for State and Local Law Enforcement
    (e.g., Community Policing-COPS, Byrne Grant Program, Violent Offender
    Incarceration Grants, Community Based Grants for Prosecutors, etc.);
    and $1.444 billion for Federal Law Enforcement (e.g., General Crime
    Support for USA, FBI, DEA, INS and DOJ, Border Control, Criminal Alien
    Deportation and Asylum Reform).
        The total VCRTF program is projected to increase by $300 million
    from $5.5 billion in 1998 to $5.8 billion in 1999 before decreasing in
    2000, 2001 and 2002. The reduction is primarily based on the phase out
    of the COPS program after 2000 when the goal of hiring 100,000
    additional police officers will have achieved. The Administration's
    budget anticipates that the remaining VCRTF programs will increase by
    about 3 percent due to inflation. The President's budget projects
    continued funding for VCRTF programs through 2007.
        Question. In S. 15, the Minority Side reauthorizes the Violent
    Crime Trust Fund through 2002 at $6.5 billion. However, none of the new
    funding is allocated to Federal agencies.
        Can you tell the Subcommittee of the impact on your agency if none
    of the reauthorized funding goes to federal programs?
        Answer. The Department is not anticipating that the DOJ VCRTF funds
    would be reduced. The VCRTF funds for federal law enforcement provide
    critical resources for assisting the USA's, FBI, DEA, INS and the
    Department in investigating and prosecuting criminals and counter
    narcotics trafficking, as well as border control activities and
    criminal alien deportation and asylum reform. If new funding is not
    reauthorized for such Federal programs, the impact would be devastating
    to the DOJ Federal agencies. The fiscal year 1998 President's budget
    requests $1.444 billion for federal law enforcement, providing funds
    for over 5,300 workyears. The Department does not project in the
    foreseeable future that such program needs would be significantly
    reduced. In fact, the 1998 President's budget projects continued
    funding of federal law enforcement efforts from the VCRTF through
    fiscal year 2007. Without continued funds, the Department would have to
    have a significant reduction-in-force of agents, attorneys and various
    support staff, with a concurrent reduction in law enforcement. Many
    critical drug and immigration initiatives are funded by VCRTF funds in
    1998. These initiatives would be severely curtailed or eliminated.
                   mexico and extradition of drug traffickers
        Question. Attorney General Reno, there has been much discussion in
    the past few weeks of the President's decision to certify that Mexico
    is ``fully cooperating'' with our narcotics control efforts. I
    recognize that Mexico is taking some steps to help us in our efforts,
    but I am troubled by the fact that, in certain areas, Mexico has made
    very little progress. One of those areas is extradition.
        To my knowledge, Mexico has never extradited to the United States a
    single Mexican national indicted in our courts on drug trafficking
    charges. Can you comment on why that has been the case?
        Answer. While it is true that Mexico has not yet surrendered any
    Mexican drug traffickers to the United States under the extradition
    treaty, the Government of Mexico has authorized the extraditions of two
    Mexican nationals--Jesus Emilio Rivera Pinon, who must complete his
    Mexican sentence before being surrendered to the United States, and
    Tirso Angel Robles, who is in the process of appealing his extradition.
    Two other individuals charged with other categories of offenses, who
    were returned in 1996, had arguable claims to Mexican citizenship
    through marriage that were discounted by the Government of Mexico.
        In the past, the traditional Mexican legal system did not allow for
    the extradition of its citizens, a policy classically pursued in most
    civil law countries in Europe and Latin America. Under the Zedillo
    Administration, however, this tradition has come under more careful and
    judicious scrutiny, and the process has invoked the seldom-used
    provision of Mexican law allowing extradition of nationals in
    ``exceptional cases.'' Prior to this reconsideration of Mexican policy
    and law, the United States saw no reason to submit large numbers of
    extradition requests for Mexican nationals. Now that ``exceptional
    cases'' are being considered, there is every reason to believe that a
    steady increase in the extradition statistics will ensue.
        Question. Does the Administration have a list of the ``Most
    Wanted'' Mexican drug traffickers indicted in the United States?
        Answer. Over the last two years, the Administration has maintained
    and presented to the Government of Mexico a continuously updated list
    of priority extradition requests. This list includes both Mexican
    nationals and non-nationals--fugitives wanted for narcotics
    trafficking, murder, sexual assault, and child molestation.
        Question. Does the FBI have any intention of placing Amado Carillo
    Fuentes (the ``Lord of the Skies'') on the FBI's ``Ten Most Wanted''
    List?
        Answer. The FBI, in consultation with the Drug Enforcement
    Administration (DEA), will strongly consider placing Amado Carillo
    Fuentes on the FBI's Ten Most Wanted List as existing fugitives on the
    list are captured. Amado Carillo Fuentes is a very dangerous fugitive
    and both the FBI and DEA are actively seeking his apprehension.
        Question. What specific steps will the Administration take in the
    coming weeks or months to work with Mexico on the capture and
    extradition of Mexican national drug traffickers?
        Answer. In the coming weeks, the Administration will continue and
    intensify its consultations with the Government of Mexico on the
    compelling nature of our cases against major Mexican drug traffickers.
    We have submitted requests for the provisional arrests of several of
    these defendants for extradition purposes. We are in the process of
    assembling formal extradition packages against these individuals, which
    we intend to present to our counterparts in Mexico for their review,
    and we will engage in discussions as to the most appropriate
    jurisdiction for effective prosecution. The Government of Mexico has
    expressed its willingness to undertake this review with a receptive
    attitude toward granting extradition in the interests of justice.
        We will also be working through highly selective channels of
    communication to develop and gather information and leads on the
    locations of major traffickers. We will continue to pursue effective
    apprehension operations, with equal emphases on success and safety of
    our law enforcement personnel. To the extent possible, the
    Administration will work to have requests for provisional arrests or
    extraditions in place prior to the arrests of wanted fugitives in
    Mexico, so that Mexican authorities will have a solid legal basis for
    detaining them. Once again, the mutual commitment by the United States
    and Mexico has been consistently pronounced, and it is the hope and
    intention of this Administration, that these joint commitments will
    lead to concrete results in the immediate future.
                                     ______

             Questions Submitted by Senator Ben Nighthorse Campbell
               impact of international crime on the united states
        Question. The United States has seen within its borders serious
    levels of Russian Organized Crime, Asian gang activity, international
    drug trafficking, and money laundering.
        On March 6, I discussed this growing problem with Secretary of
    State Albright when she testified before this subcommittee. The
    Secretary indicated that international crime poses a ``new situation''
    for the United States. She also indicated that our country is facing a
    ``new set of threats.''
        There are startling examples of the impact of international crime
    from my home state of Colorado:
      --An outstanding warrant is pending in Denver for the arrest of Drug
            Kingpin Jorge Hugo Reyes Torres, the leader of one of the
            largest drug trafficking organizations in Ecuador. Torres is
            sought by federal officials for allegedly smuggling tons of
            cocaine into Colorado.
      --In 1995, one of the most notorious Russian mobsters was found to
            have a Colorado driver's license and an address outside of
            Denver. The FBI and Interpol reportedly identified this
            criminal as the most powerful player in Russian crime in the
            United States.
      --And, as recently as last month, three residents of Pagosa Springs,
            a mountain community near Durango, were indicted by a federal
            grand jury on accusations of participating in an international
            money laundering scheme.
        What steps is the Justice Department taking to address this new and
    growing threat of international crime and its direct impact on the
    United States?
        Answer. While there has long been a nexus between criminal
    activities in the United States and illicit enterprises in other
    nations, the impact of international crime on the United States and its
    citizens has never been greater. The Department of Justice recognizes
    this threat and has marshaled its resources against the many facets of
    international crime. Chief among these threats, and of particular
    concern to the Department, are those activities involving terrorism,
    drug trafficking, money laundering, organized crime, and fraud. Many of
    the criminal activities originate from countries where the tools of law
    enforcement and criminal justice institutions are surpassed by those of
    organized crime groups.
        The Department's response to international crime is multi-faceted:
    The expansion of the Department's law enforcement presence overseas;
    the aggressive investigation and prosecution of crimes against U.S.
    citizens; the multilateral efforts to use extradition treaties,
    immigration laws, and other means to deny international criminals safe
    haven anywhere in the world; the promotion and coordination of
    international law enforcement efforts among multilateral organizations;
    the imposition of economic prohibitions from transacting with major
    international narcotics traffickers or any of their front companies;
    and training of foreign agents and prosecutors to improve their law
    enforcement capabilities.
        In 1996, Congress approved a major expansion of the FBI's Legal
    Attache program, which extends the reach of U.S. investigative efforts
    around the globe. Working with law enforcement officials in their host
    countries, FBI personnel in the Legal Attache offices have increased
    the number of cases investigated overseas that impact upon the United
    States. For the future, we are proposing to open eight new offices and
    expand eight existing offices.
        As the lead agency in addressing narcotics trafficking overseas,
    DEA and its country offices have worked to reduce the flow of drugs
    into the United States. These offices have allowed the Department to
    target international drug traffickers more effectively. DEA plans to
    open a new country office in Beijing, which will address major opium
    production in the neighboring Golden Triangle and Golden Crescent
    regions. The opening of the Beijing office is pending host national
    government approval.
        The Department has also placed several attorneys around the world
    to work with representatives from other countries on case-related
    matters as well as to enhance relations with foreign governments. These
    DOJ attorneys frequently assist in drafting legislation, arranging
    extradition, and training foreign investigators and prosecutors on
    basic rule of law issues.
        The Department has also expanded its efforts to investigate and
    prosecute international criminal activities against U.S. citizens and
    interests wherever they take place. For example, our resolve to bring
    terrorists to justice has resulted in many recent convictions. In
    September 1996, Ramzi Yousef was convicted with two accomplices for
    conspiring to blow up more than two dozen U.S. airliners, and in
    October 1995, Sheikh Abdel Rahman and nine of his followers were
    convicted for plotting to bomb several locations in New York City,
    including the Lincoln and Holland tunnels, the United Nations building,
    and the FBI Office. These two examples show how the FBI and other law
    enforcement agencies work hand in hand with the Criminal Division's
    Terrorism and Violent Crime Section to investigate, arrest, prosecute,
    and convict these international criminals.
        The Department's ongoing battle against international crime also
    includes its aggressive use of immigration laws, extradition treaties,
    and mutual legal assistance treaties to prosecute criminals and return
    them to their country of origin. The INS has employed immigration laws
    to deport international criminals, unlawfully residing in the United
    States, back to their countries of origin, while strengthening our
    ability to prevent these criminals from entering this country. As
    evidence of our multilateral efforts, the number of requests for
    extradition and mutual legal assistance handled by the Department's
    Office of International Affairs (OIA) has nearly doubled in the last
    five years. Hundreds of these requests are made each year by United
    States, state, and local agencies seeking fugitives or evidence for
    cases within their jurisdictions. With the assistance of the
    Department, state and local authorities are able to locate and bring to
    trial defendants who have committed crimes in their communities and
    then fled from the United States. OIA has also worked with the State
    Department to increase the number of international law enforcement
    treaties with foreign countries. In 1996, you and your colleagues in
    the Senate approved twelve new extradition and mutual legal assistance
    treaties, which will advance our goals of denying safe haven to
    international criminals.
        The work of the United States, however, is not enough. Because
    crime is a transnational threat that pays no respect to territorial
    borders, the United States has increased its law enforcement
    coordination with other nations. As the United States assumes the
    presidency of the G7/P8 organization, President Clinton has announced
    that international crime-fighting efforts will be at the top of the
    agenda. Among the issues that the Administration will promote are
    terrorism, high-technology and computer crime, and regional organized
    crime. The Department will continue to promote an anti-crime agenda and
    negotiate comprehensive multilateral treaties.
        The challenge of international crime is one which the Department
    will continue to face. I believe that to successfully meet this
    challenge and combat the criminal elements that threaten this country
    and its citizens, the Department cannot act alone. It must have the
    support of Congress, as well as foreign nations around the world.
        Question. To what extent does the Justice Department coordinate
    with the State Department in this area?
        Answer. In the area of international crime efforts, the Department
    of Justice (DOJ) has established a successful partnership with the
    Department of State (DOS), with whom all overseas activities are
    coordinated. As you heard in testimony from Secretary of State
    Albright, international crime poses new challenges for the United
    States, that we must all face together. In keeping with Presidential
    Decision Directive (PDD 42), signed by President Clinton on October 21,
    1995, DOJ has worked with DOS and other U.S. government agencies to
    develop aggressive and coordinated attacks on international organized
    crime.
        DOJ attorneys and law enforcement personnel work with their
    counterparts in DOS on a daily basis to ensure a coordinated approach
    to terrorism, drug trafficking, money laundering, extradition and a
    host of other criminal law issues. As DOJ's mission has expanded
    overseas, it has received the cooperation and support of DOS.
        An example of our work together is the opening of the International
    Law Enforcement Academy in Budapest. The Academy represents the
    coordinated work of the DOJ, DOS, and other Government agencies to
    establish and promote the training of law enforcement officials from
    Eastern Europe, Russia, and the Newly Independent States. To date, 377
    students from 19 countries have attended the seminar program there and
    gained the skills necessary to improve their anti-crime work.
        The Criminal Division's International Criminal Investigative
    Training and Assistance Program (ICITAP) provides training to
    investigators and other law enforcement personnel from foreign
    countries. The ICITAP program is funded by the State Department and,
    therefore, maintains a close working relationship with State in order
    to coordinate its training programs.
        As we increase our efforts against international criminal
    organizations, all government agencies must work together. I am firmly
    committed to the cooperative work of DOJ and DOS, and I look forward to
    working with Secretary of State Albright to address the major threat
    posed by international crime.
                     assisting other countries fight crime
        Question. Many countries around the world are experiencing rising
    crime rates, increasing violence, and a breakdown in law enforcement.
    Much of this crime has an impact on the United States, either directly
    in our communities or indirectly by destabilizing our friends and
    allies.
        The seriousness of this issue was addressed by A.I.D. Administrator
    Brian Atwood in his testimony on February 27 before the Foreign
    Operations Subcommittee. Mr. Atwood stated: ``The reality is that most
    nations in conflict simply lacked the institutional capacity to avoid
    escalating violence.''
        The United States has a wealth of expertise in ``what works'' to
    fight crime, drugs, and gangs. Experts who have first-hand experience
    in these areas--from law enforcement to community-based organizations--
    could be invaluable resources to other countries experiencing these
    problems if some technical assistance were available.
        The Justice Department has a number of offices and programs which
    work in the international crime arena. These include: the Executive
    Office of National Security in the Deputy Attorney General's Office;
    the Office of International Affairs in the Criminal Division; an
    international clearinghouse of justice information operated by the
    Department's Office of Justice Programs; the International Criminal
    Investigative Training and Assistance Program (ICITAP) which is funded
    by the State Department; and the FBI and DEA which are actively
    involved in major international crimes and drug trafficking.
        To what extent do these programs provide technical assistance and
    expertise--from law enforcement to community leaders--to assist other
    countries with gangs, drugs, and crime?
        Answer. The Department provides technical assistance and expertise
    in the international crime arena through many programs. One component
    within the Criminal Division that provides such training is the
    International Criminal Investigative Training and Assistance Program
    (ICITAP). Its mission is to train investigative and law enforcement
    personnel in foreign nations.
        ICITAP provides worldwide training designed to enhance police
    services in foreign nations. It supports United States policy by
    providing law enforcement institutional development assistance and
    training to foreign countries, based on internationally recognized
    principles of the rule of law and human rights. Crafted in partnership
    with the host country, ICITAP's programs enable police organizations to
    deliver effective police services, and lay the groundwork for the
    creation of specialized programs or units to address issues such as
    drugs and gangs. Training in gang intervention and investigations, as
    well as related seminars and internships are ongoing in South Africa,
    Guatemala, Honduras, El Salvador, and Panama.
        ICITAP uses a cadre of federal, state, and local police and
    criminal justice experts as instructors, consultants, subject matter
    specialists, and program managers to implement creative solutions to
    pressing crime problems and to help forge ties with foreign law
    enforcement officials. ICITAP also partners with other donor nations to
    maximize the impact of limited U.S. resources. Since its creation in
    1986, ICITAP has conducted projects in 38 foreign countries, and 21 of
    those projects remain active today.
        In addition, the Criminal Division coordinates training of
    prosecutors in specific criminal law areas, including narcotics, money
    laundering, and asset forfeiture investigations and prosecutions. The
    Narcotic and Dangerous Drug Section (NDDS) provides a variety of
    international training and assistance. NDDS has drafted a set of model
    laws, along with commentaries, granting authority to enable effective
    investigation and prosecution of criminal cases. The Section also has
    written a compliance manual for countries seeking to implement
    directives of the 1988 U.N. Convention against Illicit Traffic in
    Narcotic Drugs and Psychotropic Substances.
        NDDS attorneys have given significant presentations at several
    international seminars and conferences on many topics, including
    complex drug investigations, the effective use of investigative and
    prosecutorial techniques, the coordination of multi-agency money
    laundering investigations, and current U.S. law enforcement efforts in
    combating money laundering. Also, in collaboration with the Asset
    Forfeiture and Money Laundering Section, NDDS attorneys taught at two
    seminars for Colombian prosecutors on financial investigations, with a
    view to implementation of the newly-enacted Colombian asset forfeiture
    and money laundering laws.
        All training and technical assistance efforts are designed to help
    in the creation or strengthening of foreign criminal justice
    institutions in a manner consistent with due process and fundamental
    human rights.
        Question. To what extent do these Justice Department programs
    coordinate with the State Department?
        Answer. ICITAP closely coordinates with the State Department and,
    in particular, its Agency for International Development (AID), on all
    overseas criminal justice development programs. ICITAP provides
    detailed plans to State and AID in order to explain and justify the
    resources committed to each of its programs. Similarly, the other
    Criminal Division training projects have worked with, and often been
    funded by, the State Department. DOJ and DOS representatives meet
    routinely to report on program developments and performance.
        ICITAP is a member of the Interagency Working Group (IWG) on Anti-
    Crime Training and Technical Assistance, which is chaired by the State
    Department's Bureau of International Narcotics and Law Enforcement
    Affairs. The IWG coordinates law enforcement assistance for the New
    Independent States, Central Europe, and, increasingly, other geographic
    areas.
                              rocky mountain hidta
        Question. The Office of National Drug Control Policy (ONDCP) and
    the Drug Enforcement Administration are implementing the Rocky Mountain
    HIDTA. Colorado law enforcement officials on the State, county and
    local levels also will be involved in the HIDTA to wage this new,
    coordinated attack on drug trafficking in our region. This new HIDTA
    will be headquartered in Colorado, with satellite offices in Utah and
    Wyoming.
        The growing need for a HIDTA in our region is clear. Investigations
    by law enforcement agencies indicate the drug trafficking problem,
    centered in Denver, impacts not only the neighboring States of Utah and
    Wyoming, but also the rest of the nation. In addition, evidence
    suggests that the Denver area serves as a transshipment point between
    Los Angeles, Mexico, and the East Coast.
        I appreciate DEA's leadership role in implementing the Rocky
    Mountain HIDTA. What additional support can the Justice Department
    provide to the Rocky Mountain HIDTA?
        Answer. The Department of Justice has already committed the Federal
    law enforcement agencies and offices to full-time participation in the
    Rocky Mountain HIDTA: United States Attorneys for the Districts of
    Colorado, Utah, Wyoming, FBI, DEA, INS, and U.S. Marshals Service.
    Resources for the Rocky Mountain HIDTA are allocated among six
    principal initiatives. These initiatives include a joint drug
    intelligence group, a Southwest Border interdiction task force, and a
    consolidated Gangs/Violence Interdiction Task Force. DOJ, through the
    DEA and the U.S. Attorneys, will continue to take a leadership role in
    implementing these initiatives.
        The HIDTA's intelligence group and its two primary enforcement
    groups are under the operational command of two DEA Assistant Special-
    Agents-in-Charge. The United States Attorney in Denver serves as
    Financial Agent for the HIDTA Executive Committee, which is chaired by
    a DEA Special-Agent-in-Charge. The U.S. Attorneys for Colorado,
    Wyoming, and Utah have designated experienced federal drug prosecutors
    to serve as lead HIDTA attorneys in their districts. The lead HIDTA
    attorney will coordinate the prosecution of HIDTA cases and will help
    ensure that HIDTA cases receive all available DOJ resources.
        In addition to taking a leadership role in implementing the Rocky
    Mountain HIDTA initiatives, DOJ will seek to create a more synergistic
    relationship between the Organized Crime and Drug Enforcement Task
    Force (OCDETF) and HIDTA programs in this region, as well as
    nationally. The OCDETF program funds case-specific task forces while
    the HIDTA program funds the administration of large, collocated multi-
    agency task forces. The Department supports a cooperative approach
    drawing on the strengths of each program. An example of such an
    approach has existed in South Florida for some time. There, HIDTA funds
    supplement OCDETF investigations and maximize the effectiveness of a
    technologically advanced task force working against the highest level
    traffickers and money launderers.
        Question. What are DEA's plans to expand the scope and
    effectiveness of the Rocky Mountain HIDTA?
        Answer. Establishment of the Rocky Mountain Intelligence Center is
    one of DEA's HIDTA priorities. The project is in the initial stages of
    development, with the assignment of personnel and purchase of basic
    equipment currently being undertaken. At some point, it will be
    necessary to develop the center beyond the planned pointer index
    system, into a multi-faceted system that includes deconfliction and
    analytical support units, as well as target identification and
    assessment programs.
        DEA supports the development of an effective intelligence center,
    that allows for the participation of all law enforcement agencies in
    the Rocky Mountain area and allows DEA to aggressively investigate and
    dismantle those major trafficking organizations that are having the
    greatest impact on our Nation. Through the intelligence center, we plan
    on identifying and targeting those major trafficking organizations
    which use the Rocky Mountain area as a drug distribution center. It is
    our intent to focus appropriate investigative resources from all
    segments of the division to vigorously track these organizations to
    their supply sources, both domestic and international. Working with
    contiguous HIDTA's where appropriate, we will concentrate our efforts
    on each targeted organization until that organization has been
    dismantled. DEA plans to continue to intensify cooperative efforts
    among HIDTA participants in order to effectively allocate resources and
    ensure continuity with ONDCP guidelines, as well as stated regional
    goals.
        The Rocky Mountain HIDTA also plans to develop a new initiative
    which will provide for a comprehensive demand reduction program. HIDTA
    members will attempt to develop neighborhood coalitions of Federal,
    State and local law enforcement representatives, state attorneys,
    members of public and private sector organizations, and residents of
    affected communities in order to successfully address drug trafficking
    and demand issues. DEA has begun this process through discussions with
    D.A.R.E. of Colorado and the Colorado Federation of Parents. We will
    begin working with similar organizations in Utah and Wyoming, including
    the Boys and Girls Clubs of America. This initiative is currently in
    the early stages of development.
                     security for the g-7 summit in denver
        Question. In June, Denver will host the Group of Seven (G-7)
    Summit, which will bring together leaders of the seven major
    industrialized nations and Russia for three days. The provision of
    sufficient security for world leaders is an important federal interest
    and, therefore, requires sufficient federal support.
        What assistance will the Department of Justice make available for
    the Denver region to assist with security and other support costs
    related to the G-7 Summit?
        Answer. The U.S. Secret Service is the lead Federal agency
    responsible for security of the G-7 venue sites, protection of visiting
    heads of state, and the protection of the President. The U.S.
    Department of State's Diplomatic Security Service is responsible for
    the protection of other visiting dignitaries. The FBI is responsible
    for the prevention, detection, and investigation of any terrorist acts
    affecting the G-7 conference. The FBI will provide assistance to the G-
    7 by assigning approximately 80 agents and 8 support employees to the
    FBI Command Center. As of February 28, 1997, the personnel and
    nonpersonnel costs associated with the G-7 summit on June 20-June 22,
    1997 are estimated to be $742,900.
        The INS will provide assistance by assigning approximately 51
    employees (11 Detention and Deportation, 29 investigative, and 11
    Examinations personnel) to support the G-7 Summit. Total personnel and
    nonpersonnel costs associated with this Summit are estimated to be
    $130,408. Specific equipment needs for this operation have not been
    finalized. General needs would encompass radios, body armor, batteries,
    and an assortment of other smaller related articles.
        Question. Do you believe these current plans are sufficient to
    support state, county, and local law enforcement in light of the
    Oklahoma City bombing trial and the many needs of the G-7?
        Answer. The Department believes the security of the world leaders
    attending the G-7 summit is of paramount importance. We began
    preparations in 1996 to ensure the safety of the G-7 participants. The
    FBI regularly meets with all Denver area law enforcement agencies to
    share information and intelligence related to the G-7 conference and
    the Oklahoma City bombing trial. We are continuing to work with the
    U.S. Secret Service, U.S. State Department, and other Federal, State,
    and local agencies to ensure a cohesive and comprehensive plan is in
    place to provide an appropriate response to any terrorist incident
    involving the G-7 conference or the Oklahoma City bombing trial.
                                 dea and mexico
        Question. Congress currently is considering the certification or
    decertification of Mexico under the international drug control program.
        According to a news report in the March 2 issue of the San Diego
    Union Tribune, Mexican authorities are now preventing our DEA agents
    and law enforcement officers from carrying their weapons into Mexico.
    In response, the DEA reportedly pulled its agents out of cross-training
    and intelligence-gathering projects in Mexico along the border.
        What is the current status of this dangerous situation?
        Answer. The activities of DEA agents are guided by joint U.S. and
    Government of Mexico [GOM] ``rules of the game'' and the Mansfield
    Amendment (Public Law 94-329), which provides guidelines to DEA
    representatives in foreign countries regarding operations, arrests, and
    overall enforcement activities. These regulations are designed to
    recognize the sovereignty of respective nations to ensure the safety of
    agent personnel by limiting their operational exposure.
        In Mexico, DEA agents assigned in-country carry firearms based on
    an informal agreement from the GOM. In addition, the U.S. Ambassador
    has issued written authority allowing Mexico-based DEA agents to carry
    weapons.
        The United States and GOM have pledged to work to ensure the safety
    of the United States and Mexican law enforcement officers in the
    Bilateral Task Forces. As long as U.S. law enforcement agents are not
    permitted to carry firearms, DEA, FBI, and Customs agents will continue
    to refrain from travelling into Mexico to the Bilateral Task Force
    facilities. In the meantime, limited cooperation with Mexican
    counterparts, however, is being maintained through the visits of
    Mexican officers to the United States and through occasional liaison
    meetings between United States and Mexican law enforcement personnel.
        Question. What steps are the Justice Dept taking with regard to
    Mexico and its position on our DEA agents and law enforcement officers?
        Answer. The United States Departments of Justice and State and the
    U.S. Embassy in Mexico City are engaging in ongoing discussions with
    their Mexican counterparts to reach a solution that will ensure the
    safety of U.S. agents.
        Question. What impact does this stand-off have on DEA's efforts to
    carry out its anti-drug mission on and over the border with Mexico?
        Answer. In the DEA's view, until the Bilateral Task Forces are
    fully staffed, vetted, trained, adequately equipped, funded, and
    operational, the United States and Mexico will be unable to develop
    effective investigations and successful, compelling prosecutions in
    Mexico against the major trafficking organizations.
        Question. Why would the Administration certify Mexico under the
    Foreign Assistance Act without first receiving assurances from the
    Mexican Government that it would allow our DEA agents to carry
    firearms?
        Answer. Mexico is an indispensable partner in combatting drug
    trafficking. In 1996, President Zedillo continued to demonstrate his
    strong commitment to combatting narcotics trafficking, which he
    recognizes to be the primary threat to Mexico's national security. In
    carrying out that commitment, the Government of Mexico continued to
    strengthen its national counternarcotics efforts.
        President Zedillo's Administration took steps to fight corruption
    within the Mexican government. We applaud President Zedillo's quick
    response to fire and arrest INCD Chief Jesus Gutierrez Rebollo and
    several of his deputies amidst corruption charges and commend President
    Zedillo for choosing to respond to this situation in a public way,
    despite the risk of embarrassment to him, his Administration, and his
    country. The Mexican Attorney General also dismissed a significant
    number of federal law enforcement officers who had been accused of
    corrupt practices.
        The Government of Mexico extradited 13 individuals in 1996, more
    than double the number of extraditions in 1995. Among this number, the
    Mexican Government extradited for the first time a Mexican national and
    a dual national.
        In 1996, the Mexican Government enacted major anti-crime
    legislation, including a law which criminalized money laundering and a
    new organized crime law. The organized crime law authorizes a new
    arsenal of investigative and prosecutorial techniques, including the
    use of court-authorized electronic surveillance, witness protection,
    undercover operations, plea bargaining, and prosecution for criminal
    association, and it further permits asset forfeiture in civil cases.
    Reforms of the Mexican penal code also included provisions to control
    the diversion of precursor chemicals for methamphetamine production,
    and the Mexican Government has worked to restrict the importation of
    precursor chemicals to a limited number of ports.
        Together, the United States and Mexico have worked to establish
    border task forces whereby U.S. law enforcement agents would work
    alongside Mexican agents to conduct narcotics investigations and share
    mutually beneficial investigative information. While obstacles relating
    to the U.S. agents' status within Mexico have hampered the advancement
    of the Bilateral Task Force effort, we are hopeful that these issues
    can be resolved quickly so that the Task Forces may become operational.
    Announcements from the recent Presidential Summit confirmed that
    together we needed to assure the safety of both United States and
    Mexican law enforcement agents.
        While we believe that Mexico has attained some significant
    achievements in 1996, there is more that needs to be done. We feel that
    the solution lies not in punishing Mexico by cordoning ourselves off
    from them, but, rather, in working with and supporting President
    Zedillo's counternarcotics efforts.
                                     ______

                   Question Submitted by Senator Conrad Burns
                         division of the ninth circuit
        Question. Considering the numerous pieces of legislation that have
    been introduced over the years regarding the division of the Ninth
    Circuit, I was wondering if you would express what you believe the
    Justice Department's opinions were regarding the split of this Circuit.
    And if you believe a split is necessary, how should the future Ninth
    and Twelfth Circuit appear? If you do not believe a split is necessary,
    what is your opinion based upon.
        Answer. The Department of Justice does not, at this time, have a
    position on either the proposal to split the Ninth Circuit or the
    variety of proposed divisions of the circuit. Pending in the House is a
    bill--H.R. 908--to establish a commission to study structural
    alternatives for the Federal courts of appeals, with a particular focus
    on the Ninth Circuit. A number of circuit study commission bills are
    pending in the Senate. If, as the Department expects, such legislation
    is enacted, the Department will look forward to providing the
    commission any and all data and perspectives the Department, as the
    Federal courts only criminal prosecutor and most frequently appearing
    civil litigator, can provide. If, in the course of our work for and
    with the commission, we decide to weigh in on the Ninth Circuit split
    issue, we will after much internal work and discussion and at the
    appropriate time.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                   charleston border patrol training facility
        Question. I have been quite impressed with the Border Patrol
    Training Facility which was established at the former Charleston Navy
    Base. The officers down there led by Ron Meyers have a can-do attitude
    and they will train 1,430 new Border Patrol Agents there this year. We
    still have some minor facility needs, but all that talk of
    environmental concerns was hogwash and all in all this has been a total
    success.
        My understanding is that the President's request for Treasury
    includes $11 million this year for facilities at the Federal Law
    Enforcement Training Center at Glynco, Georgia, and a similar amount
    for the next few years. I'm told that FLETC and the Treasury-General
    Government Subcommittees are already requesting a shut-down plan for
    Charleston, even though operations have only been ongoing for six
    months.
        What is your assessment of the Charleston Border Patrol training
    facility?
        Answer. The Charleston Border Patrol training facility has
    succeeded in providing the Immigration and Naturalization Service
    immediate facility resources to conduct basic training of newly hired
    Border Patrol agents. These additional resources should allow the
    Service to deliver the training necessary to achieve its hiring goals
    for the next three years or longer, if necessary. Through the hard work
    of many Border Patrol and other Department of Justice employees, these
    facilities were brought on line within a short time and allowed the
    Service to begin and sustain a training rate in excess of traditional
    levels.
        Despite different missions, similar functions between previous Navy
    and current Service tenants allowed the adaptive reuse by the Border
    Patrol of many Charleston Naval Station structures with minimal
    alterations. Additional alterations of these existing facilities,
    however, will be needed to fully meet all Border Patrol facility
    functional requirements. Because most facilities on the Naval Station
    are older facilities and had been vacant for several years prior to the
    Services' occupancy, all current Border Patrol occupied facilities
    required selective repair and replacement of existing building systems
    to become operational. Continued minor repair of existing facilities
    will be needed to sustain operations. Modernization of building systems
    would provide a more cost-effective facility plant to operate than
    currently exists; however, if done, the cost-benefit of such a
    modernization could not be realized for several years. Because they
    were constructed recently, the outdoor facilities at the Goose Creek
    Naval Weapons Station should require only minimal repair for the
    foreseeable future.
        Should there be a need to expand the current training mission in
    Charleston, sufficient opportunity exists at the locations of both the
    outdoor and indoor facilities to acquire additional facilities. Outdoor
    training facilities at the Goose Creek Naval Weapons Station are in
    close proximity to each other and adjacent to undeveloped property
    where additional facilities could be constructed if required. Likewise,
    additional vacant facilities adjacent to indoor facilities occupied at
    the Charleston Naval Station are currently available for repair and
    occupancy if desired.
        Question. Isn't this facility required for the foreseeable future
    whether we add 1,000 Border Patrol agents per year as is authorized in
    the 1996 Immigration bill or 500 per year as you have proposed in this
    budget?
        Answer. The INS needs a place to train Border Patrol agents, both
    now and in the foreseeable future. With the growth that INS has
    experienced in recent years, the Service will need to train Border
    Patrol Agents in response to both attrition, as well as any new agents
    added in the appropriations process in the future. If the Federal Law
    Enforcement Training Center at Glynco, Georgia cannot accommodate our
    training requirements, INS will continue to rely on the Charleston
    Border Patrol Training Facility to meet its needs.
                         mount pleasant illegal aliens
        Question. For the past five years, the administration has made the
    Southwest Border region its priority for INS. Five thousand four
    hundred additional INS positions have been added from California to
    Texas. I understand that Mexico is dominated by crime cartels. But, the
    rest of the country has crime too.
        Last Summer, our local police in Mt. Pleasant, South Carolina, near
    my home arrested five individuals when they were caught speeding on the
    Cooper River Bridge and then the police found open alcohol containers
    in the car. On further investigation, the police ascertained that these
    individuals were illegal aliens. They contacted INS, the nearest office
    of which is in Charlotte, North Carolina, and were told to let the
    aliens go. They weren't ``criminal'' aliens and so INS wouldn't get
    involved. This unfortunate event got the Department of Justice and INS
    a lot of bad press in my backyard.
        Is it normal practice for INS to only worry about criminal illegal
    aliens?
        Answer. During the summer of 1996, the Mt. Pleasant, South Carolina
    Police Department (MPPD) contacted the Charlotte, North Carolina, INS
    office. The Charlotte office is a suboffice of the Atlanta, Georgia,
    INS District Office, which also serves the States of Alabama, Georgia,
    South Carolina, and North Carolina. MPPD requested that INS assume
    custody of the five alleged illegal aliens that they had arrested for
    traffic violations. As you pointed out, Charlotte is the closest INS
    enforcement office to the MPPD. The office is approximately 200 miles
    from Mt. Pleasant, South Carolina. INS special agents did not have
    information indicating whether or not the MPPD was arresting the
    subjects or had lodged criminal charges on which to detain them for the
    five to seven hours it would have taken INS special agents to respond.
    Criminal aliens are a higher priority than aliens not convicted of
    crimes. Had we known that the MPPD was charging the suspects with state
    violations, the INS Charlotte Office would have had time to respond and
    to interview the suspected illegal aliens. The INS does not have the
    resources to respond to every alleged illegal alien arrest.
        Section 133 of the Illegal Immigration Reform and Immigrant
    Responsibility Act of 1996 authorizes the Attorney General to enter
    into written agreements with state and local law enforcement to allow
    them to function as immigration officers in relation to the
    investigation, apprehension, or detention of aliens in the United
    States (including the transportation of such aliens across State lines
    to detention centers). We are currently drafting regulations and a
    Memorandum of Understanding to implement the provisions of this
    section.
        Question. Now in last year's Immigration Act, Congress required
    that states have a minimum of 10 INS personnel per state, so we will
    have 3 special agents in Charleston. It is my hope that this INS
    debacle will not be repeated.
        But, I think the Justice Department needs to keep in mind that
    there are 50 states, and illegal immigration is not confined to Border
    states. Alien detention and deportation issues are important to our
    constituents too.
        Answer. We understand and appreciate your concern and those of your
    constituents regarding the illegal alien problem in the State of South
    Carolina. We are committed to enforcing the immigration laws throughout
    the United States. The illegal entry of aliens into the United States
    is not only a border problem, it also affects communities across the
    country. We take seriously our responsibility for enforcing all
    immigration laws and regulations that apply to both criminal aliens and
    administrative violators. In the past few years, we have strengthened
    enforcement personnel and technological resources at the southern
    border; however, we have also added hundreds of personnel in the
    interior of the United States. We believe the added resources will help
    enforcement efforts in the state of South Carolina.
                            fingerprints/immigration
        Question. There has been a great deal of controversy over the
    failure of the INS and the FBI to conduct fingerprint checks of
    immigrants applying for citizenship. Apparently, as many as 180,000
    immigrants were naturalized without checks to ensure they do not have
    criminal records. And it appears 71,000 got citizenship even though
    they had criminal records.
        You have had a chance to review this situation. Is it clear yet why
    this happened? Was it simply miscommunication between the INS and the
    FBI?
        Answer. The INS naturalized over one million citizenship applicants
    between August 31, 1995, and September 30, 1996. Out of this group, it
    appears that approximately 180,000 persons may have been naturalized
    without an FBI fingerprint clearance; however, the FBI did conduct
    name-checks on 113,126 of these people. These name checks were
    conducted against the FBI's full Criminal Justice Information System
    (CJIS) database. Because approximately 66,000 citizens do not appear in
    FBI billing records, it is not clear whether the FBI conducted any type
    of criminal background check before they were naturalized. The INS has
    not yet reviewed the files for these cases, and it is not clear how or
    why this has happened. However, INS has taken measures to ensure that a
    criminal background check has been conducted on all citizens before
    they are naturalized.
        Approximately 71,000 persons with FBI arrest records (Idents) were
    naturalized during this same period. None of these citizens belong to
    the subset of approximately 66,000 citizens who may not have had any
    type of FBI clearance. It should be noted that almost half of the
    Idents were administrative arrests, and not criminal. Further, not all
    arrests result in convictions, and not all convictions would render an
    applicant ineligible for naturalization. INS' Naturalization Review
    Team in Lincoln, Nebraska, under the oversight or involvement of the
    Department of Justice, KPMG Peat Marwick, the Executive Office for
    Immigration Review (EOIR), the Inspector General, the General
    Accounting Office, and several Congressional Subcommittees, is
    reviewing the naturalization decisions for all persons who were
    naturalized between August 31, 1995, and September 30, 1996, and who
    have felony or potentially disqualifying misdemeanor arrests.
        As of May 14, 1997, INS had reviewed 15,536 of these files and
    determined that original decisions in 10,030 (64.5 percent) of the
    cases were proper (i.e., statutorily defined residency and good moral
    character criteria were met by the applicant), that 296 (2 percent) of
    the applicants were presumptively ineligible (presuming an applicant
    could not produce evidence that a disqualifying conviction had been
    overturned on appeal), and that 5,210 (33.5 percent) case files did not
    contain sufficient information upon which to validate the original
    adjudication and, therefore, would need to be returned to the
    appropriate INS field office for further action. This case review
    effort is still underway, and the Department will reports its findings
    when the review is completed. For those individuals found to be
    incorrectly naturalized, INS intends to initiate proceedings to revoke
    citizenship.
        The FBI and the INS have had significant difficulty matching
    records. This is primarily because each agency has its own numbering or
    case identification system. The FBI assigns a Process Control Number
    (PCN) to fingerprint cards (FD-258) received and placed into its
    Billing Database, while the INS assigns an Alien File or ``A-Number''
    to aliens when they immigrate to the United States. It is very
    difficult to locate an INS record in the FBI Billing Database without
    using the FBI-assigned PCN number. The FBI does not assign PCN numbers
    to all fingerprint cards submitted by the INS. Only those fingerprint
    cards that the FBI places in its Billing Database are assigned PCN
    numbers.
        In addition, neither the FBI nor the INS possess databases designed
    to track the fingerprint clearance process. As a result, both agencies
    have had to rely upon existing databases designed for other purposes.
    The FBI relies primarily upon its Billing Database, while the INS
    relies upon its Central Index System (CIS). Some program modifications
    have been made to enhance the ability of these systems to identify
    arrest records of individuals naturalized.
        The overwhelming majority of INS-submitted fingerprint cards are
    recorded in the FBI Billing Database. Fingerprint cards that are
    rejected by the FBI upon receipt because they lack biographic and/or
    other information are not recorded in the Billing Database. The names
    of individuals whose fingerprint cards are rejected later because the
    prints are unclassifiable are run through the FBI's Criminal Justice
    Information System (CJIS) Database. If an arrest record is located in
    the CJIS Database, the IDENT (rap sheet) is returned to the INS with
    the unclassifiable fingerprint card. Unclassifiable fingerprint cards
    are also returned to the INS when no arrest record is located in the
    CJIS Database, but the response is not considered to be a NON-IDENT.
        Question. What can we do to go back and check these individuals? I
    mean how is Justice going to find criminals that were naturalized?
        Answer. As stated above, INS is reviewing the case files for those
    individuals known to have had felony or potentially disqualifying
    misdemeanor arrests (a subset of the 71,000 idents). In addition, INS
    has recently conducted name checks against the FBI's full CJIS database
    for the 66,000 individuals that were not shown in the FBI billing
    records. This has produced approximately 9,000 candidate idents. If any
    of these individuals are confirmed as being naturalized during the
    period in question, their case files will be reviewed if the rap sheets
    indicate felony or potentially disqualifying misdemeanor arrests.
        Question. What steps is the Justice Department taking to ensure
    this doesn't happen again?
        Answer. The INS has implemented a series of initiatives to improve
    and strengthen the U.S. naturalization program. They include the
    following: (1) strengthened the current citizenship process to ensure
    that no individual is naturalized without the verified completion of a
    fingerprint check by the FBI; (2) hired the KPMG Peat Marwick, LLP,
    management firm to oversee an INS audit of naturalization cases from
    September 1995 through December 1996 (the DOJ Office of the Inspector
    General and the GAO will monitor this audit); (3) instituted additional
    Service-wide quality assurance steps to ensure that all procedures are
    being consistently followed throughout the naturalization process in
    all INS offices; and (4) initiated a comprehensive re-engineering of
    the naturalization program with the assistance of the Coopers Lybrand
    consulting firm.
        The objectives of the project are: to ensure the integrity and
    security of the naturalization program; to determine applicants'
    eligibility for naturalization consistently and accurately under the
    law; to enhance the overall working experience of employees; to utilize
    human, technological and fiscal resources more efficiently and
    productively; to develop a customer-oriented workforce and service-
    oriented culture while ensuring that legal standards and protocols are
    in place and maintained; to develop and implement an effective system
    of standards, measurements and accountability for performance and
    results that can be systematically collected and reported; and to
    improve the effectiveness of internal and external communication.
        The reengineering project will examine every facet of the
    naturalization process including the submission of fingerprint cards to
    the FBI as part of the criminal background check. The contractors are
    being asked to explore technological solutions that will complement the
    process redesign efforts.
        In addition to the above, the Attorney General recently established
    the Fingerprint Coordination Group. I chair monthly meetings of the
    Group, which consists of high level officials from INS and the Federal
    Bureau of Investigation (FBI). The Group is dedicated to improving the
    processing of INS fingerprint cards, the largest single customer of the
    FBI's Criminal Justice Information Services Division. Through exchanges
    of information regarding each organization's processes, sharing of
    technical expertise, increased reliance on automation, and assignment
    of personnel to the other agency's facilities, these two organizations
    are identifying ways to expedite the criminal background checks
    performed as part of the naturalization application process and ensure
    that the INS is provided with accurate and timely information on each
    applicant. The group's efforts will ensure an integrated approach to
    all process improvements and automation efforts. The resulting
    improvements will help both INS and FBI reduce current workload
    backlogs.
        Under the Fingerprint Coordination Group, I am establishing the
    Joint Fingerprint Processing Working Group. Within the next 90 days,
    this group will present its findings and recommendations regarding:
        (1) immediate solutions, such as improving the quality of print
    submissions to the FBI, ensuring the authenticity of submitted prints,
    and ensuring consistency of the A-number shown on both the FD-258 and
    N-400;
        (2) short-term solutions, including an examination of the impact of
    the FD-258 tracking system and the Machine Readable Data process on
    INS-FBI matching efforts, and improvements to the Designated
    Fingerprint Services Program, including its training and quality
    assurance elements; and
        (3) long-range plans, concerned principally with the transition
    from manual to electronic print-taking and checking.
        Question. You know there is a bit of deja vu in all this. In 1994,
    the INS proposed to stop making fingerprint checks through the FBI
    altogether. INS claimed this would save $3 million. Senator Byrd and I
    wrote you protesting this action, and you directed INS to maintain the
    fingerprint check system.
        One thing is unclear however. if you read the record of our
    hearings in 1994, we expressed concerns that the INS system of taking
    the fingerprints--which were then sent to the FBI--was subject to
    fraud. Anyone could take the prints and then send them in to INS. The
    Department told us that it had created a fingerprint working group
    including the FBI, INS and the Inspector General.
        Now, four years later, it appears we still have the same problem.
    Why?
        Answer. Through the recent implementation of the Designated
    Fingerprint Service Program, the INS created an innovative way to
    conduct business in this area. However, the rule making process
    required an extensive number of internal and external reviews since the
    proposal affected public and business entities. Before the proposed
    regulation was published, reviews were conducted both within the INS
    and outside the INS by DOJ and OMB. Following publication of the
    proposal, public comment was considered and responded to and the
    procedure again reviewed. This process led to the publication of a
    final order on June 4, 1996. Following publication, an additional ten
    months was required to allow entities the opportunity to review the
    proposal, respond if interested in conducting business and be trained
    as required.
                    new state and local assistance programs
        Question. Your budget includes two new state and local grant
    programs--$49 million for a new Violent Youth Court Program and $95
    million for a new state prosecutors program to target gang crime. Could
    you provide more specifics on these programs. For example, how many
    state prosecutors do you foresee the Federal Government providing and
    for how long will such assistance continue?
        Answer. Last year, for the first time in seven years, the national
    juvenile violent crime and murder arrest rates went down. While these
    signs are certainly promising, juvenile crime rates are still
    unacceptably high in many cities, towns and neighborhoods. We can and
    must do more. The establishment of these two new State and local grant
    programs--the Violent Youth Court Program, and the Prosecutorial
    Initiatives Targeting Gang Crime and Violent Juveniles Program--are
    essential to the Administration's commitment to mount a full-scale
    assault on juvenile crime in America. This commitment is comprised of
    four essential elements that are designed to target gangs and violent
    juvenile criminals, keep the nation's children gun and drug free and on
    the right, law-abiding track, and reform the juvenile justice system.
    Furthermore, these programs will benefit State and local communities by
    preventing and attacking gang-related and violent juvenile crime at the
    community level, providing communities the tools and resources to
    identify and target their juvenile crime problems.
        The Violent Youth Court Program will provide grants to state and
    local communities to plan, develop, implement, and administer
    specialized, court-based activities focusing on more effectively
    addressing violent and non-violent youth offenders as they move through
    the justice system. Communities will have the opportunity to request
    funding for programs that meet their needs. Funds will be used for
    innovative initiatives that will enhance and expedite judicial
    activities related to increasing incidents involving youth violence,
    allowing better management at the community level of juvenile violent
    offenders. These initiatives may include the establishment of juvenile
    gun courts that target young firearms offenders; juvenile drug courts
    that will provide continuing judicial supervision over young offenders
    with substance abuse problems (similar to the integrated administration
    used in the adult Drug Courts program); courts of specialized or joint
    jurisdiction; and other enhanced strategies aimed at improving
    adjudication of juvenile offenders including programs involving the
    courts, prosecutors, public defenders, probation officers and
    correction agencies. These special courts have a certain coercive power
    to correct behaviors and thus improve public safety: court-imposed
    graduated sanctions and the courts' ability to hold offenders
    accountable are effective in reducing the criminal behavior of those
    under their jurisdiction.
        The Prosecutorial Initiatives Program will provide direct funding
    to prosecutors' offices to support new initiatives targeting gangs,
    gang violence, and other violent juvenile crime, including hiring new
    gang prosecutors, buying equipment, and conducting state-of-the-art
    training. Under this program, the Federal government would provide
    funding of $100 million per year over a two-year period, at which time
    the local jurisdictions would take over. During the two-year period,
    prosecutors would set up the infrastructure needed to pursue,
    prosecute, and punish dangerous gang members and other violent juvenile
    offenders for their crimes. More specifically, the program is designed
    to facilitate better cooperation and coordination between prosecutors
    and school officials, probation and parole officers, youth and social
    service professionals, and community members in order to increase
    identification of high-risk juveniles and, ultimately, speed the
    prosecution of violent juvenile offenders. Since each jurisdiction will
    determine how their community spends the funds received, including how
    many new prosecutors are needed to accomplish these goals, communities
    essentially control the decision-making process.
                             hepatitis c in prisons
        Question. The Committee has become aware of the potentially serious
    problem of Hepatitis C infections among prisoners in the country
    including Federal prisoners. It is our understanding that the
    Infectious Disease Coordinator at the Federal Bureau of Prisons is
    aware of this problem which can affect not only prisoners but prison
    employees who may be exposed to infections during normal prison contact
    with infected individuals. Could you tell the Committee your view of
    the seriousness of the problem in the Federal Prison System and
    describe any steps currently being taken to deal with Hepatitis C among
    Federal prisons?
        Answer. Studies from state correctional systems indicate a high
    prevalence of Hepatitis C infection ranging from 30 percent to 40
    percent among incarcerated populations. The majority of BOP inmates
    with Hepatitis C infection have acquired it prior to incarceration
    through injection drug use. Hepatitis C is transmitted primarily
    through exposure to blood and not by food or routine contact.
    Occupational-related transmission has been uncommon. BOP uses universal
    precautions to prevent exposure to blood borne pathogens such as
    Hepatitis C. The use of barrier methods during known or anticipated
    exposures to blood or bloody fluids is highly effective in preventing
    infection with the Hepatitis C virus. BOP addresses the issue of
    Hepatitis C infection in the following ways: (1) training of BOP
    employees upon hire and annually on blood borne pathogen occupational
    exposure, including the transmission of Hepatitis C virus and the
    effective use of universal precautions; (2) provision of protective
    equipment for BOP staff to prevent exposure to blood and blood-
    contaminated fluids; (3) counseling and medical referral for all BOP
    staff with occupational exposures to Hepatitis C virus; (4) clinically-
    based testing of inmates with a history of risk factors for Hepatitis C
    infection, and (5) promulgation of treatment guidelines for the medical
    management of inmates with Hepatitis C infection.
        Question. We have been told that the Bureau does not currently have
    a policy requiring blood testing and treatment for all prisoners. This
    seems unfortunate since mandatory testing could be useful in
    identifying not only Hepatitis C but also HIV/AIDS. Could you confirm
    for the Committee the Bureau's current policy regarding testing for
    prisoners.
        Answer. BOP does not require mandatory screening of inmates for
    either Hepatitis C or HIV/AIDS. Inmates with a history of injection
    drug usage, blood transfusions prior to 1990, or other risk factors for
    Hepatitis C or HIV/AIDS are tested upon prison entry and through
    clinical evaluations. BOP has the following HIV testing policy for
    inmates: (1) random mandatory testing of 10 percent of BOP inmate
    population annually with a seroprevalence for HIV infection of 1.3
    percent documented for 1996; (2) serial annual testing of a cohort of
    inmates who have entered BOP during one selected month each year, and
    (3) mandatory HIV testing of inmates upon release to the community.
                                      cops
        Question. Recent news reports say that you disagree with the
    Administration's position on COPS and the Local Law Enforcement Block
    Grant. Is that so?
        Answer. There is no disagreement between me and the Administration.
    In DOJ's initial budget request I asked for $1.4 billion in funding for
    COPS--enough to keep us on track for funding 100,000 additional
    community police officers by 2000--and continued funding for the local
    law enforcement block grant. Subsequently, however, we decided that--
    given our overall budget constraints--it would be more effective to
    target limited funds toward juvenile justice and youth violence
    initiatives. I asked for a package that reflected those goals. The
    budget we transmitted to Congress includes, in addition to the COPS
    funding, a youth violence and juvenile justice package that includes a
    combination of formula block grant and discretionary funding.
        As I testified before the House, I believe the proposed funding for
    my Department laid out in the President's budget request is a strong,
    flexible and balanced package. I want to work with you and this
    Subcommittee to develop the very best ideas to improve this proposal
    and achieve your common goals of putting cops on the street, attacking
    gangs and youth violence, supporting local law enforcement and funding
    solid and proven prevention programs, like those in Boston and
    elsewhere that have been so successful at preventing crime by young
    people.
                           effectiveness of the diap
        Question. In 1993, Vice President Gore recommended consolidating
    the Federal Bureau of Investigation (FBI), Drug Enforcement
    Administration (DEA) and the Bureau of Alcohol, Tobacco and Firearms
    (ATF). Instead the Justice Department created the coordinating position
    of the Director of Investigative Agency Policy or DIAP. The DIAP is
    supposed to oversee common policies, stress ``jointness'' in
    operations, and reduce redundancy. Director Freeh was appointed to this
    position four years ago.
        Director Freeh's testimony before the House Appropriations
    Committee was televised last week, and he didn't appear too
    knowledgeable about the Immigration and Naturalization Service and
    investigative agency policies on fingerprints. And, I look at your
    budget and we have $32 million to complete the new $130 million FBI
    laboratory at Quantico, we have a new $25 million multi-year request to
    rebuild DEA's own laboratories, and in the Treasury appropriations bill
    we now have a $55 million new ATF laboratory proposed. And, across the
    country and in my home state, the FBI is building its own new secure
    offices that do not include the DEA.
        What is your assessment of the effectiveness of the DIAP?
        Answer. On November 18, 1993, I established the Office of
    Investigative Agency Policies (OIAP) to increase efficiency within the
    Department of Justice (DOJ) and to coordinate specified activities of
    the Department's criminal investigative components. FBI Director Louis
    J. Freeh was selected as the first Director of Investigative Agency
    Policies (DIAP) from among the principals of the participating OIAP
    agencies. The DIAP was charged with advising the Deputy AG and I on
    criminal investigative policies, procedures, and activities that
    warrant uniform treatment or coordination.
        Shortly after the appointment of Director Freeh as the DIAP, an
    Executive Advisory Board (EAB) was established to assist in the
    development and analysis of issues suitable for the OIAP review. The
    EAB consists of officials drawn from the ranks of the OIAP member
    agencies. These agencies include the United States Marshal Service,
    Immigration and Naturalization Service, Drug Enforcement
    Administration, Federal Bureau of Investigation, and the DOJ Criminal
    Division. Although they are not members of the EAB, other DOJ
    components, including the Bureau of Prisons, Attorney General's
    Advisory Committee, and the DOJ Office of the Inspector General,
    participate in many of the OIAP's efforts. Senior level employees from
    the member agencies provide staff support to the DIAP and the EAB in
    fulfilling the mission of the OIAP. A Chief of Staff appointed by the
    DIAP directs staff activities and serves as liaison among the OIAP
    staff, DIAP, EAB, and other organizations.
        Over the past three years, the OIAP has proven to be an effective
    policy making and coordinating body within the DOJ as well as with
    other Federal agencies. Among the achievements of the OIAP is the
    development of a number of wide-ranging law enforcement policies,
    including a uniform Departmental policy on the application of deadly
    force; use of and payments to informants; and disclosure of impeachable
    information. An item currently under OIAP review is a Violence Against
    Women Act/Firearms Policy.
        The OIAP has proven to be an effective means to promote interagency
    cooperation. To date, the results are unprecedented and greatly benefit
    our Nation's law enforcement officers and enhance the ability to combat
    criminal elements. At the OIAP, partisan agency interests have been
    greatly diminished and interagency cooperation has become the norm.
        Question. Why can't we consolidate Federal crime laboratory
    facilities? Do we really need separate FBI, DEA, and ATF laboratories?
    I mean how different is ATF's explosive forensic efforts from the
    FBI's?
        Answer. In October 1995, at the request of Deputy Attorney General
    Jamie Gorelick, FBI Director Louis Freeh directed the Office of
    Investigative Policies (OIAP) to examine the consolidation of the FBI,
    DEA, and INS laboratories. OIAP Resolution 11 served as the guideline
    for this examination.
        Resolution 11 established the Interagency Laboratory Working Group
    (ILWG) to examine the feasibility of consolidating the Immigration and
    Naturalization Service Forensic Document Laboratory (INSFDL) and the
    Drug Enforcement Administration Special Testing and Research Laboratory
    (DEASTRL) into the soon to be constructed FBI Laboratory facility.
    After a three month study, ILWG unanimously agreed that collocation and
    consolidation of the INSFDL and DEASTRL laboratories into the new FBI
    Laboratory would not be cost effective and would not result in any
    measurable cost savings to the Federal Government. Also the ILWG
    believes that, under consolidation, the INS and the DEA would not be
    able to maintain the same quality of service that they are presently
    providing their respective agencies.
        In the recommendation of the ILWG to the DIAP, the report states
    ``All members of the ILWG are in agreement that the consolidation would
    provide minimal savings in the sharing of equipment. There would be no
    savings in terms of personnel costs through consolidation and that
    there would be minimal savings in terms of space considerations * *
    *.'' In addition, it was the position of the ILWG that ``* * * it is
    not possible under consolidation, to maintain the same important
    services to the DEA and INS by their respective laboratories, if such
    consolidation were to take place.''
        The FBI and the BATF both conduct explosives examinations; however,
    they differ in that the FBI conducts a greater variety of forensic
    examinations. Accordingly, the FBI and the BATF laboratories employ
    different examination protocols. In addition to the component
    examination and explosives residues examinations, which are conducted
    by both laboratories, the FBI Laboratory also has the unique capability
    of conducting additional specialized examinations in the support of
    explosives cases. These entail such things as forensic metallurgical
    examinations, hair and fiber examinations, elemental analyses, nuclear
    DNA and mitochondrial DNA examination, etc.
        The differences in the examination protocols could be easily
    addressed with the adoption of one new set of examination protocols
    promulgated through the formation of a Technical Working Group. This
    has been done in DNA, Latent Fingerprint, and Material Analysis. A
    Technical Working Group in the area of explosives examinations is being
    formed in the near future to address this and other issues.
                            national advocacy center
        Question. Your budget includes $8.3 million to open the National
    Advocacy Center in April 1998. The Center will be a skills training
    center for U.S. Attorneys, other Justice Department attorneys and State
    and Local prosecutors. It will train approximately 15,000 personnel,
    including over 3,100 State and Local prosecutors. The creation of this
    institute realizes the fulfillment of the recommendation of Attorney
    General William French Smith's Task Force on Violent Crime made back in
    1981. You've been there as a Local prosecutor in South Florida and you
    know the need for training and for joint Federal/State training. Could
    you explain your view of the need for the Advocacy Center to the
    Subcommittee?
        Answer. Our national law enforcement priorities are directly tied
    with our State and Local partners. In order to ensure that these
    priorities are addressed in a comprehensive manner, we are committed to
    conducting cooperative law enforcement training. I believe that the
    best place to conduct this training is at the National Advocacy Center
    (NAC).
        The NAC will provide, for the first time, joint training programs
    for Federal prosecutors, agency attorneys and Local prosecutors in
    areas where they have mutual interests, as well as a state-of-the-art
    facility for conducting these training programs.
        The NAC has been specifically designed as a training facility for
    prosecutors. As it currently operates, the Office of Legal Education
    (OLE) conducts trial advocacy training in converted office space here
    in Washington, DC, and a great majority of its specialty training at
    hotels in cities throughout the nation. It is very difficult to provide
    quality education in makeshift accommodations. The NAC will allow us
    the flexibility to increase the quality and quantity of training using
    the additional capacities afforded by the facilities and technologies
    available at the NAC. These include six lecture halls, ten mock
    courtrooms, a conference center and a computer training facility, all
    equipped with the latest technology. We will be able to produce and
    edit our own videotape programs and also perform distance learning
    programs from the facility.
        Since 1991, when the Congress appropriated the monies to build this
    facility in Columbia, South Carolina, we have engaged in a
    collaborative effort with the National District Attorneys' Association
    (NDAA). A cooperative agreement, which formalized our working
    relationship, was executed between the NDAA and the DOJ on July 22,
    1996. With this agreement in place, the enormous talent of our Federal,
    State, and Local prosecutors will be shared in what, I believe, will be
    the best cooperative effort between the Federal government and the
    States in many years. Presently Federal, State and Local prosecutors
    are working closer together than ever before. Many State and Local
    prosecutors are now cross-designated as Federal prosecutors and vice-
    versa. With a nationwide corps of Federal, State and Local public-
    sector attorneys as a base, we can select the best and the brightest
    instructors to cross-train the students of the NAC. Our plan is to work
    with NDAA to enhance both of our trial advocacy courses, as well as,
    develop and present joint courses on areas such as health care fraud,
    telemarketing fraud, violent crime, methamphetamine labs, drug
    prosecutions, and juvenile justice issues. The NAC will facilitate our
    joint ability to focus on priority legal training needs on a national
    scope.
        At the present time, the OLE annually trains approximately 11,000
    individuals. This total includes Assistant United States Attorneys
    (AUSA), Department of Justice Trial Attorneys, United States Attorneys'
    offices (USAO) and Department paralegal/support staff, Executive Branch
    attorneys, and State and Local prosecutors. With the opening of the
    NAC, we plan to increase the number of people trained to 15,000
    annually including approximately 3,100 State and Local prosecutors.
        The NAC is currently under construction and is scheduled for
    completion in January, 1998. We are presently scheduled to begin
    classes at the NAC in the spring of 1998. We have requested a budget
    increase in 1998 of $8.3 million to cover the cost of moving the OLE to
    the NAC, enhancing our training programs and conducting training of
    State and Local prosecutors. These increases can be broken down into
    three categories: Start up and operations ($2,868,000); Program
    enhancements ($3,369,000); and National District Attorneys' Association
    (NDAA) operations ($2,097,000).
        With your continued support, I believe that the Department of
    Justice in partnership with the NDAA, will continue to operate a
    premier legal training institute for Federal, State and Local
    prosecutors at the National Advocacy Center.
                         district of columbia situation
        Question. The crime situation here in our nation's capital is out
    of control. We've just recently had two police officers murdered.
        The Department of Justice U.S. Attorneys serve as the prosecutor
    here. Your budget proposes an additional 55 attorneys for criminal
    prosecutions here, an increase of 26 percent. You've got my support for
    this initiative. I was wondering if you could discuss it more fully.
        Answer. The United States Attorney's Office for the District of
    Columbia (USAO/DC) is unique among U.S. Attorney's Offices nationwide
    in its dual responsibility for prosecution of violations of Federal
    criminal statutes in the United States District Court and violations of
    the District of Columbia Code in the Superior Court of the District of
    Columbia. This Office prosecutes most violations of the D.C. Code
    committed by adult offenders. (Other violations of the D.C. Code,
    including offenses committed by juveniles, are prosecuted by the Office
    of Corporation Counsel for the District of Columbia.) The practical
    effect of this jurisdictional scheme is that the U.S. Attorney for the
    District of Columbia acts as both Federal prosecutor and local District
    Attorney for this district.
        As the primary local prosecutor in the District, we handled over
    26,000 cases in Superior Court in 1996, ranging from shoplifting and
    prostitution to murder, kidnaping, child abuse and sex crimes. Criminal
    charges were filed in approximately 17,000 of those cases.
        There are currently 211 attorneys assigned to the Superior Court
    Division of the Office to handle those cases. The request for 55
    additional attorney positions for the United States Attorney's Office
    for the District of Columbia includes much needed support for our
    efforts to adequately address our responsibilities in Superior Court.
    The infusion of new staff will allow for more manageable caseloads
    (attorneys in some sections handle nearly 200 cases at one time and
    schedule five to seven trials each week) and more thorough preparation
    of cases by Superior Court attorneys, as well as expansion of the work
    of the Division in a number of new initiative areas including,
    community prosecution, domestic violence, Operation Ceasefire, gang
    prosecutions and ``cold case'' murder investigations.
        In addition, this Office prosecutes a number of juveniles charged
    with homicide who are certified for prosecution as adults.
    Community Prosecution
        The number one priority for the criminal side of the USAO/DC in
    1998 is the office-wide adoption of a community prosecution model. We
    established the Community Prosecution pilot project (CP) in the Fifth
    Police District on June 3, 1996. Nineteen Assistant United States
    Attorneys work together as a team to handle the investigation and
    prosecution of both local and Federal criminal matters occurring in the
    Fifth District (5D). In addition, two prosecutors are located in an
    office in the 5D police headquarters to be easily accessible to the
    police in the District and to the neighborhood's residents.
        We believe that the project has been a great success. The CP
    project has done a remarkable job of focusing a variety of resources on
    a particular geographic area of the city in a new and dynamic way. We
    also believe that our cooperative efforts with the 5D community have
    begun to reap real rewards. We intend to expand CP to each of the seven
    police districts in the District of Columbia, and have established a
    committee to plan how and when to implement this model office-wide.
    However, the CP model is very resource intensive. Rather than
    processing criminal cases in an ``assembly-line'' fashion, this model
    contemplates careful review of each case in the larger context of the
    affected community. Thus, final implementation of a city-wide community
    prosecution approach is dependent upon enactment of the requested
    increase for 1998. The budget requests 39 new Assistant positions
    specifically for expansion of the CP project.
    Domestic violence
        Each year, over 6,000 criminal cases involving some form of
    domestic violence are referred to the USAO/DC for prosecution. These
    cases involve not only violence against women, but spousal and partner
    abuse, intrafamily child abuse, sibling abuse and elder abuse. The U.S.
    Attorney's Office and the D.C. Superior Court, along with numerous
    other organizations and agencies, signed a Domestic Violence Plan which
    envisions a multidisciplinary and comprehensive approach to combating
    domestic violence in the city.
        Toward that end, this Office has created a Domestic Violence Unit
    within the Superior Court Division which will be staffed with trained,
    dedicated personnel who will vertically prosecute all of the Office's
    domestic violence cases, including violations of the Violence Against
    Women Act. The Unit is currently staffed by four misdemeanor-level
    prosecutors who carry caseloads of approximately 200 cases pending
    trial. The Office has delayed expanding the unit to include felony
    cases because of staff shortages. Approximately 20 felony domestic
    violence cases come to the Office every month. The fiscal year 1998
    President's Budget request includes an additional five prosecutors to
    specialize in domestic violence. This will allow the Office to begin
    vertical prosecution of felony cases and to accommodate the monumental
    increase in misdemeanor domestic violence prosecutions that has
    developed over the last year.
    Operation Ceasefire
        This comprehensive law enforcement initiative established by the
    USAO/DC with the Metropolitan Police Department (MPD) and the Bureau of
    Alcohol, Tobacco and Firearms (ATF), is designed to significantly
    reduce the occurrence of gun-related violence within the District of
    Columbia. The Ceasefire partners have joined forces to: decrease the
    number of illegal firearms on the streets of the District of Columbia
    by increasing efforts at interdiction and seizure; increase the
    penalties for firearms related offenses; improve the intelligence base
    for law enforcement by requiring a debriefing as a condition precedent
    to plea negotiations; and educate young people about the dangers
    associated with firearms through outreach programs in schools and other
    organizations.
        Since the inception of Operation Ceasefire, firearm seizures have
    increased to record levels. In addition, legislative initiatives have
    increased the statutory penalty for pistol possession from a
    misdemeanor to a felony. Due to inadequate staffing at the U.S.
    Attorney's Office, however, the initiative has fallen short of its
    goals with respect to creating an intelligence bank and educating young
    people about the destructive power of firearms. The fiscal year 1998
    President's Budget requests three additional attorneys for this effort.
    Gang Prosecutions
        We have determined that the increase in violent crime in the
    District of Columbia over the past decade is due largely to the rise of
    gangs and gang-related violence. Gang investigations and prosecutions
    constitute a highly specialized area of law enforcement. Such
    investigations are extremely complex, resource intensive, and long
    term. Effectively investigating and prosecuting a violent gang often
    requires the efforts of at least one full-time attorney on that
    project, working with an investigative team of local and Federal law
    enforcement officials. The fiscal year 1998 President's budget proposes
    the addition of five attorneys specifically for this purpose. Those
    resources would be used to create a Gang Prosecution Unit or to assign
    gang specialists to each of the Office's geographically based sections,
    if we move to office-wide implementation of the Community Prosecution
    model. They will be tasked with the identification, analysis,
    investigation, and prosecution of violent gangs throughout the City. We
    believe that, with these resources, we can target twelve of the most
    violent gangs in the District of Columbia for prosecution and make
    headway into combating the violence spawned by gang activity.
    Unsolved Homicide Case Investigation Squad
        Over the past ten years, Washington, D.C. has experienced a
    tremendous increase in violent crime, and, for several years, has had
    the highest per capita murder rate in the country. Less than 60 percent
    of these murders have actually been solved by arresting and prosecuting
    a suspect. To work on the problem of ``cold cases,'' the FBI and the
    MPD created the ``Cold Case Squad'' consisting of ten FBI agents and
    eight MPD homicide investigators whose mission is to analyze,
    investigate and solve old, difficult cases. This squad has been
    enormously successful in solving these case and, in the process, has
    generated an enormous amount of investigative work to be handled by
    prosecutors in the Office's Homicide Section. However, we have been
    unable to devote sufficient resources to the initiative to allow us to
    play a more integral role in the investigation and prosecution of these
    cases. We believe that the involvement of a prosector is essential in
    order to secure cooperating defendants, an essential element in many of
    these prosecutions, and to facilitate greater cooperation between
    Federal and local law enforcement agencies in this important endeavor.
    The fiscal year 1998 President's Budget request includes the addition
    of three attorneys to the staff of this Office to allow for the
    creation of a ``Cold Case'' Squad for this purpose.
        Question. On the same topic, where do we stand relative to the
    Justice Department taking over the city's prison system? Isn't that the
    option that the President has come out in support of?
        Answer. Under the President's National Capital Revitalization and
    Self-Government Improvement Plan, the Federal Government would take
    responsibility for housing the District felons sentenced to a term of
    incarceration. In preparation for this shift, Representatives of the
    Office of Management and Budget (OMB), Department of Justice (DOJ), and
    District of Columbia (D.C.) Government are developing the Memorandum of
    Understanding (MOU) between the Federal Government and the Government
    of the District of Columbia on criminal justice matters. The MOU will
    set forth the expectations and responsibilities relating to the changes
    proposed in the District of Columbia criminal justice and judicial
    system.
                                     lorton
        Question. Is the proposal for the Bureau of Prisons to operate the
    Lorton complex or build new prisons, and how would this be financed?
        Answer. Recent Congressionally mandated studies confirmed that most
    of the facilities at the Lorton Complex have outlived their life-cycles
    and need to be replaced, but several others at Lorton remain in good
    working condition and can be re-used. The proposal permits both
    renovation of a small portion of the Lorton Complex and construction of
    new facilities at Lorton and other locations as necessary. The
    absorption of sentenced D.C. inmates would increase the BOP population
    by approximately 10 percent. However, our system is critically
    overcrowded in its medium and high security facilities, and 72 percent
    of the D.C. felons require medium or high security facilities. Thus,
    the BOP could absorb sentenced D.C. felons only after Lorton is
    renovated and new facilities are constructed at Lorton and other
    locations.
        The renovation and new construction costs would be financed through
    new resources provided by Congress and operations funding will be
    requested for BOP during the transition period.

                              subcommittee recess

        Ms. Reno. Thank you.
        Senator Gregg. Thank you very much, Madam Attorney General.
        Ms. Reno. And I will call and make an appointment to come
    up and talk to you about terrorism.
        Senator Gregg. Great.
        Ms. Reno. Thank you.
        Senator Gregg. The hearing is recessed.
        [Whereupon, at 11:40 a.m., Wednesday, March 12, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, MARCH 13, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 1:52 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Stevens, Domenici, Inouye,
    Bumpers, and Lautenberg.

                             DEPARTMENT OF COMMERCE

                             Secretary of Commerce

    STATEMENT OF HON. WILLIAM M. DALEY, SECRETARY
    ACCOMPANIED BY:
            RAYMOND G. KAMMER, JR., ACTING CHIEF FINANCIAL OFFICER/
                ASSISTANT SECRETARY FOR ADMINISTRATION
            MARK E. BROWN, DIRECTOR, OFFICE OF BUDGET

                                opening remarks

        Senator Gregg. This is great. The Secretary is early, and
    that is wonderful. We appreciate that. I would hold the hearing
    pending the arrival of Senator Hollings, but I understand he is
    on the floor, so he probably will not be coming, in any event,
    until later. In order not to inconvenience the Secretary, who
    has been kind enough to show up here not only on time, but
    early, and give us his time, I think we should get started. Mr.
    Secretary, the floor is yours.

                               summary statement

        Secretary Daley. Thanks very much, Mr. Chairman. Let me
    introduce the two people who are with me. Ray Kammer, who is
    our Acting CFO and Assistant Secretary for Administration, and
    Mark Brown, Commerce Department Budget Officer, are joining me
    today.
        Let me go through my remarks, Mr. Chairman. I appreciate
    the opportunity to appear on behalf of the President's fiscal
    year 1998 $4.22 billion budget request for the Department of
    Commerce. Our budget represents and supports our programs that
    are at the foundation of our economic growth, job creation, and
    our global competitiveness. It reflects the President's vision
    for our Nation as we approach the 21st century and builds on
    the fine work of my predecessors, Mickey Kantor and Secretary
    Brown.
        The fiscal year 1998 budget request for the Department of
    Commerce is an increase of $466 million over the fiscal year
    1997 level. Our budget growth is in three main areas: the
    decennial census, ongoing weather modernization efforts, and
    technology investments.
        Outside those three critical areas, the Department's budget
    stays flat from fiscal year 1997, and even with this increase,
    our budget remains the smallest of any Cabinet agency. And
    perhaps most important, it is fully in line with the
    President's commitment to a balanced budget in the year 2002.
        Our 1998 allocation recognizes the role which Commerce
    plays in helping to spur our economic growth. To fulfill the
    priorities of this Department, we will, No. 1, aggressively
    promote export promotion and trade law enforcement. On the
    global economic stage, our Department works to open markets,
    promote exports, and enforce our existing trade agreements. We
    will advocate on behalf of American firms while heading off
    unfair trade practices.
        With our new trade mission criteria in place, we will once
    again help the private sector capture growing business
    opportunities abroad in the face of fierce foreign competition.
    Also, I would like the chairman and members of the committee to
    know that I am committed to being an active chairman of the
    Trade Promotion Coordinating Committee [TPCC] and will work to
    ensure that the TPCC plays a central role in improving trade
    finance and export promotion activities, beginning with the
    TPCC steering group meeting, which I will hold before the end
    of the month.
        No. 2, technology for economic growth. Technology and
    innovation, the elements of our winning economy and the keys to
    the global economy of tomorrow, are still our top priorities.
    This administration has long considered the private sector a
    partner in keeping us on the cutting edge, and gone are the
    days of a decade ago when our competitors put technology which
    we developed to better use than we did.
        No. 3, expanding opportunity for all Americans and all
    communities. Being strong and ambitious abroad means little if
    we cast a blind eye toward the workers, businesses, and
    communities here at home. Commerce will continue to work with
    the economically distressed communities and promote minority
    entrepreneurship to establish businesses and jobs that are the
    cornerstones of our neighborhoods and communities.
        Performing the best census in our Nation's history,
    Commerce will be generating economic data analyses that are
    thorough market studies of an ever shifting global economy. The
    2000 census is the most important of those statistical
    analyses, and not just because it will add to our competitive
    advantages and decide everything from congressional
    representation to budget apportionment. The census goes, in my
    opinion, to the very heart of what Government does. It is in
    many ways the most direct contact which people will have with
    their Government. We can serve America well, reestablishing the
    reasons for the faith in our Government, and prove wrong those
    who are cynical about bipartisanship by working together to
    conduct a decennial census that is accurate, fair, cost
    effective, well-managed, and free of partisan politics.
        I look forward to working with you, Mr. Chairman, and this
    committee and the entire Congress to fulfill that mandate.
        Our resource management and environmental stewardship.
    Commerce has a critical role in resource management and
    environmental monitoring and prediction responsibilities. This
    budget request will allow America to manage our resources to
    compete for the future. Most people think that natural
    resources at Commerce means only fisheries, but in addition to
    this multibillion dollar industry that employs thousands, our
    resource and weather work helps industries like shipping,
    airlines, and agriculture, all of which are multibillion dollar
    exporters and employers in their own right, to operate safely
    and efficiently.
        Like the rest of the Federal Government, the Commerce
    Department is doing more with less. Over the past 6 months, the
    Commerce staff has been reduced by 3 percent, continuing a 4-
    year trend in personnel decreases. The number of political
    appointees will be reduced by nearly one-third by the end of
    this year, and management layers have been eliminated and more
    staffers are working in field offices.
        To help our streamlining efforts, Commerce has several
    innovative management initiatives underway. While not
    principally a regulatory agency, we remain focused on ensuring
    that all regulations in the Department maximize benefits while
    placing the smallest burden on those whom we regulate. The
    Bureau of Export Administration has taken a new look at its
    regulations, as has the National Oceanic and Atmospheric
    Administration, which is revising and updating its marine
    resource regulations, eliminating over 400 pages of them, and
    EDA has eliminated over 200 of the 370 regulations.
        I am determined to continue this reform effort to make sure
    the same efficiency and productivity that America's private
    sector has embraced finds a home at Commerce.
        I hope with your help, Mr. Chairman, to establish the
    Patent and Trademark Office as a performance-based
    organization. This would allow Commerce to run the PTO more
    like a private-sector business operation, with flexible
    procurement, simpler personnel rules, and accountability
    through a CEO. Doing this requires a legislative approval, but
    in the hope of helping this process along, we have submitted a
    new reprogramming proposal to the committee and your House
    counterparts that would separate PTO policy functions from
    operations.
        I would also like to take a look at the Advanced Technology
    Program to see how it can be strengthened. I believe ATP is a
    critically important program that provides enormous benefits to
    our Nation's long-term economic prosperity. ATP projects play a
    special role in fostering technological developments with long-
    term payoffs and widespread benefits to the economy. The
    President's budget provides strong support to this program.
        Since becoming Secretary, I have heard a number of
    questions which have been raised by you and by others about the
    budget process, about the ratio of new projects to old, about
    big companies putting grants outside a consortium, about
    whether applicants first go to the private capital markets for
    funding, and also whether States which lack strong R&D bases
    should have a better chance of participating in this program. I
    would like to take a look at these questions in regard to the
    fiscal year 1998 budget and ask my staff to consult with public
    and private experts and ATP participants to prepare an analysis
    for me. I would be glad to have the advice of the committee on
    these issues and would like to get back to you within 60 days
    with our conclusions.
        Because I also have concerns that there is duplication
    among the various divisions of ITA, I have asked for a
    reorganization of the ITA to accomplish the following: reduce
    administrative costs, eliminate redundant functions, strengthen
    our priority programs, such as the Trade Compliance Center, and
    move forward with more export assistance and trade advocacy
    resources out of our headquarters and into the domestic and
    field offices, and overseas offices. I would also like to put
    the criteria that drive the Malcolm Baldrige National Quality
    Award, which rewards the best in private-sector management
    practices, to work at our Department, beginning with two of our
    most publicly accessible and visible agencies--PTO and the
    National Weather Service.

                               prepared statement

        Also, Mr. Chairman, finally, with an eye on the fiscal year
    1999 budget, I have ordered a comprehensive management review
    for the entire Department. A team from my office will examine
    all of our programs to guarantee that Commerce is giving
    America a real return on the dollars which the taxpayers invest
    with us, our work and our workers. In the end, the same
    productivity and practicality that has helped our Nation take
    the lead in the global economy should be applied to the
    Commerce Department.
        Thank you, Mr. Chairman. I look forward to answering your
    questions.
        [The statement follows:]
                     Prepared Statement of William M. Daley
        Mr. Chairman and members of the Committee, I am happy to appear
    before you today, to discuss the President's vision for the Nation's
    future and to talk about how the Department of Commerce is a critical
    part of that future. I'll also describe how our budget for fiscal year
    1998 will help make the President's vision become a reality.
        I'll outline our budget request in a moment, Mr. Chairman, but
    first I want to talk about the vital importance of the economic growth
    and job-creation priorities which Commerce supports, and which are so
    central to this Administration's vision for America's future.
        In his State of the Union message, the President stated: ``Over the
    last four years, we have brought new economic growth by investing in
    our people, expanding our exports, cutting our deficits, creating over
    11 million new jobs, a four-year record.'' The Administration and the
    Congress should be proud of these accomplishments, but you and I both
    know that we should not pause in our efforts to ensure that our Nation
    retains its pre-eminent position in the global marketplace. The
    President continued: ``We face no imminent threat, but we do have an
    enemy. The enemy of our time is inaction.''
        I agree with that statement, Mr. Chairman, and at the Commerce
    Department we are doing our best to help the private sector expand the
    Nation's economy even further. The overriding goal of the Department of
    Commerce is an action-oriented one, and it is stated clearly in our
    Mission Statement: ``To promote job creation, economic growth,
    sustainable development, and improved living standards for all
    Americans''. We do this by working in partnership with business,
    universities, communities, and workers.
        Last year, Commerce programs provided significant benefits for the
    Nation's economy and contributed to our world leadership roles in
    trade, technology, and science. The economy has been strong for the
    last 4 years: the private sector grew at an annual rate of 3.3 percent,
    exports are at a record high, and nearly 11.8 million jobs have been
    created. Much of this growth came in small- and medium-sized
    businesses, which continue to be the focal point for Commerce's trade
    development, export assistance, and technological development programs.
        Commerce's emphasis this year has been on streamlining and focusing
    our programs to provide maximum support to American communities,
    businesses, and families in more effective ways--``one-stop-shops''--
    and using new approaches--World-Wide-Web sites, and CD-ROM
    technologies. We're stressing that kind of customer focus all across
    Commerce, and I'll be providing examples today of how we've been able
    to re-shape our programs in order to serve the Nation as a whole, and
    our specific customers, more directly.
        The fiscal year 1998 budget request for the Department of Commerce
    is $4.22 billion, an increase of $466 million over the fiscal year 1997
    level of $3.76 billion. Even with this increase (much of which is
    required for Decennial Census preparations), Commerce's budget remains
    the smallest of any Cabinet agency. Full-Time Equivalent (FTE)
    employment in fiscal year 1998 will increase to 38,298 over the fiscal
    year 1997 level of 34,937, also largely for Decennial Census needs.
        This budget request is fully in line with the President's
    commitment to a balanced budget in 2002. The fact that the President
    has proposed this increase, even within the very tight constraints
    necessary to meet the President's commitment, is testament to
    Commerce's effectiveness as a catalyst for the Nation--spurring
    economic growth and development, technology and infrastructure
    investment, and environmental and resource stewardship. And I fully
    agree with the President's position on the balanced budget amendment--
    I, too feel that the Nation would suffer if the Federal government's
    critical flexibility to respond to pressing needs and to provide
    essential programs and services were held hostage. By working together,
    we can attain the goal of balancing the Federal budget by 2000 without
    a Constitutional amendment.
        The Commerce Mission which I mentioned a moment ago is supported by
    three interdependent themes which encompass our programs: Support for
    the Nation's Economic Infrastructure, Support for the Nation's Science,
    Technology, and Information Initiatives, and Support for the Nation's
    Resource Management and Stewardship Responsibilities. In pursuing our
    mission, Commerce will be following several priorities, which I'll be
    focusing on in the months ahead:
      --Aggressive Export Promotion.--Commerce has programs which promote
            exports, identify new market opportunities, advocate for U.S.
            firms, and emphasize small and minority-owned firms and
            enforcement of existing trade agreements.
      --Technology for Economic Growth.--Innovation is a key source of our
            economic growth, and Commerce supports the private sector in
            accelerating the application of critical technical innovation.
      --Expanding Opportunity for All Americans and All Communities.--
            Through EDA and MBDA, Commerce strengthens the ability of
            communities to have strong local economies and participate in
            the global marketplace.
      --Performing the Best Census in Our Nation's History.--Commerce
            produces demographic and economic information which is the
            basis for Congressional apportionment and the allocation of
            Federal funds. Commerce data provide insights into the American
            marketplace and the changing nature of our economy and people.
            And I support our plan for Census 2000 as the only way to hold
            down costs and improve the accuracy of the Decennial Census.
      --Resource Management and Environmental Stewardship.--Commerce has
            critical resource management and environmental monitoring and
            prediction responsibilities, affecting billions of dollars of
            economic activity each year.
      --Accountability and Results-Oriented Management.--We must ensure
            that the public investments in Commerce Department programs are
            helping to build long-term economic growth. Commerce has made
            valuable contributions to our current economic prosperity.
      --Building Partnerships with America's Businesses and Communities.--
            Commerce works with businesses and communities not just through
            our programs, but also through a constant dialogue of listening
            and exchanging ideas.
        Let me now discuss our key bureau programs and their requests for
    the coming year. I also want to share with you some real-life examples
    of how our programs are accomplishing their goals and are helping
    American businesses and communities.
        The International Trade Administration (ITA) remains at the
    forefront of the Administration's efforts to boost the economy and
    support more high-wage, high-skilled jobs, by increasing the sales of
    American goods and services in the world marketplace. ITA's request of
    $272 million will continue support for the Administration's Big
    Emerging Market initiative, support for small- and medium-sized
    businesses through the Export Assistance Centers and for larger firms
    through the Advocacy Center, and fund our responsibilities as a
    participant nation in the Uruguay Round and NAFTA.
        Advocacy for American exports is one of the prime responsibilities
    of the Commerce Department, and these efforts are paying off
    dramatically on behalf of the Nation's businesses and workers. Some $65
    billion (including $38 billion in American content exports) were
    generated from our advocacy efforts in 1995 and 1996.
        As Secretary of Commerce, I chair the Trade Promotion Coordinating
    Committee, which focuses the Federal government's response to foreign
    competition. My first meeting as Chair will take place in the next few
    days. During my tenure, I will work to ensure that the TPCC remains an
    effective vehicle for coordinating these crucial programs supporting
    our economy.
        So much of our Nation's $835 billion in exports come from small and
    medium-sized companies. Rocket Man, Inc., of LaGrange, Kentucky is a
    16-person company that produces mobile beverage systems used at
    amusement parks, festivals, and sporting events. In 1993, Rocket Man
    realized there was an export potential for their products, and
    contacted ITA. When they began exporting, sales grew 300 percent
    between 1993 and 1994, and 225 percent the following year. ITA helped
    find overseas distributors, refine an export strategy, set prices, find
    language interpreters, and refine their information needs. The company
    president said of ITA's support: ``It's invaluable, instead of having
    to make mistakes on my own. When you have someone you can call, it can
    bring [essential information] up [to] companies like ours with little
    or no experience, where otherwise it would take years'' for small and
    medium-sized companies to develop on their own.
        ITA has also helped Petrotech of Belle Chase, Louisiana, which
    designs and manufactures microprocessor controls for turbomachinery.
    Petrotech's president told us how ITA's New Orleans office helps his
    120-person company, especially in the face of foreign competition: ``We
    battle in practically every sale against the customer, the customer's
    government, the competitors, and the competitor's government * * *. ITA
    helps us get the answers to questions on the legality of sales, sending
    proposals, and making quotes * * * [Commerce's] data base about area
    exporters is astonishing, and provides a networking catalyst not
    available elsewhere.''
        I am considering ways to reorganize ITA, to reduce administrative
    overhead, address concerns about political appointees, and put more
    personnel in the field.
        The Bureau of Export Administration (BXA) helps implement the
    Nation's foreign policy and national security goals by enforcing export
    controls over dual-use goods and technologies. BXA's request of $43
    million includes $2 million to fund their new responsibilities under
    the Chemical Weapons Convention (CWC) treaty and $1 million for
    implementation of the Presidential initiative on encryption.
        The Administration strongly supports ratification of the CWC, in
    the best tradition of bipartisan foreign policy, and wants to ensure
    that our Nation retains its world leadership role in controlling these
    weapons. We believe the U.S. should be one of the original members of
    the treaty when it enters into force. The CWC will help further the
    cause of global peace, and if ratified, it will go into effect on April
    29, followed by a 30-day implementation period.
        In my view, failure to ratify the treaty is not a realistic option.
    It was proposed and negotiated under the Reagan and Bush
    administrations, and all of our G7 partners have ratified it. The CWC
    treaty enjoys widespread international support, as well as the backing
    of the U.S. chemical industry--the Chemical Manufacturers' Association
    and other major trade groups. From an economic perspective, our
    Nation's chemical industry would be subject to trade sanctions that
    apply to non-member pariah states. Commerce will play a lead role in
    minimizing burdens on industry and maximizing protection of company-
    confidential information. Based on our excellent working relationship
    with the chemical industry, I am confident that they trust us to
    represent their, and the Nation's, best interests.
        BXA has been of great help to the 80-year old Entwistle Company (of
    Ft. Worth, Texas, and Hudson, Massachusetts), designers and
    manufacturers of ordinance parts. Larry Hove, Entwistle's Vice-
    President, said: ``Through a chain of events, we sold a few million
    dollars worth of products that we wouldn't have sold if we hadn't
    participated [at a defense show in Paris] * * *. The value [of BXA] for
    me is that I have someone who I can talk to who has a global view of
    what's happening in the defense world. We don't have people on the
    ground in any place.''
        The Economic Development Administration (EDA) assists communities
    across the country in recovering from economic difficulties, most often
    by establishing the infrastructure that will enable them to generate
    and retain jobs, and thus create self-sustaining economies. EDA also
    maintains the flexibility to respond to high-priority or unexpected
    needs, ranging from natural disasters to the closing of military bases.
    EDA has undertaken significant management reforms and has undergone a
    comprehensive reorganization to ensure efficient and effective program
    implementation. EDA's $343 million request includes funding for the
    Public Works grant program, which will yield thousands of new jobs in
    distressed communities. In this session of Congress, the Administration
    will submit a legislative proposal to re-authorize EDA's programs.
        EDA helped develop the West Virginia Wood Technology Center in
    Elkins, completed in 1993, which provides training in log and lumber
    grading and inspection, profile knife grinding, kiln drying, and
    related technologies to workers in a 5-state region. The Center's
    success has helped the host county's unemployment rate drop two-thirds.
    Seven companies are expanding into new product markets, and at least
    one (and up to seven) out-of-state companies are relocating into the
    county to take advantage of the skilled labor force.
        EDA is one of the Commerce bureaus that is moving ahead on finding
    ways to measure the impacts of its programs in new ways. EDA has
    developed and implemented a performance measurement system for its
    programs which, over time, will generate outcome information on the
    economic impact of their projects in distressed communities. The
    measures, which include job creation and private sector leveraging,
    will evidence the return on the Department's investments in the
    economic growth of the nation.
        The National Telecommunication and Information Administration's
    (NTIA) request of $54 million will support a $14 million increase to
    the high-priority and highly-competitive Telecommunications Information
    and Infrastructure Assistance Program, which supports computer access
    and literacy to serve educational, medical and other social needs in
    every state. NTIA's funding request also provides for the United
    States' participation in the International Telecommunication Union
    Plenipotentiary Conference, and for a new initiative supporting
    telecommunications privacy.
        The National Technological University in Ft. Collins, Colorado, is
    a private, non-profit, accredited institution providing graduate
    degrees in 14 engineering disciplines, using faculty of 47 U.S.
    universities. NTU was formed in 1984, and is the first university in
    the world to operate a regular education service on a
    telecommunications satellite. Its use of telecommunications and video
    technology allows engineers to earn degrees and keep abreast of new
    developments in their fields without stopping work to go back to
    school. Dr. Lionel Baldwin, President of NTU, said: ``Commerce has been
    the only part of the Federal government that has participated in any
    significant way * * *. NTIA provided critical start-up funds for
    equipment to launch NTU and continued this support during the initial,
    very rapid growth period.''
        The Minority Business Development Agency (MBDA) seeks $28 million
    to continue addressing the critical needs of the Nation's minority
    business communities. In 1998 MBDA will continue its reinvention
    strategy which calls for the coordination and mobilization of public
    and private resources and building business capacity within local
    communities across the country. MBDA's 1998 request includes funds to
    support both new and existing programs--a revamped management and
    technical assistance effort including service delivery through
    Internet, and projects developed jointly with the Small Business
    Administration. Last year, a major revision was made to the Minority
    Business Development Center (MBDC) program. MBDA now grants ``bonus
    points'' to local applicants in the competitive award process and
    requires a 40 percent cost share.
        Spatial Data Integrations, Inc., of Louisville, Kentucky is a
    minority-owned company which provides mapping and digital data
    conversion services to government, utilities, and private sector
    businesses. As a contractor and subcontractor for the Department of
    Defense, for example, they produce topographical and hydrological maps,
    and specialize in describing the relationships between items on those
    maps. They have been bidding on projects for the local transit
    authority and utility companies, as a way to expand business. Audwin
    Helton, company President, has said that the local Business Development
    Center helped him develop business and financial plan that he ``could
    take to the bank''. With this help, the company has expanded from 4 to
    13 employees. He said: ``They've helped me with proposal writing and
    basic business advice which I still seek out regularly. They treat
    everyone with respect.''
        Field Lining Systems of Glendale, Arizona, is a minority-owned
    company that supplies and installs linings for tanks, ponds, and
    landfills. They buy information about business leads from MBDA's
    Phoenix Business Development Center at a rate that this small company
    can afford, and then use this information for bidding on jobs in nine
    western states, including Alaska. They came out of Chapter 11 in 1991,
    have been growing ever since, and hope to expand into the Mexican
    market.
        Also in his State of the Union address, the President said: ``To
    prepare America for the 21st century, we must harness the powerful
    forces of science and technology to benefit all Americans.'' The United
    States remains the world leader in many aspects of science, technology,
    and information, and the Department of Commerce is instrumental in
    helping the Nation maintain that leadership role. The $9.2 million
    funding request for the Under Secretary for Technology/Office of
    Technology Policy (US/OTP) will support the Experimental Program to
    Stimulate Competitive Technology (EPSCoT) initiative, and a new series
    of economic and technology development programs in support of the
    Administration's foreign policy efforts. EPSCoT seeks to foster
    regional technology-based economic growth by creating stronger linkages
    among companies, universities, and governments in States traditionally
    under-represented in Federal R&D funding.
        The National Institute of Standards and Technology (NIST) requests
    $692.5 million for fiscal year 1998. This will allow for several new
    competitions in the Advanced Technology Program (ATP), which stimulates
    promising, but high-risk, enabling technologies that can form the basis
    for new and improved products, manufacturing processes, and services.
    This funding will also maintain our nation-wide network of
    Manufacturing Extension Partnership (MEP) service providers, which
    enhance the global competitiveness of thousands of smaller-sized
    manufacturers. The Malcolm Baldrige National Quality Award program has
    been a national success, and will be expanded to cover education and
    health care, two large and critical areas of the national economy which
    are not currently served by the award.
        The NIST laboratories are a key part of the Department's technology
    programs. These labs develop and supply companies, universities,
    hospitals, and other organizations with essential measurement know-how.
    They develop otherwise unattainable tools that ensure confidence in the
    growing number of measurements demanded by the technically complex
    affairs of commerce, science, engineering, health, safety, defense, law
    enforcement, and the environment. ``NIST quality'' measurements are
    part of a universal technical language linking U.S. companies and
    institutions to the rest of global economy. As part of its extensive
    ongoing program evaluation process, NIST conducts impact studies of the
    measurement-related infrastructure it provides to the U.S. economy.
    These studies are one mechanism the Department will use to demonstrate
    its performance under the requirements of the Government Performance
    and Results Act, a vital law that I'll discuss in more detail later on.
        In one of these studies, U.S. makers of coordinate measuring
    machines (including: Brown & Sharpe Mfg. Co. of North Kingston, Rhode
    Island; Giddings & Lewis Inc. of Fond du Lac, Wisconsin; and The L.S.
    Starrett Co. of Athol, Massachusetts) credit NIST with saving them 5-10
    years in early-stage research. Firms also attributed annual production-
    efficiency gains--ranging from 10-30 percent between 1985 and 1988--to
    NIST's pioneering work on computer-based, error-compensation methods.
    The technology enabled them to produce lower cost designs without
    sacrificing performance. In all, the effort is estimated to have
    produced first-level benefits totaling more than $93 million. Generated
    by an initial NIST investment of $430,000 over 10 years, this total
    does not include scrap reduction and other secondary benefits realized
    by manufacturers because of the increased accuracy of their inspection
    equipment.
        The legislative mandate of the ATP is to promote ``commercializing
    new scientific studies rapidly'' and ``refining manufacturing
    practices.'' This offers a tremendous scope of opportunity to spur
    America's creative technology energies. The objective of some projects
    is to develop technologies that enable lower cost, higher quality, or
    faster-to-market products. The ultimate objective of others is to
    develop the know-how to provide new-to-the-world or radically improved
    products and services. The ATP has a high potential impact on U.S.
    economic growth because, unlike other Federal technology programs, it
    makes investments explicitly for this reason rather than for some other
    National goal.
        One example of this is Nanophase Technologies Corporation of Burr
    Ridge, Illinois, a 2-person start-up company that received an ATP award
    to develop an innovative process for producing ultra-fine ceramic and
    metal powders at the nanometer scale for applications ranging from skin
    care products to high performance engine parts. Their ATP research
    enabled the company to attract support from major industrial
    organizations and venture capital firms, who furthered commercial
    development. The company has launched new products, and negotiated an
    agreement with E. Merck for international distribution of one early
    project this year. The early applications are projected to yield more
    than $20 million in annual revenues within three years, and more
    products are in development. The company has opened the world's first
    facility devoted to commercial-scale production of nanocrystalline
    materials, and expects to employ several hundred workers within the
    next two years. ``All of this represents huge progress and success for
    NTC,'' says Robert Cross, CEO and President of the company, ``and it is
    directly the result of the challenge and support of the Advanced
    Technology Program.''
        I also want to take a look at the ATP program to see how it can be
    strengthened. I believe ATP is a critically important program that
    provides enormous benefits to our Nation's long-term economic
    prosperity. ATP projects play a special role in fostering technological
    developments that have long-term payoffs and widespread benefits to the
    economy--the kind of initiatives that would otherwise not be funded by
    the private sector. The President's budget provides strong support for
    this program.
        Since becoming Secretary, I have heard a number of questions
    raised--by you as well as by others--about the program and its funding.
    I am committed to examining questions that have been raised--about the
    budget process, about the ratio of new projects to old ones, about big
    companies winning grants outside of consortia, about whether applicants
    first go to private capital markets for funding, and about whether
    States lacking strong R&D bases should have a better chance of
    participating in this program. I want to look at all of these
    questions, and I've asked my staff to consult with public and private
    experts and ATP participants and prepare an analysis and
    recommendations for me. I would be very glad to have the advice of this
    Committee on these issues (and will be back to you within 60 days with
    my conclusions).
        Before I complete my discussion of NIST this morning, I want to say
    that I am very impressed by the quality movement in the private sector.
    Through the Malcolm Baldrige Quality Award, I have already had the
    chance to meet some of the best and brightest in the private sector. It
    is clear that Quality Management works, and I want to apply those same
    principles to the Department of Commerce as much as possible. The
    advice that one of the leaders of the quality movement in the private
    sector gave me was to start by creating some ``islands of quality'' and
    then build on them. I've selected two organizations in the Department
    to be our first ``islands of quality''--the Patent and Trademark Office
    and the National Weather Service. Both of these agencies deal with the
    American public on a daily basis, so their quality improvements should
    immediately benefit our citizens.
        The Patent and Trademark Office (PTO) promotes industrial and
    technological progress in the U.S. by administering the laws relating
    to patents and trademarks, strengthening the protection of intellectual
    property rights, and advising on the trade-related aspects of
    intellectual property. In fiscal year 1998 the PTO requests a budget of
    $656 million, all of which is derived from user fees. The PTO's
    appropriation request, however, provides that $92 million in patent
    fees will be retained in the Treasury for deficit reduction.
        Fogarty Research and Development of Portola Valley, California,
    designs and develops medical devices, and has acquired 60 patents on
    its products. Company founder and president Thomas Fogarty, M.D.,
    depends on PTO to bring critical time and cost savings, and valuable
    technical opinions, to his products and production methods. He says:
    ``By our interaction with PTO, we can learn ways that we can change the
    design or the claim and make it protectable * * *. I could potentially
    have 2-3 engineers working on a project accumulating bills at the rate
    of $30,000.''
        The Economics and Statistics Administration (ESA) seeks $52
    million, a modest increase that will pay large dividends in improving
    the statistics that are essential to tracking and understanding the
    Nation's growing and changing economy. ESA's priority is to implement
    the next steps in the Bureau of Economic Analysis's (BEA) strategic
    plan for improving the quality of GDP and other economic data and for
    re-engineering its antiquated computer systems. Although BEA has made
    good progress in implementing its plans in recent years, it has done so
    by eliminating important (but lower priority) statistical programs.
    Much work remains and further cuts would compromise the quality of our
    most basic measures of economic performance.
        In decrying the ``lack of investment in our statistical
    infrastructure'' in recent years, the National Association of Business
    Economists said in a recent press release that the statistics produced
    by BEA and Census ``are vital to the functioning of our market economy.
    Businesses make decisions about where to locate a plant, how much to
    produce and how much to pay their workers based on [the] data * * *.
    Participants in financial markets make investment decisions which in
    turn affect interest rates, the stock market and the value of the
    dollar. These data also serve as critical inputs into the formulation
    of monetary, fiscal and trade policy. In short, the quality of our
    economic statistics impacts the lives of every American.''
        The Census Bureau measures the demographic and economic character
    of the Nation. The Census Bureau's fiscal year 1998 request totals $661
    million. In 1998, we will accelerate the implementation of our plan for
    a 2000 Census that is cost effective and accurate--a ``one-number''
    census that is right the first time. In addition to partnerships with
    State and local governments, easy-to-read and return forms and the use
    of cutting-edge technology, I support the use of statistical sampling
    in 2000 in order to hold down costs and increase the quality of the
    Decennial Census. Sampling has been endorsed by some tough audiences--
    the National Academy of Sciences, GAO, and our own Inspector General.
        The Bureau has other cyclical census activities, and additional
    portions of the request will be devoted to conducting the Economic
    Censuses, which are performed every five years. The vital economic data
    they produce are the foundation for all of our economic statistics for
    the next five years. As with BEA, the Census Bureau has had to
    eliminate important (but lower priority) activities to live within
    funding constraints. Further cuts in the Economic Censuses would
    seriously compromise the quality of this endeavor.
        Census data give insight into our Nation's local markets. For
    example, the Latin American Economic Development Association (LAEDA) of
    Camden, New Jersey, uses Census data to help train local entrepreneurs
    in commercial real estate and small business creation, and it focuses
    on the development of effective business plans and the key role that
    Census data play in them. LAEDA has increased its 9-week training
    programs from 2 to 3 per year, because of increased demand. Alfonso
    Castillo, Director of Training and Technical Assistance, said: ``People
    walk away [after completing our training program] with a good idea of
    what data are available, how it can be used, and how it will help their
    business. It has worked very well''.
        B&B Organic Compost & Soils, Inc. of Durham, North Carolina, with a
    patented method of converting stumps and wood waste to organic topsoil,
    also benefits directly from Census data. The firm is expanding by
    granting franchises on its process around the country, and charges
    royalties on the basis of local population data. Company founder and
    president Bill Andrews says that Census staff are ``super nice'', and
    the data he gets from them are available in a hurry and just what he
    needs.
        NOAA remains the largest component of the Commerce Department, with
    a request of $2 billion for fiscal year 1998. This net figure contains
    a number of offsetting priority increases, as well as decreases in
    programs that are attaining their goals and therefore can be eliminated
    or continued at reduced levels. Nation-wide modernization and
    restructuring of the National Weather Service continues, with the
    initial deployment of the Advanced Weather Interactive Processing
    System (AWIPS) and operational streamlining of activities under the NWS
    Modernization and Associated Restructuring initiative. These
    initiatives will produce more timely warnings of severe weather and
    accurate weather forecasts. Restoration of American fisheries and the
    protection of species in danger of extinction will continue to be a
    priority. One major change included in the NOAA budget for fiscal year
    1998 is the way in which capital assets, such as environmental
    observing systems and facilities, are budgeted.
        I'm pleased to be able to share with you some illustrations of how
    NOAA programs are helping to save lives and property, and to preserve
    our natural environmental. During the major blizzard last year, for
    example, we provided early and accurate forecasts, so State officials
    were able to implement emergency plans promptly, and commercial
    airlines were able to relocate their planes out of harm's way. We
    issued warnings about Hurricane Fran 31 hours before landfall, and
    flash flood warnings 6 hours before they occurred. And although last
    year saw a higher-than-normal number of tornadoes, we are able to
    provide warning lead times of more than 15 minutes, so the number of
    lives lost was well below the average.
        By implementing controlled access measures for some fisheries,
    we've reduced accidents and property loss, increased the economic value
    of fish by making fresh products available for longer periods. We've
    provided scientific support to the Coast Guard in 70 oil or chemical
    spills, and partnered with State and local agencies to restore 40,000
    acres of coastal habitat.
        The Hatteras Village Aqua Farm in Hatteras, North Carolina is a
    clam-breeding company established in 1984. Initially the company sold
    their clams to wholesalers, but gradually broadened into direct sales
    to restaurants (1992), their own retail store (1995), and last year,
    they opened their clam beds to tourists, so that customers could gather
    their own clams. A NOAA grant to North Carolina State University has
    helped the University study this type of approach to clam breeding and
    has helped the company with marketing their unique concept.
        Biotechtronix, Inc., of Pendleton, South Carolina, develops
    chemical testing instruments for the commercial marketplace--
    applications in food, environmental, and chemical companies. This
    technology is a result of biodegradable material research funded by
    NOAA, which revealed the relationships between chemical elements and
    color sensors. Using those research findings, the company developed and
    was able to market a more sophisticated device.
        Lincoln Electric System of Lincoln, Nebraska, generates or buys
    power to serve that city of 200,000 people. Summertime consumption of
    power can often outstrip the System's own capacity, so System staff
    arrange to purchase the additional power needed, at the lowest possible
    cost. Chief Engineer Phil Euler says: ``We have several models, all
    using statistics of weather provided by NOAA, to help us determine our
    customers' electric needs and the most economical ways of meeting them.
    Our customer accounting group uses weather data in explaining to
    customers why bills are higher this month than last * * *. Our
    technical assistance group uses weather data to advise on the design of
    buildings and how big an air conditioner and heating unit are needed.
    We use weather data in setting budget billing by normalizing power
    [customer] consumption and removing the weather extremes.''
        Commerce focuses on providing effective management and stewardship
    of our Nation's resources and assets to ensure sustainable economic
    opportunities. This requires us to see resources in new ways, and to
    update our responsibilities in relation to them. In the past,
    Commerce's definition of ``resources'' and our management
    responsibilities focused on tangible items, and our role was seen as a
    hands-on one. NOAA, for example, has direct management responsibilities
    for fish stocks, and must preserve and protect endangered species. But
    now we recognize that the Federal portion of the radio frequency
    spectrum (which NTIA oversees), and intangible items such as
    intellectual property rights (which PTO protects) and the capabilities
    of former military bases (which EDA helps local communities to harness)
    are also key resources. Our role with these resources is a stewardship
    (rather than a hands-on management) one.
        Commerce has several innovative management initiatives underway.
    While not principally a regulatory agency, we must remain focused on
    ensuring that all regulations of the Department are designed and
    implemented to maximize societal benefits while placing the smallest
    possible burden on those we regulate. BXA has taken a new look at its
    regulations, and has rewritten many of them, simplified and clarified
    others, and dropped the remainder. NOAA is revising and updating its
    marine resource regulations, eliminating 400 pages of them. EDA has
    eliminated over 200 of its 370 regulations.
        I am committed to reducing the number of political appointed
    positions at the Department by the end of fiscal year 1997. We will
    develop a specific plan to achieve this goal in a manner that ensures
    the efficient and effective operation of the Department.
        We are implementing the Government Performance and Results Act
    (GPRA) seriously in Commerce, and when the law is fully implemented at
    the start of the next fiscal year, we will have a Strategic Plan and
    useful performance measures in place. The initial plan we've already
    provided to OMB has been declared to be one of the best that was
    developed across the Federal government. NOAA's own Strategic Plan, for
    example, serves as a vital management tool within that bureau and as a
    positive example to other agencies. We look forward to consulting with
    this Committee and others which are interested in our programs later
    this Spring, and ensuring that the GPRA Strategic Plan we send up in
    September gives you additional useful insight into the effectiveness of
    our programs on behalf of American families, businesses, and
    communities.
        We have launched a pilot program under the Vice President's
    Performance Based Organization (PBO) effort which is designed to make
    the Federal government more flexible and autonomous, and make managers
    accountable for measurable results. As in a private business, a PBO is
    designed to achieve clear accountability for operating results. A key
    PBO characteristic is that the organization is granted considerable
    administrative and regulatory flexibilities in return for increased
    measurable performance. One Commerce pilot is being developed under
    this initiative--the Patent and Trademark Office--and others are under
    consideration, including the National Oceanic and Atmospheric
    Administration's seafood inspection program.
        The Vice President has encouraged us to establish PTO as a PBO.
    Ultimately, through legislation, we hope to run the operational
    elements of PTO in a manner similar to the way a private business
    operates. PTO would have a much more flexible procurement system, a
    simpler and more flexible set of rules for managing personnel and
    accountability through a CEO with a performance agreement that contains
    specific, measurable objectives. The authorizing committees were
    engaged and supportive of the idea of a PTO PBO in the last session of
    Congress.
        In the meantime, we can make progress toward this goal of a PTO PBO
    through administrative actions. We have just submitted a reprogramming
    proposal to this Committee and to the House Appropriations Committee
    including an administrative reorganization which would: separate policy
    functions from operations; establish three business lines in PTO--
    patents, trademarks, and information dissemination; reorganize the
    patent examining group into industry sectors; and consolidate some
    administrative functions.
        This administrative reorganization would be a significant advance
    toward accomplishing a more business-like operation, but we would still
    need the legislation to: grant additional personnel flexibilities;
    exempt PTO from FTE ceilings; create an Undersecretary for Intellectual
    Property to oversee the policy functions of patents and trademarks; and
    establish a Chief Operating Officer.
        I am very enthusiastic about putting PTO operations on a more
    business-like footing. I hope that this Committee is able to give our
    reprogramming proposal favorable treatment.
        The Commerce Administrative Management System (CAMS) will replace
    existing financial and administrative systems, and will provide the
    Department with an integrated, user-friendly, flexible financial and
    administrative system to support program managers, improve
    productivity, and reduce costs. The Department took delivery of the
    central part of the system--a new off-the-shelf Core Financial System
    (CFS)--in August 1996, and we marked a key milestone in CAMS
    implementation when the Census Bureau began operating several parts of
    the CFS in October. Census plans full bureau-wide implementation of the
    CFS by October 1998. NOAA began using a critical component of the CFS
    in August 1996, and they plan to begin implementing other parts of the
    CFS in their Washington-based offices this Summer, with full NOAA-wide
    implementation of the CFS by fiscal year 1999. Other bureaus are
    planning CFS implementations in fiscal year 1998 and beyond.
        Converting software and information in preparation for the year
    2000 poses a real and serious threat to business processes throughout
    the world. If left unchanged, systems will stop functioning or produce
    erroneous results when they begin to process 20th century dates. The
    scope of this problem is great, ranging from everyday purchases of
    consumable office supplies, to our ability to report economic and
    statistical data used in critical ways throughout the Federal
    government and private industry, to the control of long-term weather
    forecasting systems.
        The shifting nature of today's economic world is challenging, and
    these challenges translate into opportunities for our programs and our
    management systems. Commerce can meet these challenges, and will
    continue forging ahead to promote economic growth for all Americans.
                                     ______

                    Biographical Sketch of William M. Daley
        William M. Daley, the 32nd Secretary of Commerce, was nominated by
    President William J. Clinton on December 13, 1996, and confirmed by the
    Senate on January 30, 1997.
        Described by President Clinton as a man of ``rare effectiveness,''
    Secretary Daley served as Special Counsel to the President for the
    North American Free Trade Agreement, coordinating the successful
    campaign to guide passage of the historic trade accord through
    Congress.
        In accepting the nomination, Mr. Daley said he was committed to
    working ``in partnership with American businesses, from Fortune 500
    companies to small enterprises, in our inner cities and rural America,
    to help our nation face the challenges and seize the opportunities that
    lie ahead.''
        Mr. Daley said, ``the Commerce Department is where America's
    potential and promise come together, where our future jobs are created
    and our economic growth is nurtured through trade, technology and
    information.''
        Secretary Daley has set a broad and aggressive agenda that ranges
    from doubling the number of small business exporters to modernizing the
    weather service to making the 2000 census the best in our nation's
    history to maintaining U.S. leadership in advanced technologies.
        Secretary Daley, a long-time Chicago civil and business leader, was
    a partner in the law firm of Mayer, Brown & Platt. He was president and
    chief operating officer of Amalgamated Bank of Chicago from 1990 to
    1993, after joining the bank as vice chairman in 1989. He also
    practiced law with the firm of Daley and George of Chicago.
        Secretary Daley has served on corporate boards and been active in
    many Chicago community and civic projects. His professional honors
    include the St. Ignatius Award for Excellence in the Practice of Law in
    1994 and the 1994 World Trade Award presented by the World Trade Center
    Chicago.
        Secretary Daley was admitted to the Illinois bar in 1975. He holds
    an LL.B from John Marshall Law School, Chicago; a B.A. from Loyola
    University; and an honorary degree of Doctor of Laws from John Marshall
    Law School.
        Secretary Daley and his wife Loretta have two daughters and a son.

                              Committee allocation

        Senator Gregg. Thank you, Mr. Secretary.
        First, let me make a general statement because this issue
    is on the front burner right now, and that is, the pressures
    which we have in this committee, which are rather inordinate
    relative to funding Commerce, Justice, State, and many of the
    independent agencies which are before this committee, are going
    to become much more severe. It appears for a variety of reasons
    the administration has decided not to pursue substantive
    entitlement reform. The decision of the administration not to
    do that falls not only on the entitlement accounts, which are
    very important accounts and, in my opinion, need to be
    fundamentally reformed for our children's future, but more
    importantly, falls on the discretionary accounts.
        We are going to receive an allocation in this committee
    which is dramatically less than what the demands of various
    agencies will be, and that allocation is going to be a function
    of the fact that this administration has not been coming to the
    table, the White House specifically, on the issue of
    entitlement reform. That is going to flow to you folks.
        I just want to state that as an opening remark, and it is
    unfortunate because programmatic activity that might otherwise
    be funded will not be.

                                 Trade missions

        On a secondary issue, I wondered if you could just tell the
    committee where you stand with the trade missions. I understand
    you have taken an initiative to put to bed some of the concerns
    relative to the political nature of the membership of the
    missions. I commend you for that, and I would be interested if
    you could outline that for us.
        Secretary Daley. Mr. Chairman, when I first was nominated
    by the President back in December and began a round of
    discussions with Senators, Members of the House, and with the
    business community, I heard two things regarding the trade
    missions: one, the importance of them as a part of our trade
    promotion and two, the critical importance to be aggressive on
    behalf of American businesses, where there are opportunities
    for American businesses that the Government should be involved
    in advocating on behalf of them, specifically major contracts
    around the world that foreign governments, our counterparts,
    have either a specific ability to award that contract or are
    major players within it.
        At the same time, questions have been raised about these
    trade missions. I asked for a 30-day stay on all trade missions
    effective the day I was sworn in to do a comprehensive a
    review. I had Under Secretary Stuart Eizenstat, Clyde Robinson,
    Deputy Chief of Staff Andy Pincus of my staff do the review. I
    announced the results of that review with some of the reforms
    and improvements to the program on March 3. Specifically, let
    me run through a couple of things we announced.
        No. 1, the first reform we did was to announce that we
    would have a project officer in charge of each of these
    missions. That person would be responsible from the beginning
    to the end to develop a mission statement to define what the
    purpose of that mission was going to be, what we wanted to
    accomplish, what were the criteria for the participation in the
    trip, and what were the criteria so that the business community
    would be able to see it in writing up front. Second, we would
    disseminate this through the Federal Register, the Internet,
    and through the media to make them aware so that they could let
    companies know that this mission was going to take place.
        The third thing we wanted to do is to make sure, and one of
    the ways is through this increased dissemination of the
    knowledge of these trips, that medium-sized and small-sized
    businesses could have an opportunity to take a look at these
    trips and see if it was worthwhile for them to participate.
        We also wanted to make sure that there would be no partisan
    politics in any sort of selection, that the career officers or
    a panel made up of a majority of career officers will make the
    decision as to who participates in these trips. Also, any of
    the documents except those that may contain certain proprietary
    business information or security information would be public so
    that there would be a transparent and an open process from
    beginning to end. After the trips, there will be a report so
    that the public, Members of Congress, and the business
    community would know what were the goals up front, what was the
    mission, what was to be accomplished on these missions, and to
    do a postmission report so that we could see if we accomplished
    what we thought we would, and make the budgets of those trips
    public.
        There are lots of different trips and trade missions that
    the ITA is involved in. Obviously, the ones that get the most
    attention are the ones that the Secretary or the very senior
    people go on. We support numerous missions throughout the world
    on behalf of American businesses. We also support many of the
    State trip missions that are done by Governors and State
    economic development organizations.
        So I think these improvements to the system that were in
    place are going to help our missions, which are an important
    part of our trade advocacy and our export promotion.
        Senator Gregg. I congratulate you for that effort. I am a
    strong supporter of the concept of missions, and I hope that
    the last year or so has not undermined that support, because
    they are very worthwhile and very appropriate. They do help us
    do business abroad. We are a global economy, and we need to
    have that sort of aggressiveness from the Commerce Department.
    I think it is good that you are setting a standard for trying
    to make them more clearly nonpartisan and nonpolitical but,
    rather, substantive.

                         reducing Political appointees

        What percentage of the folks who are Aassistant Secretaries
    in the International Trade Administration [ITA] are political
    appointees? I know you are reorganizing the Department and
    reducing political appointees, and we expect you will be doing
    that in ITA.
        Secretary Daley. I also announced at my confirmation
    hearing in January that, in addition to the moratorium on trade
    missions, that I was going to reduce by the end of 1997 the
    number of political appointees within the Department by 100,
    which is about one-third of the appointments to positions.
    There are about 256 political positions in the Department. By
    the end of 1997, we will have gotten to 156.
        ITA accounts for about 55 of the political appointees in
    the Department. We have just begun the consultation with the
    Under Secretaries to try to figure out the most effective means
    to downsize the political appointees. The two areas that will
    probably take the bulk of this hit will be in the Secretary's
    office and ITA because therein lie many of the political
    appointees that probably should be cut.
        These numbers that I laid out have been rather historical,
    so they go back many, many years as far as the number of
    political appointees in the Department. It is nothing that just
    arose over the last couple of years.

                                      ATP

        Senator Gregg. On another subject, last year in the report
    of this committee and the final language of the bill, we
    directed the National Institute of Standards and Technology
    [NIST] not to initiate new programs for advanced technology
    programs, and yet they have done that. My question is: Why?
        Secretary Daley. My understanding, Mr. Chairman, as I spoke
    with Chairman Rogers is that there was language on the House
    side and on the Senate side that did not end up in the final
    piece of legislation. As you know, we feel strongly that this
    program is very important, and we moved forward because of
    interest on behalf of the business community and a belief that
    this is a strong program. We have gone out to the business
    community within the last 30 days. We are getting a response.
    Obviously, the grants have not been awarded yet. The process
    has started, and we feel strongly about this program and look
    forward, as you can see from the budget, to hopefully increase
    it over the years.
        My understanding is that the language prohibiting any new
    grants was not in the final bill, and so the decision was made
    on our part to move forward with new grants.
        Senator Gregg. Well, we will certainly make every effort to
    make it clear this time, assuming there is any money at all. We
    can redebate that issue, but we have been through it so many
    times, let us not take the committee's time.

                            status of AWIPS program

        Where do we stand with the advanced weather interactive
    processing system [AWIPS] program, in your opinion?
        Secretary Daley. We have moved forward with 21 pilot
    systems, which are in the process of being activated right now.
    If all goes well with the program, we will institute another 18
    by the end of the year, around the fall. We have made a
    commitment to the House and to you that this program will be
    capped at $550 million. We will live within that. I know it has
    been a long process that has gone over budget and is behind
    schedule, but we think the program is together.
        The inspector general agrees with us. He has raised issues
    about this in the past, but he believes that the program is on
    course now, and we feel strongly, as we have from the
    beginning, that it will be a major plus to our ability to
    forecast and protect not only property but lives as we move
    forward.

                                the 2000 census

        Senator Gregg. Now, the big problem, obviously, with the
    agency--the big issue not problem--with the agency, is the
    question of the census; whether we do a statistical analysis or
    a head count. You had a hearing with Governmental Affairs,
    yesterday, was it?
        Secretary Daley. Tuesday morning.
        Senator Gregg. I have talked to Senator Thompson, and we
    are going to have to reach some cloture on this. I am not sure
    that there is any great need to revisit the issue right now. We
    have talked about it. Just for the record, the hope is that we
    can take the politics out of it and reach cloture on the issue
    of what is the best way to proceed. That is my goal and Senator
    Thompson's goal, and I know that is your goal.
        But, in any event, we have to make a decision here, and I
    think we will proceed under the assumption that before this
    bill is completed, there will be a decision made on whether we
    are going to go statistically or head count. We will try to
    make the call here so that people can start planning.
        Secretary Daley. I would appreciate that, Mr. Chairman. As
    you know, we feel very strongly, as I stated to Senator
    Thompson, that statistical sampling is the way to go for a more
    accurate and more cost-effective census. But I wholeheartedly
    agree with you, and once again stress, I think, the importance
    for all of us to try to work together in this because it is
    important for the success of the census that the American
    people have the faith that this is obviously very important and
    is being done in a way that is not part of a partisan wrangling
    and is managed well.
        This is the largest peacetime mobilization in our country.
    It is a massive endeavor. Questions have been raised about it.
    We have serious questions about this. That is why we are taking
    it so seriously.
        If I have the honor to be here 4 years as Secretary of
    Commerce, this will be the most important thing that I assume
    will be on my watch. So I feel very strongly that it has to be
    done right, and I appreciate your words about the census.

                             PTO revenue diversion

        Senator Gregg. Senator Lautenberg.
        Senator Lautenberg. Thanks very much, Mr. Chairman.
        I am delighted, Mr. Secretary, to see you here. What I have
    seen thus far indicates that you are not going to let any of
    the good pace that has existed in the Department for these past
    years decline in any way. It looks like you have a proactive
    agenda, and I am pleased to see that.
        Every time we hear from Commerce, it is always refreshing
    and surprising to note the variety of things that you have to
    concern yourselves, your Department about, whether counting
    folk, watching out for weather changes, fighting the
    international marketplace and making sure American companies
    have a chance to compete fairly, encouraging technology, a
    variety of things that are very interesting. I am sure that you
    will bring the right kind of energy and skill to the job.

                              Patent and trademark

        I have a couple of questions regarding the PTO. Some of the
    functions that it serves now are being considered, in my
    understanding, for movement from PTO to another part of the
    Department of Commerce. Also, there is the question of
    diversion of fees. PTO's revenues are derived exclusively from
    fees that it earns for granting and issuing patents and
    registering trademarks.
        As I understand it, if we divert some of the revenue stream
    away from the Department, we have a very likely possibility of
    extending the period for patent pendency to almost twice what
    it presently is. If anyone on your team there has any comments,
    please feel free to jump in.
        I think that would be a disaster. America's ability to
    compete now and in the future depends very much on our ability
    to get technology that we are so good at out into the
    marketplace, turned into viable products for people. And if we
    put any impediments in the way of getting these patents
    considered promptly, I think we run the risk of hindering our
    competitive edge, delaying developments to maintain our
    competitive edge, as well as adding nothing to the viability of
    our leadership.
        I would like to get your position, Mr. Secretary, on how
    you feel about the revenue diversion from the Patent Office. I
    know that the administration has been looking at it covetously,
    if I may say. Balancing the budget is the principal occupation
    here. I think it is important, but I think other things are
    important as well. So let me not bias your view. [Laughter.]
        Secretary Daley. We do obviously have great concern about
    the Patent Office in the sense that we share the same concern
    about these sorts of delays that may occur. We do feel
    confident that for the year 1998 the revenue request, which is
    only about 1 percent less than what it was last year will not
    have any deleterious effect on the operations in 1998.
        Obviously, when we begin to go beyond that, there is the
    concern about delays in our ability to grant patents. Bruce
    Lehman runs a great shop. We are taking a look at it to try to
    strengthen this to take the PTO and make it a performance-based
    organization. There is legislation that obviously you have been
    involved with that has been introduced and marked up in the
    House, H.R. 400. We have talked to the committee and the
    Members, the sponsors of that legislation about their concerns
    also about the funding needs for PTO. We share the same
    concerns you have.
        As I said, for 1998 we think we are able to keep the fine
    service that we have given our taxpayers. We have talked to
    Chairman Hyde on the House side about that legislation to see
    if we can work out some arrangement for out-years. But we
    believe a PBO, performance-based organization, will make PTO
    operate better, keeping the policy functions within the
    Department, and be able to run basically the backroom
    operations in a more businesslike manner. But we share the same
    concerns you have, sir.
        Senator Lautenberg. Mr. Secretary, however, based on the
    expected revenue stream and, again, if there is a diversion,
    would it be correct for me to say that you have not been able
    to put the full complement of examiners that you need in the
    Department in place, that prospects for keeping staff at a full
    performance level are decreasing? What does that do to the
    process of moving patents along?
        Secretary Daley. Well, obviously, we would have to look at
    the personnel situation. We would have to look at some of the
    plans which we already have for purchase of new equipment and
    more modern technologically advanced equipment that would help
    the process along and shrink the pendency periods. All of those
    would be issues that we would have to reexamine if these funds
    are not there and see if we could manage ourselves better
    through that. Obviously, it is a major sum of money.
        Senator Lautenberg. Mr. Secretary, I do not want to put you
    at odds with the President, but if, in fact, it appears that
    the Patent Office will not be able to have the complement of
    skilled personnel that it needs, the diversion of funds will
    present an obstacle to good, efficient service, then I would
    say this: You would have to make that as clear as you possibly
    can so that we can focus on the costs of not doing it fully,
    not funding it fully, because it is not without some pain.
        I come from a State that has the third highest patent
    production in the country. We are ninth in size, but we are a
    highly technological place. And we need to be able to move
    these things along, I think. Again, it is not only New Jersey,
    but it is very much the country that depends on our capacity to
    be able to get things patented and registered, protect the
    efforts with rewards that ought to be there. And if we do not
    have it, it presents a situation, one that I am prepared to
    take up the struggle for. I hope that you will be able to make
    the case--again, not wanting to put you in a difficult
    position.
        Secretary Daley. I appreciate not wanting to get me at odds
    with the President after 5 weeks on the job.
        Let me just mention one thing that has been noted to me,
    Senator, and that is the revenue stream as it exists under our
    budget plan. In 1998, the revenues will be $656 million; by the
    year 2000 it would rise about 40 percent to $900 million. So it
    is a rather substantial rise. But we do share the same concerns
    you do, and the people at PTO obviously do, trying to keep some
    of these potential increases under control.
        Senator Lautenberg. You have looked at my legislation to
    make the Patent Office a Government corporation.
        Secretary Daley. Yes.
        Senator Lautenberg. Have you reviewed it enough to comment
    on it at this juncture?
        Secretary Daley. I would like to refrain from commenting
    specifically on it yet, Senator. I have just begun to be
    briefed on it and would like to work with you and your staff to
    try to provide comments on it.
        Senator Lautenberg. I would look forward to that. Thanks,
    Mr. Chairman.
        Senator Gregg. I am going to exercise the prerogative of
    the Chair, if that is all right, and recognize the chairman of
    the committee, who is kind enough to join us. Although we do
    work by first-come, first-served, if you have questions----
        Senator Stevens. I have no specific questions right now. I
    was just trying to get a feel of what was coming off here.
        Thank you very much.
        Senator Gregg. Senator Inouye.
        Senator Inouye. Thank you very much, Mr. Chairman.
        Before I proceed, I believe that this is the first meeting
    that Senator Hollings has missed since he has become a member
    of this subcommittee, and he has asked me to convey his regrets
    and apologies. But as you know, he is very busy at this moment.
        Senator Gregg. He is amending the Constitution; that takes
    a higher priority. [Laughter.]
        Senator Inouye. But, Mr. Secretary, he wanted to be here,
    and he sends his best wishes to you, sir.
        Secretary Daley. Thank you.

                                    Tourism

        Senator Inouye. I have several questions. If I may, I would
    like to submit them in writing. But I will ask a couple of them
    at this point.
        Tourism is the world's largest industry. I think last year
    it brought in about $3.8 trillion and hired more than 250
    million people. We are considered about the wealthiest in the
    world, and yet we spend less per capita than just about every
    country in the world. Vietnam spends more than we do, and
    Burma, of all places, spends more than we do. Russia, which is
    supposed to be on the verge of bankruptcy, I think spends about
    10 times what we do. The Irish spend about 14 times what we do.
        I am wondering if we cannot recognize the importance of
    this industry and give it a little boost.
        Secretary Daley. Senator, I know we had this conversation
    in one of our meetings, and I appreciate your bringing it up
    again.
        I had the opportunity about 2 weeks ago to speak at the
    Travel and Tourism dinner. There were about 1,400
    representatives, a very enthusiastic group. They brought up
    some of the same concerns. I reiterated to them this
    administration's commitment in looking for opportunities which
    we can promote. Obviously, it is the industry which does, as
    you say, employ a tremendous number of people. It also provides
    tremendous entry level opportunities for people today. The
    tourism industry has also been very supportive of the
    President's plans to try to move people from welfare to work.
    There are real opportunities there.
        As you know, there was a White House conference last year
    on travel and tourism, and we are looking for ways to implement
    some of the recommendations from that.
        I made the suggestion in our trade mission review that we
    make sure that those members of the travel and tourism industry
    take a look at some of these missions to see if there are
    opportunities for them to join me and other missions that go
    out of our Department. We must make sure that we can spread the
    word about the opportunities for people around the world to
    come here. Obviously, it is a big business, and we share the
    same concerns you do.
        I am very much committed to spending time on this issue
    because it is a major employer. It was described to me as kind
    of the Rodney Dangerfield of sectors. Other sectors get much
    more publicity than the travel and tourism industry does, but
    there are few that employ and give the opportunities for job
    advancement from entry level to the senior positions in the
    travel and tourism industry.

           Public broadcasting facilities, planning, and construction

        Senator Inouye. It gives me some hope now.
        For the past 25 years, as you know, the Congress and this
    Nation have supported public broadcasting, and one of the
    important programs in public broadcasting is what we call PTFP,
    facilities programming. I note that your fiscal year 1998
    budget does not include any funding for this program, and for
    fiscal year 1997, though we appropriated $15 million in grants,
    none of these grants has been awarded. And yet I gather that
    you have already received over 220 applicants.
        Why is this being held up?
        Secretary Daley. To be honest with you, Senator, I do not
    know the answer as to why it has been held up. I do know that
    we have not moved forward with the $15 million program. We
    obviously have tremendous support. The administration supports
    public radio and television to make sure it is available to
    all. Right now public television is available to about 90
    percent of the population and public radio to about 85 percent.
    So there has been pretty much total saturation. I do not know
    the answer, and I will get back to you as to why those grants
    have not been awarded.
        Senator Inouye. I would appreciate that. I thank you very
    much. And, Mr. Chairman, if I may, I would like to submit some
    written questions.
        Senator Gregg. Absolutely. Of course.
        Senator Inouye. Thank you, sir.
        [The information follows:]

                           Awarding 1997 PFTP Grants

        The filing deadline for the 1997 grant round was February
    12, 1997. A total of 220 applications is received. We
    anticipate awarding the fiscal year 1997 grants in mid-August
    1997.

        Senator Domenici. Mr. Chairman, might I inquire, are we at
    a point where the Secretary has already testified?
        Senator Gregg. Yes; the Secretary was kind enough to give
    us his thoughts, and now he is taking questions.
        Senator Domenici. Well, first, Mr. Secretary, I hope you
    are still enjoying your job. [Laughter.]
        Secretary Daley. I am.
        Senator Domenici. I have not had a chance to meet with you.
    On two occasions, you were so gracious and were scheduled to
    come to my office, and I had to break the appointments. I try
    my best. Perhaps when a couple more months pass, you will not
    need to talk to me. You will have everything you need, and you
    will not hear----
        Senator Gregg. The day you do not need to talk to Senator
    Domenici is the day you are in big trouble.
        Secretary Daley. I will probably be out of a job then.

                               Budget restraints

        Senator Domenici. No; I tell you, I do not know what our
    chairman said, but I want to tell you something that I really
    believe. I thought there was a chance to get a budget agreement
    with the President. However, after what I have heard over the
    last 36 hours, I do not think there is a chance of getting an
    agreement with the President.
        Now, I note with interest that your Department's budget has
    a 12.5-percent increase--12.4 percent I think is the right
    number. Well, as much as I like you and would hope you would
    have a great 4 years, I want to tell you there is hardly a
    chance that you are going to get a 12-percent increase. In
    fact, I am looking at the prospect now that the discretionary
    accounts may be lucky to get a freeze. It is not fair to just
    tell you that, and it is not fair to say that here in front of
    all these people without telling you a little more.
        The problem is that the President's budget does not cut
    discretionary spending until the last 2 years of his 5-year
    budget. Second, the President does not have very many
    entitlement restraints in his budget--very, very small amounts.
    In fact, what he thought he had has already been cut one-fourth
    by the Congressional Budget Office in its reestimate of the
    President's budget request.
        Now, I am preaching the Gospel to you. You already know the
    Gospel, Mr. Chairman. I think it is good to make sure some of
    these people take back to this administration the fact that we
    do not have very many ways to go. I wish there were a lot of
    ways to go.
        Senator Gregg. Before your arrival, Senator, I made the
    same statement, but I think it resonates a little better coming
    from the chairman of the Budget Committee.
        Senator Domenici. Well, I do not want to be repetitious.
        Senator Gregg. No; please continue. It is excellent.
        Senator Domenici. I tell you, when we do not have a chance
    to take the part of this budget that is out of control and do
    something about it, and we are being asked to increase almost
    every single domestic program around, except maybe Veterans,
    NASA, Transportation, and a few others, then I think it is
    right to tell you, even though you are not responsible for any
    of that, what at least this Senator sees as the reality of it
    all.
        I will not go any further, but I will say in addition that
    it is interesting that if we were to freeze spending, then your
    accounts are going to be in the same bucket with accounts that
    are very popular, like the Justice Department and the FBI. You
    understand what that means. Those are not going to be frozen.
    They are going to go up. Who is going to freeze the DEA and the
    FBI? So what happens? It means you have got to take it out of
    some of these other programs that are in this subcommittee's
    jurisdiction. That is the problem when we have them up against
    each other competing for funding.

                                 BXA encryption

        Now, that is enough of that. Could I ask about encryption
    for a minute, or do you want to comment? I should not cut you
    off.
        Secretary Daley. I will convey your comments. Obviously,
    Senator, we would hope that there can be an agreement reached
    and obviously that we could move on and get back to good
    relationships.
        Senator Domenici. Well, for those around here who wonder
    where I have been--I will not say more about the President's
    budget--they may find out here. My time might have arrived to
    say more about it. I thought we were working on something, so
    since we may not be, the public may learn a little more about
    that budget.
        On encryption, would you provide the justifications used by
    the administration for limiting the export of stronger
    encryption software products?
        Secretary Daley. Senator, this has been an ongoing
    situation in trying to balance obviously the competitive needs
    of American businesses to export a product that we are the
    leaders of the world with, and at the same time, legitimate
    national security and law enforcement concerns. And we think we
    have come up with a pretty good plan, a key recovery plan,
    which can work. There have been four licenses granted, and we
    think that, after much discussion with the industry, we have
    come up with a plan. It is not a perfect plan, but it is an
    attempt to try to balance both of these important needs and
    concerns.
        As you may know, President Clinton appointed David Aaron
    the Ambassador of Cryptology to discuss with other nations what
    sort of protections and their concerns on this issue. He has
    gotten pretty good response in his discussions, no specific
    actions, but my understanding is we plan to provide briefings
    on our key recovery plan next week on the Hill for the Members.
        Senator Domenici. I have five questions on the subject. I
    will submit them for the record. Will you answer them as soon
    as you can?
        Secretary Daley. Yes, sir.
        Senator Domenici. On the census, I think we have clarified
    that the Bureau of the Census is going to collect information
    on minority- and women-owned businesses. Have you all the money
    now in hand, or do you still need more money from the Small
    Business Administration? Do you know?
        Secretary Daley. I do not know the answer to that.
        Senator Domenici. Can you get us an answer? We think they
    have been bothered enough on contributing to the census.
        Secretary Daley. My understanding is we will have to
    reprogram some funds in 1997.
        Senator Domenici. Can you tell us for the record how much?
        Secretary Daley. Yes.
        [The information follows:]

        Work is continuing on the Survey of Minority-Owned Business
    Enterprises (SMOBE) and the Survey of Women-Owned Business
    Enterprises (SWOBE) in fiscal year 1997. In fiscal year 1997,
    the Administration proposed that SWOBE be funded by SBA, and
    SBA is submitting a reprogramming to this effect. Census will
    continue to do the SWOBE on a reimbursable basis. SMOBE is
    funded by the Census Bureau for both fiscal years 1997 and
    1998. Both surveys are done in conjunction with the five year
    Economic Censuses. For fiscal year 1998, funding for SWOBE is
    requested as part of the SBA budget request and SMOBE is part
    of the Census budget request.

                      proposed termination of PTFP program

        Senator Domenici. I have a number of additional questions,
    but I wonder, Mr. Chairman, are you interested in proceeding
    with some dispatch?
        Senator Gregg. Please, if you want, we have plenty of time
    for you, Senator. Whatever you desire is fine with me.
        Senator Domenici. Well, let's talk for just a minute about
    the Public Telecommunications Facilities Program. Do you have
    that somewhere there?
        Secretary Daley. Yes.
        Senator Domenici. The budget justification documents
    indicate that the administration proposes to terminate the
    Public Telecommunications Facilities Program, stating that the
    support for public television and radio broadcasters will rest
    with the Corporation for Public Broadcasting.
        Could you explain that to us?
        Secretary Daley. My understanding is we have provided
    support to make public radio and television available to all.
    Public television is available to about 90 percent of the
    population, and public radio to about 85 percent. So we are
    eliminating a $15 million program, but obviously support public
    radio and television in other forms.
        Senator Domenici. Well, the problem for my State, and I
    think the State of the distinguished Senator from Alaska, who
    chairs the Appropriations Committee, I think we have some of
    the sort of last of the Mohicans. We have some, especially
    among our Indian people, that have not yet been able to do
    this. We think that they deserve some consideration, and I
    assume in marking up the bill we will have to take that into
    consideration.
        I should not be one who is complaining if you finally get
    down to terminating something, but I do raise the concern.

                status of the Trade Compliance Center initiative

        What is the status of the Trade Compliance Center
    initiative?
        Secretary Daley. This was announced last summer by
    Ambassador Barshefsky and Secretary Kantor. We are committed to
    strengthening the center to make sure that we have one facility
    where we can gather all these agreements that have been reached
    to make sure that in this one organization we are able to find
    out whether or not these agreements are being lived up to and
    the American business community would have a place to come to
    to try to get an analysis of the agreements. It is moving
    forward.
        Our commitments that have been made as far as personnel
    will be reached by the end of this year. Our commitment is to
    have 25 people in the compliance center operating. Our first
    task is to try to gather the data base and to input the
    information on our trade agreements. We are committing $2.5
    million and 25 people to the center.

                           Patent and trademark fees

        Senator Domenici. Well, this is my last question, and this
    one concerns me greatly. It has to do with the patent and
    trademark fees. Has anybody asked about that?
        Senator Gregg. Senator Lautenberg brought that up. Yours
    may be a different topic.
        Senator Domenici. Well, I guess I am interested in knowing
    how the Patent and Trademark Office is going to deal with
    reduced resources that are going to result under the
    President's proposal, which we understand is to hold $92
    million in surcharges in reserve in 1998 and $119 million in
    reserve thereafter, which, in effect, means that the President
    would spend the surcharges on some other program.
        Now, I am not sure this is right, but those who pay the
    fees say they are told by their PTO officials that this
    proposal will cancel plans to hire 500 new patent examiners and
    will more than double the patent waiting time, which already, I
    understand, is at 20 months.
        Secretary Daley. My understanding, Senator, is that
    obviously there is concern that using some of the surcharge for
    deficit reduction has been going on for a couple of years. The
    current request, which is $656 million, is only 1 percent less
    than last year, so for 1998 we think there will be no
    deleterious effect upon the operations.
        We have concerns. We have a higher increase, I believe, in
    PTO, but we share the same concerns. We are moving forward with
    legislation and working with the Hill to create a PBO,
    performance-based organization, out of PTO which will,
    hopefully, make it more effective. We are also discussing with
    Senator Lautenberg and House members who have bills similar to
    that which we are trying to accomplish which do address the
    surcharge question. We will try to work with Congress to come
    up with a way to guarantee that the same level of performance
    that we have been giving to the American people remains. It is
    a major concern to us also.
        Senator Domenici. Well, I hope you understand that
    sometimes in the bowels of these big departments like yours,
    little entities that are very, very vital--and this PTO is
    one--that has to be run well. It has to have sufficient
    talented people. I for one can think of a lot of places I would
    like to see with less personnel than the Patent Office that has
    already taken 20 months on average to process a patent. This is
    vital. So I assume you are worried if you are concerned about
    keeping that a first-class operation.
        Secretary Daley. Yes, sir, we are. And as I say, we are
    confident for 1998 there will be no negative effect. There will
    have to be management issues addressed, whether it is personnel
    or whether it is purchases of new equipment that have been
    planned if we do not additional funding. But as of right now,
    we feel confident that the same level of professionalism can
    continue.
        Senator Domenici. Is the Bureau of Labor Statistics in your
    Department?
        Secretary Daley. No, sir; it is in the Department of Labor.
        Senator Domenici. I have some additional questions. I will
    submit them. Thank you very much, Mr. Chairman. Thank you, Mr.
    Secretary.
        Secretary Daley. Thank you, Senator.

                               Management issues

        Senator Gregg. We have about 31,000 people who work at
    Commerce. Is that right?
        Secretary Daley. Yes, sir.
        Senator Gregg. How do you translate policy where you have
    had fairly--this is not unique to this administration--but you
    have a fairly consistent turnover in the leadership of Commerce
    down to the operating level and staff level of an agency that
    large? What is your game plan for getting that sort of
    responsiveness, finding out where it works, and where it does
    not?
        Secretary Daley. After 5 weeks of being there, Senator, it
    is one of the challenges that I see. Obviously, you do it
    through the structure. We have a structure with about five
    Under Secretaries, most of whom have been in this Department
    now for just about all the 5 years. We will be announcing,
    hopefully, shortly, a Deputy Secretary who will basically take
    the role of a chief operating officer to be involved in a lot
    of management issues, many of which have been questioned by the
    Hill when there have been questions about the Department.
        It is probably the single biggest concern of someone like
    me coming into a Department that has such diverse pieces within
    it, how you communicate with your employees and how you make
    sure that the missions that they are charged with by the
    Congress are lived up to. So we will be bringing over a new CFO
    and Assistant Secretary for Administration. Ray has done a
    wonderful job, but he wants to go back to his home at NIST. And
    also a new chief information officer to help us try to
    communicate, quite frankly, with our employees. But it is the
    single biggest management problem.
        I have made a point of stressing to the Under Secretaries
    and the Assistant Secretaries that policy alone is not how they
    will be judged, but they will be judged on what sort of
    management techniques they use and how effective they are in
    making sure that the level of service to the American taxpayers
    and citizens is second to none and is the same level that
    builds businesses that we so often interact with and are so
    good at communicating with their customers, that we are more
    reflective of them than maybe what we have been. It is the
    biggest challenge I have.
        Senator Gregg. Well, I think it is. I know it is your
    biggest challenge, and obviously it will be the biggest reward.
        Secretary Daley. Also, Mr. Chairman, I have also begun a
    series of meetings and conversations with a number of the
    business leaders who have been successful at restructuring
    organizations and communicating better with their employees and
    making sure that they communicate better with their customers
    in trying to learn from their experiences to see if we can
    duplicate any of that in the Department.
        Senator Gregg. Senator Bumpers, did you have any thoughts
    or questions?

                           effect of PTFP in Arkansas

        Senator Bumpers. Mr. Chairman, I would just like to add my
    voice to those of Senator Inouye and Senator Domenici about the
    Public Telecommunications Facilities Program.
        Mr. Secretary, when I was Governor of my State, public
    television only covered central Arkansas when I became
    Governor. I took a vow we were going to have it all over the
    State by the time I left office. Just another politician's
    broken promise. But, in any event, I did all I could do, and we
    began to get some money from the PTFP program. And, of course,
    not too long after I left office, we did, in fact, have 13
    transmitters. The whole State was covered.
        This has been a particularly helpful program to us.
    Arkansas has received about $1 million under this program since
    1992. In New Hampshire about $600,000. And those are small
    amounts of money the way we talk about money around here, but
    those small amounts do a tremendous amount of good for small
    States such as mine.

                            Weather station closings

        The second thing I want to say is I am terribly troubled
    about closing all these weather stations, and I am particularly
    troubled about the one in Fort Smith, AR. Last year the
    chairman was very generous in helping me get money for a new
    weather station to serve Fort Smith. They had a terrible
    tornado there. The damage was something like $200 million, and
    they got almost no warning.
        And so after talking with the Weather Service a number of
    times and after the tornado had occurred, they agreed to use
    some money they had, if Congress had no objection, to put a new
    doppler radar in, which, hopefully, would cure that problem.
        Fort Smith is in a very unique position, and that is 20
    miles from my home town. And I can remember when I was raising
    my family being totally dependent on Fort Smith television and
    Fort Smith weather to tell us when to go to the storm cellar.
    People who do not live in tornado alley do not know how
    terrifying that can be.
        Fort Smith suffered one of the worst tornadoes in history
    of the State back in 1980, somewhere along there. They are
    right in the middle of tornado alley, and as I say, it was
    just--it was last April, and they had this terrible tornado,
    with almost no warning whatever. And we had all that
    sophisticated doppler radar in Tulsa.
        So while they are in the process of putting up a new
    doppler radar there, which they hope to have operational on an
    experimental basis by the end of this month, we have got 160
    local weather stations scheduled for closing. The Fort Smith
    local station last year did not have the authority to push the
    button, and yet they had 150 spotters. And Fort Smith,
    incidentally, is surrounded by mountains on the southwest side;
    tornadoes always approach cities in Arkansas from the southwest
    moving northeast. And when I think about the tornadoes we had 2
    weeks ago, people got as much as 31 minutes' notice.
        Of course, how much notice you get all depends on the form
    of the tornado. I understand that. But everybody got between 11
    minutes and 31 minutes notice in that terrible tornado that
    went across my State about 10 days ago--sorry, 2 weeks ago this
    coming Saturday. But Fort Smith got none last year. They are
    absolutely convinced. People in that city are probably more
    paranoid than anybody in the State about tornadoes.
        Last year spotters from all over the area were calling in
    to the Fort Smith station saying, I saw a tornado on the ground
    here, and I saw a tornado on the ground there and so on. And
    yet they were not allowed to push the button to alarm and alert
    people there because that had been left to the jurisdiction of
    the Tulsa station.
        So, Mr. Chairman, I am saying that as much for your benefit
    as I am Secretary Daley's to say I think we need to look long
    and hard before we close those local stations. It is a three-
    man station, but if it would save one life over the next 20
    years, it would be money well spent, as far as I am concerned.
        Those are my sentiments, Mr. Chairman.
        Senator Gregg. OK. Obviously you are concerned about
    adequate tornado warnings--something this community takes very
    seriously. We appreciate that. Did you want to comment?
        Secretary Daley. We obviously share the same concern,
    Senator. There have been public comment periods. We share the
    same sensitivity. We are very proud of the fact that the
    warnings gave people in most areas sufficient time in this last
    tornado, and my understanding is that Nexrad will be built in
    Fort Smith. I do not know the time this will be finished and
    operating next month.
        Senator Bumpers. We are very grateful for that. Don't
    misunderstand me.
        Senator Gregg. Well, we appreciate your being here. I did
    notice, in going through the numbers, that the National Oceanic
    and Atmospheric Administration [NOAA] number was increased by,
    I think, $103 or $107 million. I have a sense--and you do not
    need to comment on this--that that was done out of a bit of
    gamesmanship. This committee, as everybody knows, is very
    committed to having a strong NOAA. The problem is, of course,
    when those things happen, this committee is going to put the
    money back. We are going to make sure that NOAA is adequately
    funded. But it comes out of other accounts in an arbitrary way
    rather than in a way that might be consistent with policies
    which you might be most comfortable with. My suggestion would
    be that your pencil pushers go back and take a look at that and
    figure out where they want that money to come from.
        Secretary Daley. My understanding, Mr. Chairman, is that
    NOAA is increased by $79 million in our 1998 budget.
        Senator Gregg. We have it down at $103 million. We will
    have to check that. If that is the case, we will be happy to
    correct our thoughts on that.
        Secretary Daley. Fine.

                         Additional committee questions

        Senator Gregg. I would ask unanimous consent that questions
    given to me by a variety of Senators also be included in the
    record. I believe there is no objection.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
                Questions Submitted by Senator Pete V. Domenici
                                   encryption
        Question. Secretary Daley, as you are well aware, we must do all we
    can to help American companies compete in the global marketplace. With
    the emergences of new telecommunications technologies and the
    Information Superhighway, we are now finding a small store in New
    Mexico is no longer limited by its location. In fact, by using the
    Internet this shop owner can sell his or her product to people around
    the world. I am truly excited by the advances in telecommunications
    because these technologies are opening up new economic development
    possibilities in rural states like New Mexico. For these reasons, I
    have cosponsored Senator Burns' Pro-Code Encryption bill. This bill
    proposes to eliminate Commerce regulations which currently limit
    American software companies ability to export strong encryption
    software products. I support this legislation because it enables
    American software companies to compete in the global encryption market
    and will help legitimize the Internet as a secure means of conducting
    commerce.
        Would you provide the justifications used by the Administration for
    limiting the export of stronger encryption software products?
        Answer. Encryption software can be used to maintain the secrecy of
    information in ways which could harm national security, foreign policy
    and law enforcement interests. Encryption products, when used outside
    the United States, can jeopardize our foreign policy and national
    security interests. Additionally, when used by international criminal
    organizations, such products can threaten the safety of U.S. citizens
    here in the United States as well as abroad. The control of encryption
    software products is essential to promote our national security and to
    advance our foreign policy objectives, including protecting the lives
    and property of U.S. citizens.
        Question. Understanding the law enforcement concerns regarding
    stronger encryption, do you believe this policy is effective in curbing
    the criminal uses of stronger encryption? If so, can you provide
    specific examples?
        Answer. Encryption products will more and more be found operating
    within a larger communications network. A global network in
    telecommunications already exists and we can see the outlines of a
    larger global information infrastructure emerging being built upon
    this. Criminals will use this network as they use telephones today. If
    the basis of this network is recoverable encryption for e-mail, home
    banking and for transfers of data, then law enforcement will continue
    to have the access it has today, to electronic surveillance as a key
    tool for carrying out its public safety mission and combating criminals
    and terrorists.
        Question. With almost 500 different software products with stronger
    encryption capabilities being sold in over 28 different countries, how
    do you expect your policy to be effective in curbing the criminal uses
    of stronger encryption? If so would you please explain your answer?
        Answer. We disagree with the implied conclusion in this question
    that the encryption genie is out of the bottle. First, many of the
    surveys which allege widespread foreign availability of strong
    encryption are based on marketing claims and advertisements.
    Advertising is not always the best source of information on products.
    Second, we do not yet see the broad use of encryption products,
    although this may change in the next few years, but for now the use of
    strong encryption is not widespread. Finally, one important goal for
    our policy is to make sure that the growing trend in the market to use
    recoverable products in building infrastructures for electronic
    commerce is consistent with public safety and national security. A
    policy to reinforce this market trend will help channel criminal use of
    encryption and protect public safety.
        Question. Is it not true that your current policy is compromising
    our multinational companies ability to communicate and transfer
    sensitive data over the World Wide Web without fear of economic
    espionage? If not, please explain your answer.
        Answer. We currently allow very strong encryption to be transferred
    to U.S. companies and their overseas subsidiaries to avoid the problems
    of espionage and theft of intellectual property you refer to, and our
    new policy promotes the use of strong, safe encryption by U.S. firms.
    This is why we have no strength limitation on the types of recoverable
    encryption products or the kind used by most corporations which can be
    exported.
        Question. Understanding a supercomputer can break a 56 bit
    encrypted message within a day, how can you be confident your current
    policy is sufficient to protect American industries conducting business
    over the World Wide Web?
        Answer. Unfortunately, there is no easy technological fix to the
    encryption problem, and ``supercomputers'' cannot easily break 56 bit
    encryption products. Even if one accepts the ``test'' which resulted in
    the breaking of 40 bit encryption in five and a half hours by a sort of
    brute force as reliable, our estimate is that it would take more than a
    year to break 56 bit encryption and 11,000 years to break 64 bit
    encryption. This is why our policy emphasizes the need to use strong,
    recoverable encryption to protect the privacy and intellectual property
    of America in a manner which is consistent with public safety and
    national security.
      survey of minority-owned business enterprises [smobe] and survey of
                    women-owned business enterprises [swobe]
        Question. I have been approached by numerous minority and women
    business owners who are very concerned with a Bureau of the Census plan
    to discontinue collecting data on minority and women owned businesses.
    In contacting your Department to express this concern, I was informed
    that these data would in fact be collected in the 2000 census. However,
    I was disturbed to learn that the Bureau of the Census was seeking
    additional funds from the Small Business Administration to finance this
    portion of the Census. Is the Bureau of the Census still seeking
    additional funds from the SBA to continue collection of these data?
        Answer. Work is continuing on the Survey of Minority Owned Business
    Enterprises (SMOBE) and the Survey of Women Owned Business Enterprises
    (SWOBE) in fiscal year 1997. In fiscal year 1997, the Administration
    proposed that SWOBE be funded by SBA, and SBA is submitting a
    reprogramming to this effect. Census will continue to do the SWOBE on a
    reimbursable basis. SMOBE is funded by the Census Bureau for both
    fiscal years 1997 and 1998. Both surveys are done in conjunction with
    the five year economic censuses. For fiscal year 1998, funding for
    SWOBE is requested as part of the SBA budget request and SMOBE is part
    of the Census budget request.
                     consolidation of statistical agencies
        Question. The current CPI debate has made us aware of the crucial
    role economic statistics play in policy making, both in the public and
    private sector. I think we all agree on our desire to produce high
    quality statistics across the board, not just in price measurement
    alone.
        There have been suggestions that one way to improve the efficiency
    of U.S. economic data compilation is to form one main statistical
    agency which would be in charge of all federal government economic
    releases. Both Canada and the U.K. have similar organizational
    structures.
        What is your opinion of such proposals?
        What are the benefits of having data collection scattered amongst
    the Commerce Department's BEA and Census Bureau, the Bureau of Labor
    Statistics, the USDA and many others?
        Answer. There is certainly room for more active coordination among
    the Nation's statistical agencies, and consolidating these agencies
    into a single entity is one way to achieve that coordination. But mere
    box shuffling will not accomplish the goal of better statistical
    performance. Too many proposals in the last Congress were driven by the
    desire to eliminate individual departments and agencies and not by the
    goal of creating a better statistical system.
        I do not support the creation of an independent (as opposed to
    consolidated) statistical agency, as recently proposed by the National
    Association of Business Economists (NABE), because I fear that such an
    agency could quickly turn into a political orphan. An independent
    agency would lack representation at the Cabinet table, which could
    limit its ability to secure adequate resources. Moreover, an
    independent agency would lack political and administrative oversight
    and accountability. There are other, and more preferable, ways to bring
    the agencies together if that is the goal.
        What will truly improve the Nation's statistical system are
    adequate resources to continue improvements to the quality of our
    business statistics, more attention to sound management practices
    throughout the agencies, and greater cooperation by the various
    agencies.
        The Census Bureau and the Bureau of Economic Analysis share the
    same constituency that the Commerce Department exists to serve, the
    American business. The data produced by these agencies is a vital
    component of the competitiveness of U.S. businesses both large and
    small. It is not surprising that STAT-USA, the information
    dissemination arm of the Economics and Statistics Administration, is
    logging tens of thousands of calls a month. Where better for these
    agencies to reside than the Department that is solely committed to
    increasing the competitiveness of American business in today's global
    economy.
        In sum, the Congress, the Commerce Department, NABE and other
    organizations and businesses share the same goal of improving the
    organization, management, priorities and funding of our statistical
    agencies. I hope that we can work together to pursue these ends.
        Background.--The Administration and the heads of the various data
    collection agencies have opposed consolidating the current statistical
    agencies into one main group. As a substitute plan, the Administration
    sent a legislative bill to the 104th Congress which would permit data
    sharing among the agencies. It is entitled the ``Statistical
    Confidentiality Act'' and will be resubmitted in the 105th Congress.
        NABE has been the most recent group to call for a consolidated
    statistical agency.
                         economic statistics initiative
        Question. Mr. Daley, the Department of Commerce is continuing an
    initiative started in the Bush Administration (then known as the
    ``Boskin Initiative'') that has as its goal the improvement of the
    quality of data collected that are essential to businesses and policy
    makers. Although CPI bias makes most of the headlines today, there is
    clearly a need for continued improvement in all of our economic
    statistics so they better reflect the increasing role that technology
    and services play in our economy.
        With the Department's budget, both the Bureau of the Census and the
    Economic and Statistical Analysis would receive increased funding under
    such an initiative.
        Does the Administration's 1998 budget request specifically continue
    the ongoing economic statistics improvement initiative within the
    Department of Commerce?
        Answer. Yes. The Administration's fiscal year 1998 budget request
    seeks to get the Mid-Decade Strategic Plan initiatives of the Bureau of
    Economic Analysis (BEA) back on track.
        Following its landmark Mid-Decade Review, BEA reprogrammed its work
    in fiscal years 1995-96, shedding some important, but lower priority
    programs to make a down payment on the most critical of its Mid-Decade
    initiatives. As a result, it made significant progress in implementing
    its strategic plan for improving the national, regional, and
    international economic accounts.
        For fiscal year 1997, however, no new funds were appropriated, and
    BEA has exhausted the opportunities for making additional cuts in
    existing programs without jeopardizing its core statistics. Thus, BEA
    has been unable to undertake any of the major new projects proposed in
    the fiscal year 1997 budget and is concentrating its efforts instead on
    building upon last year's improvements. It has, for example, extended
    the improvements made to GDP in fiscal years 1995 and 1996 to its GDP
    by industry estimates and will soon extend them to its capital stock,
    gross state product, and international estimates.
        Now that we are at the point of completing the improvements already
    in the pipeline, our users are growing restless, waiting for us to go
    further in implementing our strategic plan. The National Association of
    Business Economists, which has been a staunch supporter of BEA's plan
    and of the improvements to date, has nonetheless noted that ``lack of
    investment in statistical infrastructure has left us with a system that
    does a better job of measuring the industrial economy of the past than
    the information economy of the present.'' Business Week has published
    articles and editorials chiding BEA for not moving faster with quality
    adjustments for high-technology goods and for its failure to develop
    estimates of the value of computer software. The funding we have
    requested for fiscal year 1998 will permit BEA to begin work on these
    and the other major new initiatives which had to be placed on hold last
    year, as outlined in our budget request.
        Question. You have requested an increase of $313 million for work
    on the Census 2000. Will this amount allow you to avoid the errors
    inherent in the 1990 census? (Aside: The original 1990 census had a
    problem with undercounting).
        Answer. The Bureau has requested an increase of $270 million for
    work on the Census 2000. The fiscal year 1998 request is an integral
    part of the Bureau's plans for Census 2000 that will produce a more
    accurate and less expensive Decennial Census with a one-number census
    that is right the first time. The requested increase will allow us to
    work on the following activities that have been improved or
    reengineered to correct problems we experienced in the 1990 census:
        Address List Development.--The requested funding level will allow
    the Bureau to begin compilation of the Census 2000 address list in
    areas where the U.S. Postal Service does not deliver mail using house
    number/street name addresses; basically, in small towns and rural
    areas. The Census Bureau expects to complete this listing in fiscal
    year 1999, which will allow local and tribal governments to review the
    addresses for their jurisdiction beginning in January 1999.
    Partnerships with local and tribal governments in reviewing the address
    list is a critical component in obtaining a complete and accurate
    address list and, ultimately, in obtaining an accurate census.
        Field Data Collection and Support Systems.--The requested funding
    level will allow the Bureau to open, set up, and staff temporary field
    offices called regional census centers (RCC's) and census field offices
    (CFO's). These temporary offices are needed to accomplish the improved
    address listing work.
        Testing, Evaluation, and Dress Rehearsal.--The requested funding
    level will allow the Bureau to deploy the full range of Census 2000
    activities in the dress rehearsal. Analysis of these operations in a
    dress rehearsal setting is vital for refining multiple mail contacts,
    telephone assistance, effective advertising, community-based outreach,
    and other operations, especially those designed to improve the accuracy
    of Census 2000 relative to 1990.
        Census Marketing, Communications and Partnerships.--The requested
    funding level will allow the Bureau to perform extensive work with a
    contractor(s) to develop the Census 2000 advertising campaign. The
    campaign is being designed to reduce the number of households that do
    not respond to the questionnaire mailings and require costly follow-up
    visits by targeting people who might not respond otherwise. Experience
    from the 1990 Census shows that when awareness of the Census increases,
    response rates are higher. In addition to looking at how messages
    should be strategically placed on radio, in magazines, on TV, and other
    media, the Census Bureau will hire ``partnership specialists'' who will
    work with state, local, and tribal governments, as well as with
    community organizations, businesses, churches, schools and local media
    to make people more aware of Census 2000 and to encourage response to
    the census. Information obtained from the dress rehearsal will be used
    to refine the campaign for Census 2000.
        Question. What has been accomplished by the Census Bureau under the
    economic statistics initiative to date? What are your primary programs
    going forward? (Aside: In fiscal year 1998, Census will start to
    implement a re-classification of industrial codes).
        Answer. Within available funding levels, we have implemented cost
    efficiencies in order to redirect funds to improve some of our
    remaining economic statistics programs. We have:
      --Provided significant staff support for the development of the North
            American Industry Classification System (NAICS), the first
            total revision of the Nation's industrial classification system
            in more than 50 years. Canada, Mexico, and the United States
            formally adopted NAICS on December 10, 1996. The 1997 Economic
            Census is the critical first step in implementing the NAICS in
            the Census Bureau's economic programs.
      --Expanded coverage for the services sector by increasing the number
            of industries covered by the Service Annual Survey, as well as
            by providing receipts information for additional 4-digit
            service industries, new data for tax-exempt firms in selected
            service industries and receipts-line information for some
            presently covered industry groups.
      --Implemented the Annual Capital Expenditures Survey, the
            Government's first statistically rigorous survey of business
            investment, and initiated a reorganization of our investments
            program to eliminate duplicate requests while ensuring that
            data user needs are fully met.
      --Developed a monthly trade statistics release that now covers both
            merchandise trade and trade in services.
      --Implemented alternative data collection techniques for the
            Manufacturers' Shipments, Inventories and Orders Survey as well
            as developed large company information profiles to increase and
            improve future survey cooperation.
      --Provided estimates of nonresidential reconstruction through an
            ``add on'' to a Department of Energy survey of commercial
            buildings.
      --Worked jointly with the Bureau of Labor Statistics (BLS) to improve
            business list information through BLS-SSEL (Census' Standard
            Statistical Establishment List) business list match operations.
      --Improved the quality of our data on exports to Canada as well as
            reduced the reporting burden on American exporters by
            exchanging trade data with Canada (using Canadian import data
            for U.S. export data and vice versa).
      --Implemented a system to provide establishment data to the Bureau of
            Economic Analysis (BEA) to be matched with BEA's foreign direct
            investment data to enhance significantly the analytical
            usefulness of the Government's data on foreign direct
            investment.
      --Began implementation, in conjunction with the U.S. Customs Service,
            of the Automated Export System (AES), a system to automate
            totally all export reporting.
      --Participated with other Government agencies in the development of
            legislation that provides for data sharing among Federal
            statistical agencies. The legislation was introduced in the
            104th Congress.
      --Implemented a new sample for the Advance Monthly Retail Sales
            (MARTS) survey which nearly doubles the sample for the
            automotive group. With the new sample, we have reduced
            revisions for retail sales and the automotive group. Next fall,
            we plan to select another new sample based on the results of
            the 1992 Economic Census.
      --Improved the estimates of private nonresidential buildings for the
            Value of New Construction Put in Place series resulting in an
            additional $25 billion for total private nonresidential
            buildings in 1995. In addition, we changed the methodology for
            calculating the monthly price index for single-family houses
            under construction. These revisions bring our series in line
            with BEA's series on fixed investment which was included in
            their recent benchmark revision.
        Many activities remain to be done, including:
      --Continue improvements to key economic indicator data, specifically:
        --Increase the sample size for the advance monthly retail trade
                survey to further reduce sampling error and monthly
                revisions.
        --Reevaluate the scope, content and conceptual measure of wholesale
                trade, and implement improvements to the program based on
                the current characteristics of wholesalers, their
                operations and practices. Current measurement concepts have
                not kept pace with changes taking place in wholesale
                distribution industries.
        --Continue improvements to the construction statistics program in
                the areas of nonresidential building construction
                expenditures and pricing information, as well as research
                into techniques and methods to measure construction at
                manufacturing and industrial sites. These initiatives
                address serious deficiencies in the measurement of
                nonresidential construction; we currently are missing $20
                billion of activity in this sector.
      --Continue improvements in the coverage of the services sector, the
            fastest growing segment of the economy, by: (1) implementing an
            annual survey of the information sector--data currently
            available only every 5 years; (2) implementing annual surveys
            of the insurance and real estate industries--data currently
            available only every 5 years; and (3) introducing coverage of
            corporate financial data; there is currently no data available
            for the service industries.
      --Implement fully NAICS in the current economic programs. Additional
            funding is critical given that in fiscal years 1995 through
            1997, we requested $11.5 million for NAICS but received
            appropriations of only $1 million. Lack of funding would
            jeopardize implementing NAICS into current economic surveys.
      --Reduce respondent burden by expanding use of electronic reporting
            and administrative data; by modernizing and augmenting our
            computerized business register file as the first phase of re-
            engineering the collection of data by better matching data
            requests to company record keeping practices, and by developing
            new sampling methodologies that spread reporting burden more
            equitably among small firms. Failure to implement innovative
            methods that reduce reporting burden would jeopardize our
            history of high response rates.
        Question. How much of this year's additional, overall funding
    request would go toward the economic statistics initiative?
        Answer. The current economic statistics request for the Census
    Bureau does not include any additional funds for improvements in
    economic statistics. Rather, all funds would be used towards funding
    base economic statistics programs. However, the fiscal year 1998
    request does include funding for the 1997 Economic Censuses and Census
    of Governments. These mandatory censuses form the backbone of economic
    data for the next five years. They are cyclical in nature, and are not
    program increases.
        Question. Within the $6 million increase requested for the Economic
    and Statistical Analysis division, how much would be devoted to the
    economic statistics initiative?
        Answer. Within the $6 million increase requested for the Economic
    and Statistical Analysis budget, $3 million will be devoted directly to
    the statistical improvement work outlined in BEA's Mid-Decade Strategic
    Plan and $1.3 million will be used to complete the migration of BEA's
    computer systems to the state-of-the-art local area network environment
    embodied in BEA's Information Technology Strategic Plan. An additional
    $1.8 million will be devoted to adjustments to base reflecting the
    increasing costs for personnel and equipment that will allow us to
    maintain our pared-down base program unharmed.
        Question. In your Mid-Decade Strategic Plan, you laid out an
    ambitious agenda for improving the quality of output and price
    measures. Which of these initiatives do you hope to pursue in fiscal
    year 1998?
        Answer. Our fiscal year 1998 budget request would allow the Bureau
    to move ahead aggressively with the next steps in its strategic plan,
    which include improving our measures of high-tech goods and financial
    services, implementing the new North American Industry Classification
    System, developing estimates of the value of investments in computer
    software, and addressing newly emerging or growing gaps in
    international finance and trade in services.
        Despite a lack of funds, BEA has thus far made substantial progress
    on our plan for improving the accounts, and our work has been well
    received. In fiscal years 1995-96, by reprioritizing our work, we
    implemented several major improvements in the quality of output and
    prices outlined in our Mid-Decade Strategic Plan. For example, we
    introduced annually updated, chain-weighted indexes for real GDP and
    prices, and quality-adjusted and updated price indexes for
    semiconductors and hospital care, which have won high praise from
    academics, business economists, and the business press for addressing
    many of the same issues now plaguing the Consumer Price Index (CPI).
    Indeed, BEA has come to be regarded as the world's leader in this area:
    The Federal Reserve recently switched to BEA's ``chain-index'' method
    for its index of industrial production, the Bureau of Labor Statistics
    (BLS) is going to start publishing alternative measures of changes in
    the cost of living ``similar to that used in the chained-price indexes
    in the National Income and Product Accounts,'' and a number of G-7 and
    other countries are looking to BEA for leadership and advice in moving
    to chain indexes.
        In fiscal year 1997, BEA has been unable, without additional
    funding, to undertake any of the ambitious new projects that were
    proposed in its fiscal year 1997 budget request. However, as noted
    earlier, we have been able to make good progress in following up on
    projects already in the pipeline.
        Unfortunately, we have not been able to accomplish as much as we
    could have were additional funding available. The Administration's
    fiscal year 1998 budget request would get BEA's Mid-Decade Strategic
    initiatives back on track. Without such funding, BEA's efforts will
    increasingly focus on marginal extensions of earlier efforts. In the
    meantime, the gaps in coverage will only grow larger, as existing
    problems worsen and new problems emerge as the economy grows and
    changes.
        As I recall, the original economic statistics improvement
    initiative was envisioned to cost $230 million over a five-year period
    (fiscal years 1992-1996) with most of the funding going to agencies of
    the Department of Commerce, the Departments of Labor and Agriculture as
    well as to the National Science Foundation.
        Question. Could you provide for the record, an update on the
    Administration's plan to carry out this program, including the funding
    provided to date, the current estimate of the total cost, and funding
    projections for the next five years?
        Answer. During the period fiscal years 1992-97 the Bureau of
    Economic Analysis, part of the Economic and Statistical Analysis budget
    account, requested appropriations some of which were a repeat request
    for funds turned down in prior years totaling approximately $39 million
    for its economic statistics initiative. During this period, however,
    only $2.6 million has been appropriated and another $6.3 million
    provided via reprogrammings and transfers. For fiscal year 1998, we are
    requesting a permanent increase of $6.2 million, which, except for
    cost-of-living increases, should go a long way toward enabling BEA to
    maintain the level of improvements necessary to keep up with the
    rapidly growing and changing U.S. economy in the foreseeable future.
    The funding projected for next five years for ESA maintains the fiscal
    year 1998 requested increase of $4.3 million for the Economic
    Statistics Improvement initiative. The outyear amounts for this
    initiative will be reevaluated based on need with each budget request
    cycle.
                            trade compliance center
        Question. Mr. Secretary, in the Fiscal Year 1997 Commerce, Justice,
    State, and the Judiciary Appropriations Act, Congress provided $2.5
    million to establish a Trade Compliance Center within the Department.
    At the time, I thought this was a good idea, and I have advanced some
    of my own initiatives to improve our ability to assist businesses
    working across the border and to monitor trade activities.
        Could you tell the Subcommittee the status of the Trade Compliance
    Center initiative?
        Answer. On July 24, 1996, former Commerce Secretary Mickey Kantor
    and Acting U.S. Trade Representative Charlene Barshefsky announced the
    creation of the Department of Commerce's Trade Compliance Center (TCC)
    under the direction of a new Deputy Assistant Secretary for Agreements
    Compliance. Over the past ten months, great strides have been made to
    develop this new organization and activity. To date, the Trade
    Compliance Center has developed and implemented an ambitious program
    plan, bringing together an initial staff, conducting upwards of 30
    specific investigations of alleged trade compliance problems,
    developing techniques and approaches to comprehensively monitor foreign
    compliance with select trade agreements, and developing a prototype
    database system which will eventually include text of all major
    bilateral and multilateral trade agreements and other information
    relevant to monitoring and evaluating foreign compliance with trade
    agreements.
        Question. What specific activities will the Trade Compliance Center
    carry out for the Department?
        Answer. The new Trade Compliance Center (TCC) has been designed to
    systematically, comprehensively, and proactively monitor and evaluate
    foreign compliance with trade agreements and other standards of
    behavior to ensure that U.S. business and labor receive the full
    benefits of these international trading regimes. Major projects
    underway include:
        Monitoring Projects.--The TCC is responsible for developing
    methodologies and implementing techniques to systematically monitor and
    report on foreign compliance with specific trade agreements. Since each
    agreement is unique, the TCC intends to establish an appropriate
    monitoring regime for approximately one trade agreement per month. In
    1997, the TCC is developing ongoing monitoring projects to track
    foreign compliance with (1) the World Trade Organization agreements on
    Trade Related Investment Measures (TRIM's), (2) Trade Related Aspects
    of Intellectual Property (TRIP's), (3) WTO accession agreements,
    including a possible accession agreement for China, and (4) the OAS
    agreement on corruption.
        Investigations.--To date, the TCC has reviewed 30 specific
    compliance cases. The TCC expects to open two to three new cases per
    month. The TCC also investigates and analyzes specific compliance
    problems, working with American business and labor to resolve
    compliance disputes, analyze compliance complaints, support USTR
    analyses and investigations, and develop compliance priorities and
    propose effective solutions. A fully staffed TCC expects to open as
    many as 100-150 compliance case files per year.
        Data Base.--In cooperation with the Department's National Institute
    of Standards and Technology (NIST), the TCC is developing and
    implementing a prototype database and computerized information
    retrieval system which will allow the U.S. Government and the private
    sector to expand greatly the Nation's ability to deal with market
    access and compliance issues. This includes, for the first time ever, a
    comprehensive, on-line database of bilateral and multilateral trade
    agreements and other information relevant to monitoring and evaluating
    foreign compliance with trade agreements.
        Question. Does the Department expect to spend the full $2.5 million
    on the Center this fiscal year?
        Answer. Yes. ITA has allocated $2.5 million and 25 FTE for the TCC
    for fiscal year 1997, consistent with the direction of the
    Appropriations Committee. After payment of its allocable share of ITA
    and DOC overhead costs, TCC will have a net operative budget of $1.78
    million.
        Question. Does the Department engage in the practice of ``taxing''
    such funds as so many agencies do to fund other departmental activities
    at the expense of the program Congress is trying to support? If so,
    what is the rationale for such ``taxing?''
        Answer. The Department of Commerce does not ``tax'' programs to
    fund other Departmental activities. Funds appropriated to ITA are used
    to carry out program activities, including paying the expenses for
    executive direction, administration and costs associated with services
    obtained from the Department in order to operate the various programs.
    Funding for each of these three categories is included in the
    appropriated amounts available for each of ITA's four program line
    items. These three categories of costs are not separately funded in
    ITA's appropriation.
        Question. Does the Department expect to achieve the full
    anticipated staffing level of 25 full-time equivalent positions (FTE's)
    this fiscal year?
        Answer. Ninety percent of the fiscal year 1997 TCC operating budget
    of $1.78 million will be spent covering personnel compensation and
    benefits, basic office supplies and infrastructure. This will allow for
    the hiring of 25 full-time employees, acquisition of basic supplies and
    equipment for these employees, and modest costs associated with
    configuring and wiring office space to accommodate the TCC's new data
    base and computerized information retrieval. Due to the timing during
    the year in which the hiring occurred, TCC will use approximately 20
    FTE in fiscal year 1997. Fiscal year 1998 anticipated FTE usage is 25.
        Question. How many FTE's are currently devoted to the Trade
    Compliance Center?
        Answer. As of March 30, 1997, there are 17 individuals employed in
    the Trade Compliance Center. Additional staff members are expected to
    be brought on board in May or June.
        Question. Would you please provide the Subcommittee with a brief
    report when the Trade Compliance Center is in place?
        Answer. The TCC is in place. The TCC is charged with developing a
    computerized database of trade agreements, associated documents,
    analytic data and other information useful to the Government and the
    private sector in monitoring and evaluating foreign compliance with the
    trade agreements. The TCC is also responsible for developing
    methodologies and techniques to systematically monitor and report on
    foreign compliance with specific trade agreements. Additionally, the
    TCC is charged with investigating and analyzing specific compliance
    problems.
        To date, the TCC has developed and implemented an ambitious program
    plan, conducting upwards of 30 specific investigations of alleged trade
    compliance problems, developing techniques and approaches to
    comprehensively monitoring foreign compliance with select trade
    agreements, and developing a prototype database system which will
    eventually include text of all major bilateral and multilateral trade
    agreements and other information relevant to monitoring and evaluating
    foreign compliance with trade agreements. Working together with the
    National Institute of Standards and Technology (NIST), the TCC has
    developed a database prototype consisting of 25 trade agreements and a
    limited number of associated documents. The TCC now plans to have a
    database consisting of 25 to 50 trade agreements and some additional
    material available to the public via the Internet before the end of
    this year. Enhancement of the database with additional information and
    functionality will come as the TCC reaches its full staffing level.
                     increases in patent and trademark fees
        Question. Your testimony proposes changes to separate policy
    functions of the Patent and Trademark Office (PTO) from business
    operations.
        How will this help the PTO deal with the reduced resources that
    will result under the President's proposals to hold $92 million in
    surcharges in reserve in 1998, and all $119 million in reserve
    thereafter, which in effect means the President would spend the
    surcharges on other programs?
        Answer. Enactment of PBO legislation would provide us with better
    tools to function within our budget levels. Under the Vice President's
    Performance Based Organization (PBO) effort, the PBO would be more
    flexible and autonomous, and make managers accountable for measurable
    results.
        In the meantime, we can make progress toward this goal of a PTO PBO
    through administrative actions. We have just submitted a reprogramming
    proposal with this in mind. This administrative reorganization would be
    a significant advance toward accomplishing a more business-like
    operation.
        Question. Those who pay these fees say they are told by PTO
    officials that the President's proposal would cancel plans to hire 500
    new patent examiners and would more then double the patent waiting time
    from the current 20 months. Is this true? If so, is it right? If not,
    what do you expect would occur.
        Answer. In the background information that follows, the surcharge
    amount for 1997 should be $115 million for a total of $717 million. For
    1998, the change from 1997 is thus a $31 million increase.
        In light of the Administration's priority to reduce the budget
    deficit, $92 million in patent surcharge funds are proposed as deficit
    reduction offsets in 1998. To function within this budget level the PTO
    is not currently planning to hire new patent examiners in fiscal year
    1998. In fiscal year 1999, under the current planning assumptions, the
    PTO would only hire patent examiners to replace those who have left
    through attrition. This means that under current assumptions, patent
    pendency will rise from 20.8 months in fiscal year 1996.
        The Administration believes that this is the correct course of
    action in the context of the higher and bipartisan priority of reducing
    the Federal deficit and balancing the budget.
        Background.--In 1997, PTO will collect $602 million in fees and
    another $119 million in surcharges from patent applicants, for a total
    of $721 million, of which PTO is allowed to spend only $663 million. In
    1998, the budget would allow the PTO to collect a total of $748 million
    (a $27 million increase from 1997) from applicants, but would allow PTO
    to spend only $656 million, a $7 million decrease from 1997. The
    surcharge, enacted as part of OBRA in 1990, was ``sold'' as having the
    patent community fully fund the operations of the PTO. Now, patent
    seekers pay more than the costs of PTO, similar to the SEC, and the
    excess could be considered a tax.
      closure of the national weather service southern region headquarters
        Question. Secretary Daley, I have been contacted by constituents
    who are concerned with the decision by the National Oceanic and
    Atmospheric Administration (NOAA) to close its National Weather Service
    (NWS) Southern Region Headquarters. This weather center is responsible
    for managing weather warning, forecast, and observation programs for
    New Mexico and nine other states.
        My concern stems from the important services this office provides
    New Mexico and the National Weather Service in forecasting and weather
    warning support. Understanding that this region is the most
    meteorologically active region in the United States and that over 50
    percent of all severe weather events occur in this region, I believe
    this closure would pose a significant degradation of service provided
    by the National Weather Service. In addition, I believe Congress made
    it very clear that any reductions which were required to meet budgetary
    goals should be applied first to staffing levels at the NWS central
    headquarters according to a streamlining plan for the NWS central
    headquarters office.
        What are the current plans for the National Weather Service
    Southern Region Headquarters?
        Answer. The fiscal year 1997 appropriation for NWS base operations
    has resulted in a reduction of $27.5 million from the fiscal year 1996
    enacted level. Of that amount, $10.5 million was to be taken out of NWS
    headquarters and central operations in the National Capital area (NCA).
    NOAA has developed a plan consistent with this Congressional guidance.
    In addition, and as a result of the remaining shortfall, NOAA will
    accelerate the planned closure of the Southern Regional Headquarters
    (SRH) to the end of fiscal year 1997. Under the current plan, NOAA will
    transfer program management and administrative responsibilities to the
    Eastern Region Headquarters (ERH) in Bohemia, New York, and Central
    Region Headquarters (CRH) in Kansas City, Missouri.
        To begin the transition process, NOAA will transfer program
    oversight to the ERH and CRH during the third quarter of fiscal year
    1997. Administrative functions and staff will remain in Fort Worth for
    the remainder of the fiscal year to transition budget, financial, and
    administrative functions. The remaining SRH staff will be responsible
    for completing the required closeout and transition functions. NWS will
    also reassign two employees from SRH to CRH for a period of two years
    to serve as a transition focal point for hurricane issues and one
    person will be added to the ERH staff to help with the regional
    transition. In addition, NWS will transfer one employee from SRH to the
    State Emergency Management Office in Austin, Texas, for a period of two
    years to serve as a transition focal point for emergency management
    issues. A summarized schedule of sample activities and tasks is as
    follows:
      --announce regional realignments (April);
      --compile vacancies, reassignments, voluntary separations (March-
            June);
      --reconfigure Central and Eastern Region Communication Networks
            (April-June);
      --reassign NOAA administrative support responsibilities;
      --delegate budget and personnel authority to CRH and ERH (May);
      --implement new regional boundaries and transfer hydrometeorological
            program (July);
      --arrange for transfer of space to GSA (July-September); and
      --closeout administrative functions (October).
        A more detailed transition plan has recently been submitted to
    Congress, entitled ``Report on Transition of Southern Region
    Headquarters and Regional Realignment.''
        Question. What are the current plans for streamlining the National
    Weather Service other than closure of Southern Region Headquarters.
        Answer. As part of the Strategic Plan for the Modernization and
    Associated Restructuring, the NWS intends to streamline all aspects of
    its program operations. Under this plan, NWS will streamline its
    headquarters operations, centralized operations and support and field
    operations to optimize efficiency and effectiveness. More importantly,
    the local warning and forecasts of the NWS will reap the greatest
    benefit from the Modernization through improved warning lead times for
    severe weather and better accuracy and timeliness for local forecasts.
    The details of these plans are outlined in the National Implementation
    Plan (NIP) which is updated and submitted to Congress on the annual
    basis.
        As a result of lower funding levels in fiscal year 1997, NWS plans
    to implement a number of additional streamlining activities.
    Specifically, NWS will (1) accelerate reductions in headquarters,
    central operations and support staffing levels and; (2) re-engineer
    certain program operations. NWS will accelerate planned reductions in
    headquarters employment levels by 113 positions by the end of fiscal
    year 1997. These reductions will advance, up to four years, the NWS
    strategic plan goal for streamlining its headquarters personnel levels.
        NWS will also streamline other headquarters activities. Starting in
    fiscal year 1997, the NWS will overhaul its use of headquarters
    management support contracts focusing on only those contract tasks that
    directly support NWS operations. The NWS will also re-engineer program
    operations by reducing non-operational travel and central
    administrative support, and outsourcing support for central computer
    operations. In total, these streamlining actions will result in over
    $11 million in permanent savings to NWS base operations.
        NOAA has also identified approximately $9.7 million in pay-related
    inflationary costs and $5 million in buyout/RIF costs that must be
    absorbed by the NWS in fiscal year 1997 bringing the total budget
    reduction to $42.2 million. In order to offset these costs, NWS reduced
    staffing levels outside NCA including the National Centers for
    Environmental Prediction (NCEP), further reduced National Buoy Center
    sensor development activities, and reduced allocations to the NWS
    Regions and NCEP.
        Question. Is there currently a streamlining plan in place for the
    NWS Central Headquarters.
        Answer. Yes, as part of the overall personnel streamlining plan,
    the NWS has developed a plan for streamlining personnel operations at
    NWS headquarter offices.
        Question. If there is in fact a streamlining plan for the central
    office, would you provide me with a detailed summary of those plans?
        Answer. Due to the extent of the fiscal year 1997 accelerated
    personnel reductions, each NWS headquarters office is revising its
    staffing plans to support future ``modernized operations.'' Upon final
    approval by the Administration, a detailed summary of these plans will
    be provided to Senator Domenici's Office.
              public telecommunications facilities program [ptfp]
        Question. Secretary Daley, the Administration's fiscal year 1998
    budget proposes to terminate funding for the Public Telecommunications
    Facilities Program (PTFP), which provides grants to public radio and TV
    stations for equipment. The PTFP program was funded at $15.25 million
    in fiscal year 1997. As recently as fiscal year 1995, PTFP received $29
    million.
        Mr. Secretary, I have been a longtime supporter of the Public
    Telecommunications Facilities Program because it is an important source
    of funding to rural states like New Mexico. PTFP grants enable local
    broadcasting stations to provide quality programming to populations
    that are generally underserved.
        The budget justification documents indicate that the Administration
    proposes to terminate the PTFP program, stating that the support for
    public television and radio broadcasters will rest with the Corporation
    for Public Broadcasting. Could you please explain how the
    Administration envisions that such support--for actual facilities and
    equipment--will continue through CPB?
        Answer. The Department of Commerce understands that there is no
    legislative guidance for Corporation for Public Broadcasting (CPB) to
    provide funds for public broadcasting facilities and equipment. CPB, if
    given such authority, will be required to develop their own mechanisms
    and the necessary expertise in these areas.
        Question. Do you think that public broadcasting infrastructure in
    New Mexico and throughout the country can be sustained without federal
    support?
        Answer. In the past, there has been demonstrated demand for Federal
    support for public broadcasting. Based on the CFB Presidential request,
    we would expect the agency to sustain this support.
        Question. I have supported past efforts to provide distance
    learning opportunities to rural areas and some such projects have been
    successfully supported in New Mexico with PTFP funding. For example,
    the Hispanic Educational Telecommunications System received its first
    grant in 1995. $1.1 million was awarded to equip nine schools.
        The Northern New Mexico Network for Rural Education received a
    grant of about $756,000 to link additional sites with this system and
    the American Indian Higher Education Consortium, which was also
    equipped through PTFP. I know additional tribal schools in New Mexico
    would like to link to this network.
        Mr. Secretary, you talk about the importance of partnerships. The
    PTFP grants are partnerships because state and local matching funds are
    provided under this program. Why aren't these partnerships a priority
    for the Administration?
        Answer. Partnerships formed through PTFP projects have been an
    important element for the program. They have been a sign of community
    support for the public broadcasting stations and distance learning
    facilities that are funded through PTFP. If Congress supports the
    termination of PTFP, we hope that public broadcasting stations will
    strengthen their relationships with non-federal partners as they find
    new ways to sustain their facilities.
        Question. The budget documents also indicate that the termination
    of PTFP is proposed due to changing national priorities. I note that
    the budget also proposes a $14.5 million increase for the President's
    information infrastructure grants program. I know that the
    ``information superhighway'' is a priority for the Administration, but
    is it realistic to assume that rural areas will be served on the
    ``information superhighway'' in the near term?
        Answer. The Information Infrastructure Grants program is helping to
    develop a national information infrastructure that is accessible to all
    citizens, in rural as well as urban areas. In 1996, almost 90 percent
    of the program funds went to projects serving rural America or
    traditionally underserved Americans living in urban areas. Since its
    inception, the Administration has requested more funding for the
    Information Infrastructure Grants program than Congress has
    appropriated. The additional funds will allow the program to fund more
    models of information infrastructure and reach more areas of the
    country in order to further encourage replication and infrastructure
    development across the Nation, particularly in underserved areas.
        Question. Is it your assessment that information infrastructure
    grants will truly meet the need for basic infrastructure to serve rural
    areas as the PTFP program has succeeded in doing through its support
    for public broadcasting stations?
        Answer. The information infrastructure grants program could not
    provide enough funds and is not designed to ensure that every rural
    community's basic information infrastructure needs are met. The program
    funds model projects that show these communities how they can develop
    effective information infrastructure and apply technology to improve
    and expand valuable services to the community. By evaluating these
    model projects and disseminating their results, the program helps other
    communities to learn from the program's grant recipients as they
    develop their own information infrastructure.
        Background.--The Administration has proposed both reductions and
    terminations for the PTFP program, largely focusing its attention on
    the information infrastructure grants program.
        For New Mexico alone, $1.45 million in grant applications are being
    submitted for fiscal year 1997 funding with most from schools. Overall,
    some $50 million in applications are likely to be submitted for fiscal
    year 1997 funding which is at $15.25 million.
                          u.s. innovation partnership
        Question. The Department of Commerce recently announced the
    formation of the U.S. Innovation Partnership which was formed to foster
    economic growth through the development of new technologies. I am
    interested in this new partnership's plan to begin developing new
    programs to stimulate technology investment and access to new
    technology in rural America. I believe this partnership could be
    helpful in my initiative to bring Internet related businesses to rural
    towns in New Mexico. I believe the Internet poses significant new
    possibilities for rural economic development, however, if rural towns
    do not have necessary telecommunications infrastructure for data
    transmissions, our efforts will be in vein.
        What agencies and various entities are participating in the U.S.
    Innovation Partnership?
        Answer. The U.S. Innovation Partnership (USIP) is a widely-
    inclusive organization with involvement from both the public and
    private-sectors. The USIP builds on the recommendations of the Carnegie
    Commission's report ``Science, Technology and the States in America's
    Third Century'' and the ``State-Federal Technology Partnership Task
    Force Final Report,'' which was produced in collaboration with the
    National Governors' Association, the National Conference of State
    Legislatures, the White House Office of Science and Technology Policy,
    the Carnegie Commission on Science, Technology & Government, and the
    American Society of Mechanical Engineers.
        The USIP involves many public and private-sector representatives
    from organizations such as the States Science and Technology Institute,
    the American Society of Mechanical Engineers, small businesses,
    universities, and national laboratories. Currently, USIP participation
    includes the following 20 governors and 13 Federal agencies:
    Participating Governors
        Governor Roy Romer, Colorado; Governor John G. Rowland,
    Connecticut; Governor Carl T.C. Gutierrez, Guam; Governor Benjamin J.
    Cayetano, Hawaii; Governor Bill Graves, Kansas; Governor Angus S. King,
    Maine; Governor Parris N. Glendening, Maryland; Governor John Engler,
    Michigan; Governor Marc Racicot, Montana; Governor E. Benjamin Nelson,
    Nebraska; Governor Bob Miller, Nevada; Governor Christine T. Whitman,
    New Jersey; Governor Gary E. Johnson, New Mexico; Governor George E.
    Pataki, New York; Governor James B. Hunt Jr., North Carolina; Governor
    Tom Ridge, Pennsylvania; Governor Lincoln Almond, Rhode Island;
    Governor Gary Locke, Washington; Governor Cecil H. Underwood, West
    Virginia; Governor Jim Geringer, Wyoming.
    Participating Agencies
        Department of Agriculture; Department of Commerce; Department of
    Defense; Department of Education; Department of Energy; Department of
    Labor; Department of Transportation; Environmental Protection Agency;
    National Aeronautics and Space Administration; National Institutes of
    Health; National Science Foundation; Small Business Administration;
    White House, Office of Science and Technology Policy (OSTP).
        Question. How do you anticipate this new partnership will foster
    economic growth?
        Answer. The mission of the USIP is to achieve new economic growth,
    high quality jobs, and globally competitive businesses by effectively
    leveraging U.S. science and technology leadership and resources through
    partnerships among states, the Federal Government, industry, and
    universities. The USIP has adopted a number of strategies to fulfill
    this mission including: build national excellence in manufacturing by
    supporting development and commercialization of new products and
    processes; build strategic partnerships among state governments, the
    Federal Government, industry, and universities; strengthen the national
    (versus Federal) science and technology system; and define and enhance
    the role of the states in the national science and technology system by
    maximizing the return on investment of public and private sector
    investments in technology and by creating the necessary climate and
    mechanisms to promote and facilitate innovation in the public and
    private sectors.
        The USIP is still in the process of establishing its work plan. The
    following are examples of initiatives that are currently being
    developed by the USIP to foster greater innovation and economic growth
    in the American economy:
        Experimental Program to Stimulate Competitive Technology.--Over the
    past several years, the National Science Foundation's Experimental
    Program to Stimulate Competitive Research (EPSCoR) has demonstrated how
    the states, the Federal Government, and universities can work together
    to increase the capacity of educational institutions to attract and
    utilize public research funding. A similar effort is needed to expand
    that capacity to move the resulting research into the marketplace.
        The U.S. Department of Commerce's Technology Administration has
    proposed to develop the Experimental Program to Stimulate Competitive
    Technology (EPSCoT). This program will foster development of the
    indigenous technology assets of states through better integration of
    local, state, regional, and Federal investments in technology-based
    economic growth. The USIP plans to involve states up front, in the
    design stage, of Federal technology efforts; therefore, details of this
    program will be worked out with representatives from state and local
    governments, regional organizations, universities, and industry. The
    fiscal year 1998 budget request to Congress is $1.65 million. It is
    envisioned that this effort will help to establish technology
    development, diffusion, and infrastructure creation practices in the
    EPSCoR states, which are largely rural, that will then serve as models
    for other states.
        Expanding the Angel Capital Electronic Network.--The USIP seeks to
    involve more states in the ACE-Net, which creates a nationwide
    Internet-based system of matching ``angel''/wealthy individual
    investors with business savvy and innovative entrepreneurs around the
    country. Angels currently invest between $10 to $20 billion each year
    in new ventures. However, the process of matching individual investors
    with appropriate business opportunities is extremely difficult and time
    consuming. ACE-Net uses Internet technology to bring investors the
    comprehensive information they need to find investment opportunities
    throughout the United States quickly and conveniently. This project is
    being led by the U.S. Small Business Administration. More information
    is available at: http://ace-net.unh.edu and http://
    www.sbaonline.sba.gov.
        Entreworld--Increasing Business Access to Technology Information.--
    USIP partners will expand existing Federal science, technology, and
    economic development information sources on the Internet to include
    state program information and to be more user friendly to private
    sector entrepreneurs. Through a partnership with the Ewing Marion
    Kauffman Foundation's Center for Entrepreneurial Leadership, the USIP
    will provide easier access for technology entrepreneurs to Federal and
    state technology information through the foundation's nationally-known
    website for entrepreneurs, http://www.entreworld.org.
        Idea to Market Demonstrations.--USIP partners will jointly develop
    and support new models for moving the ideas of individual inventors,
    university professors, and researchers at national laboratories to the
    commercial marketplace more quickly and with greater economic impact.
    The USIP will review practices that stifle innovation and identify
    incentives that help to stimulate the flow of ideas from individual,
    university, and Federal labs to the commercial sector. The USIP will
    foster demonstrations aimed at developing nationwide capacity to
    support the movement of technology-based ideas to successful market
    introduction.
        Reciprocity Among States for Innovative Environmental
    Technologies.--Regulatory reciprocity among the states will simplify
    the process of compliance and reduce the cost for companies or
    inventors to bring environmental technologies to market. The USIP
    supports new initiatives as well as existing efforts to negotiate
    reciprocal acceptance among state regulatory bodies of new technologies
    validated and tested by any one of them. Current initiatives include a
    six state memorandum of understanding to develop reciprocal data,
    testing, and eventually permitting arrangements for new environmental
    technologies and a ten state effort to explore the implementation of
    International Standard Organization (ISO) 14000 standards, an
    international performance-based environmental management system.
        Question. What particular goals have been established with regards
    to stimulating and providing access to technologies in rural Areas?
        Answer. While the USIP does not have particular goals for
    stimulating and providing access to technologies in rural areas, it is
    anticipated that many of the activities undertaken by the USIP will
    benefit rural areas. The ACE-Net provides a tool for entrepreneurs
    located in rural areas to access angel investors throughout the country
    through the use of the Internet. Likewise, the Entreworld initiative
    will better link individuals, businesses, and governments, wherever
    they are located, to Federal, state, and local science and technology
    resources on the Internet in a format that is oriented to
    entrepreneurs. And, the EPSCoT initiative specifically seeks to
    stimulate the role of technology in states that are traditionally
    under-represented in R&D funding, which often have largely rural
    economies.
        The Economic Development Administration (EDA) of the U.S.
    Department of Commerce is also involved with the USIP in the area of
    stimulating and providing access to technologies in rural areas. The
    EDA provides economic development assistance to distressed areas. In
    such areas, the EDA helps rural communities incorporate technology as a
    tool for their economic development by providing funding assistance for
    communities to plan technology-led economic development and create
    technology-based infrastructure.
        Question. Will this partnership be working to improve the
    inadequate telecommunications infrastructures in rural towns?
        Answer. A number of USIP partners are involved with
    telecommunications infrastructure issues. The Commerce Department's
    Telecommunications and Information Infrastructure Assistance Program
    (TIIAP), which is a highly-competitive, merit-based grant program that
    brings the benefits of an advanced national information infrastructure
    to communities and rural towns throughout the United States, provides
    the most direct means of addressing the issue in the short-term. The
    EDA also provides funding assistance to communities to plan and build
    telecommunications infrastructure.
        One of the USIP's original task forces was co-chaired by Larry
    Irving, Assistant Secretary for Communications and Information at the
    U.S. Department of Commerce, who oversees the TIIAP program, because
    USIP representatives identified telecommunications infrastructure as an
    important issue that should be addressed by the USIP. This task force
    allowed state leaders to work closely with Federal officials to
    identify the most important issues facing the States in the area of
    information infrastructure.
        Additionally, at a number of regional meetings held by the USIP,
    local officials discussed how new information infrastructure resources
    could be more user friendly to entrepreneurs, people working in small
    businesses, rural users, and to local governments. The USIP is
    currently developing proposals in the areas of information
    infrastructure and electronic commerce as well as continuing to engage
    Federal, state, and local officials on these issues.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                                 census budget
        Question. This year's appropriations for the Year 2000 census
    totals $84 million. In the fiscal year 1998 budget you have submitted,
    you are requesting $374 million, an increase of $290 million. Within
    two years you are proposing over $2.2 billion. Assuming sampling, the
    total cost of the census will be $4 billion.
        My understanding is that even these numbers may be understated and
    that the Census has recently come up with new estimates. Could you tell
    us how much more you think it will cost based on these WESTAT labor
    surveys?
        Answer. The Bureau is currently assessing the cost effects of the
    WESTAT study recommendations. We will share our findings with the
    Congress as soon as the assessment is complete.
        Question. In constant dollars, that is adjusting for inflation, the
    1960 census cost $11 per housing unit. In 1970 it had gone up to $19
    per unit. In 1980 it increased to $20 per household and $25 per
    household in 1990. I guess that means we are looking at over $35 in the
    year 2000.
        Why is the cost for the decennial census increasing so much after
    adjusting for inflation?
        Answer. A major goal in planning Census 2000 has been cost
    reduction. Although the 1990 census cost $25 per housing unit in 1990
    dollars, we expect Census 2000 will cost less per housing unit, in 1990
    dollars, despite a steady decline in public cooperation and the fact
    that wage rates for temporary field staff have increased faster than
    the rate of inflation.
        Many factors other than inflation affect the cost of a decennial
    census: an increase in the number of housing units; declines in mail
    response rates/public cooperation; attempts to improve the overall
    count in a time of reduced mail response, poorer cooperation with
    census-taking, and changes in the mobility of the U.S. population--
    these changes require more follow-up, longer field work, and more
    temporary census offices; attempts to reduce the differential in the
    count among population groups, which involved special targeted
    procedures for counting as well as expensive, intensive follow-up in
    difficult areas--our plan for Census 2000 reduces the expense of the
    intensive follow-up; attempts to obtain better small-area counts, which
    involved improving address lists and developing an accurate electronic
    mapping system.
        Question. Could you please discuss some of the measures that you
    are instituting to try to bring down the cost of the census.
        For example, I understand that you are intending to spend $100
    million for advertising on the assumption that for every 1 percent of
    the population that mails back their census forms, you will save $25
    million.
        Answer. The Census Bureau will implement the following operations
    designed to reduce the cost of Census 2000:
      --Work with the U.S. Postal Service, as well as state, local and
            tribal governments, to improve the quality of the address list.
            In 1990, the Census Bureau compiled the address list from
            costly private sources without help from these knowledgeable
            partners.
      --Use U.S. Postal Service information to identify vacant housing
            units. In 1990, enumerators visited every housing unit from
            which a completed form was not received, even those the Postal
            Service identified as vacant.
      --Use repeated mail contacts and motivating messages, in addition to
            forms that are easier to read and complete, increase the chance
            that households will return completed forms and avoid more
            expensive personal visit follow-up.
      --Use state-of-the-art technology--electronic imaging and intelligent
            character recognition--to ``read'' completed forms and create
            data files ready for tabulation. The 1990 census was
            microfilmed and key entered. In Census 2000, the forms will be
            scanned directly into computer files ready for tabulation.
      --Offer ``point and click'' data tabulation so data seekers can
            access the Census 2000 data and assemble their own data tables
            instantly. This process is responsive to data user requests. It
            is less costly and time consuming than publishing a large
            number of printed paper volumes that still do not provide the
            information needed by local governments.
      --Make personal visits to a scientifically selected sample of
            remaining nonrespondive households to ensure direct contact
            with at least 90 percent of households in each census tract and
            use that information as a basis for completing the follow-up
            operation. This operation will produce more accurate results
            less expensively and more quickly than the method used in 1990.
                                    sampling
        Question. There is a lot of controversy up here regarding sampling
    to make the census more accurate. The House full committee chairman has
    called it ``witchcraft.'' As I understand your plan it is to keep going
    back and trying to count everyone, and when you've finally gotten to a
    90 percent response you would use statistical models for estimating the
    last 10 percent.
        As I understand it, the Commerce Department uses sampling for a
    number of surveys it carries out. I have a list here of 100 regular
    surveys that the bureau performs using statistical sampling. The
    economic projections that are announced every month, upon which Alan
    Greenspan determines interest rates and the stock market goes up or
    down--that is based on sampling isn't it Mr. Secretary?
        Answer. Yes. Statistical sampling is used in almost all of the
    economic and demographic censuses and surveys that the Census Bureau
    conducts, including the Current Population Survey, the Survey of Income
    and Program Participation, the Consumer Expenditure Survey, the Census
    of Governments, the Annual Survey of Manufactures and the Monthly
    Retail Sales Survey. Statistical sampling is a known, scientific,
    quantifiable and transparent method for collecting data that are
    important for businesses and policy makers.
        Question. Why do you believe that a census using sampling would be
    more accurate than a ``100 percent'' census?
        Answer. As determined by the National Research Council, traditional
    methods of enumerating the population have reached the limit of their
    ability to produce an accurate count. For example, in the 1990 census
    after repeated attempts to follow-up on nonresponding housing units,
    the Census Bureau used less systematic techniques, such as proxy
    responses and final attempt information (e.g. asking the neighbors) to
    conclude our accounting of nonrespondents. Statistical estimation
    techniques have long been used in the census for a number of purposes,
    including close-out procedures, determining vacant units, and
    imputation of missing census responses. The use of statistical methods
    to sample nonrespondents and to improve the accuracy of the census is
    formal recognition that modern statistical procedures can improve the
    process, reduce costs, and produce better data for the Nation as a
    whole, and for all component population groups, by reducing the
    differential undercount.
        Question. How much do you estimate that the sampling will save
    compared with a ``100 percent'' census?
        Answer. There two integral components to the Bureau's plan for
    using statistical sampling in Census 2000--sampling for a nonresponse
    follow-up (SNRFU) and integrated coverage measurement (ICM).
        If the Bureau were not to use SNRFU in Census 2000, the estimated
    cost would increase by $400 million, as additional field enumerators
    would be needed to attempt to conduct field visits. This would have no
    appreciable impact on the quality of data, at any level of geography,
    in Census 2000.
        If the Bureau were not to employ the use of the quality check
    survey--ICM--the Bureau would save an estimated $200 million. However,
    such a decision not to incorporate ICM would dramatically decrease the
    quality of data for Census 2000 at all levels of geography--national,
    state, Congressional districts and census tracts.
                  u.s. and foreign commercial service [us&fcs]
        Question. Please provide the number of US&FCS American employees
    and foreign service nationals by nation for the past four years.
        Answer. The following chart shows the number of Americans, foreign
    service nationals, and personal service contractors for each year
    during the period 1994 through 1997.

    --------------------------------------------------------------------------------------------------------------------------------------------------------
                                                        As of May 1997           Fiscal year 1996--         Fiscal year 1995--         Fiscal year 1994--
                                                 ---------------------------     September 30, 1996         September 30, 1995         September 30, 1994
    Region                 Country                                          --------------------------------------------------------------------------------
                                                   Amer.     FSN     PSC's    Amer.     FSN     PSC's    Amer.     FSN     PSC's    Amer.     FSN     PSC's
    --------------------------------------------------------------------------------------------------------------------------------------------------------
     ANESA Algeria                              .......  .......  .......  .......        1  .......  .......        1  .......  .......        2        1
        WH Argentina                                  3        9        5        2        8        4        2        8        5        2        8        2
       EAP Australia                                  3       11        3        3       14  .......        3       15  .......        3       15  .......
       EUR Austria                                    1        5        2        1        6        2        1        7  .......        1        5  .......
       EUR Belgium                                    2        8  .......        2        8  .......        2        8  .......        2        8  .......
       EUR Belgium-USEC                               3        4  .......        3        4  .......        2        5  .......        2        4  .......
        WH Brazil                                     7       14       35        6       14       14        5       20       11        5       17        1
       EUR Bulgaria                                   1        3        4        1        2        4        1        2        2        1        4  .......
        WH Canada                                     6       18        7        5       19        3        4       20        1        5       21  .......
        WH Chile                                      2        7        5        3        7        5        1        8  .......        3        9        1
       EAP China                                     13  .......       50       10  .......       46       12        6       39        8        5       26
        WH Colombia                                   2        8        1        1        9        2        2        9        1        2       10        2
        WH Costa Rica                                 1        3  .......  .......        3  .......        1        3  .......        1        3  .......
     ANESA Cote D'Ivoire                              2        2        4        2        3        4        1        3        2        2        3        1
       EUR Croatia                                    1        1  .......  .......        1  .......  .......        1  .......  .......        1  .......
       EUR Czech                                      1        2        5        2        3        8        2        3        5        2        5        5
       EUR Denmark                                    1        5  .......        1        5  .......        1        5  .......        1        5  .......
        WH Dominican Republic                         2        2        4        2        3        2        1        4        1        1        4        1
        WH Ecuador                                    1        4        3        1        5        2        1        4        2        1        4        1
     ANESA Egypt                                      3        8        3        3        7        3        3        8        3        3        8        3
       EUR Finland                              .......        3        1  .......        4        1  .......        4  .......        1        4  .......
       EUR France                                     5       19       12        5       19       14        5       20       11        5       25        5
       EUR France-OECD                                1  .......  .......        1  .......  .......        1  .......  .......        1  .......  .......
       EUR Germany                                    7       27       15       10       31       10       11       33        7       11       37        5
       EUR Greece                                     1        8        1        1        8  .......        1        8  .......        1        8  .......
        WH Guatemala                                  1        2        2        1        3        1        1        3        1        1        3  .......
        WH Honduras                             .......        1        3  .......        2        4  .......        3        2  .......        3        1
       EAP Hong Kong                                  4        6       13        3        9       10        3       12        2        3       11        1
       EUR Hungary                                    2        6        2        2        6  .......        2        6  .......        2        6  .......
     ANESA India                                      6       16       13        6       17        3        6       17        3        5       22        7
       EAP Indonesia                                  5        7       13        5       12        8        5       13        3        4       13        2
       EUR Ireland                                    1        3        2        1        3        2        1        4        1        1        4  .......
     ANESA Israel                                     2        7        1        2        6  .......        1        6        2        1        6        1
       EUR Italy                                      5       19        1        5       20  .......        5       21  .......        5       21  .......
        WH Jamaica                              .......        1        1  .......  .......  .......  .......        1  .......  .......  .......  .......
       EAP Japan                                     15       38        6       15       39        1       14       41        1       13       39        1
       NIS Kazakhstan                                 1        2        7        1        2        8        1        5        6        1        4  .......
     ANESA Kenya                                      1        2  .......        1        3        1        1        3        1        1        3  .......
       EAP Korea                                      6       14        8        5       15        5        5       19        3        6       21  .......
     ANESA Kuwait                                     2        3        3        2        4        2        2        5        2        2        5        1
       EAP Malaysia                                   3        6        5        2        7        1        2        8        1        3        7        4
        WH Mexico                                    13       27       31       12       29       32       11       29       15       11       30       15
     ANESA Morocco                                    1        2        2        1        2        2        1        3        1        1        3        1
       EUR Netherlands                                2        9        2        2        9        2        3        9        1        3        9  .......
       EAP New Zealand                                1        4        4        1        3  .......        1        4  .......  .......        4  .......
     ANESA Nigeria                                    1        4        4        1        6        4        1        7        4        2        5        4
       EUR Norway                                     1        2        3        1        2        3        1        3        1        1        3        1
     ANESA Pakistan                                   1        6        1        1        7  .......        1        7  .......        1        7        1
        WH Panama                                     1        4        1  .......        4  .......        1        4  .......        1        4  .......
        WH Peru                                       1        1        6        1        3        5        1        2        3  .......        2        3
       EAP Philippines                                2        6       11        1        6        9        1        7        8        4        7        9
       MDB Philippines/ADB                            1        2        3        1        2        3        1        2        3        1        1        2
       EUR Poland                                     2        6        1        2        7        4        3        7        3        3        7        4
       EUR Portugal                                   1        6        1        1        6  .......        1        6  .......        1        6  .......
       EUR Romania                                    1        3        3        1        3        3        1        4        1        1        4        2
       NIS Russia                                     8       15       19        9       19       13        9       25        5        8       23        2
     ANESA Saudia Arabia                              5       14       10        7       16       11        6       20        1        6       21        7
       EUR Serbia                               .......  .......  .......  .......  .......  .......  .......  .......  .......  .......        1  .......
       EAP Singapore                                  3        7        6        3       10        7        3       10        5        4       10        1
       EUR Slovakia                             .......  .......        2  .......        1        2  .......        1        2  .......  .......        1
     ANESA South Africa                               4        8        5        4        7  .......        3        7  .......        2        7        3
       EUR Spain                                      4       12        2        4       11        2        3       12        1        4       13        1
       EUR Sweden                                     1        6        1        1        7  .......        1        8        1        1        8        1
       EUR Switzerland                                1        3        4        1        5        2        3        6        2        2        6        1
       EAP Thailand                                   3        9       11        3       11        6        3       12        4        3       12        4
       EUR Turkey                                     2        9        2        3       10        2        3       10        3        3       10        2
     ANESA UAE                                        2        6        1        2        7  .......        2        7  .......        2        7  .......
       EUR United Kingdom                             5       13        5        4       13        4        5       14        1        4       16        1
       NIS Ukraine                                    2        4        5        2        5        3        2        5        3        2        5        1
       MDB United Kingdom/EBRD                        1  .......        1        1        1        1  .......        2  .......        1        1  .......
       NIS Uzbekistan                                 1        2        6        1  .......        5        1        2        3        1        1        2
        WH Venezuela                                  2        8        4        2        8        1        3       11        1        3        9        1
       EAP Vietnam                                    2  .......        2        1  .......  .......  .......  .......  .......  .......  .......  .......
                                               -------------------------------------------------------------------------------------------------------------
                 Total                              198      502      399      190      552      296      187      616      190      188      625      142
    --------------------------------------------------------------------------------------------------------------------------------------------------------

        Question. In January 1995, I visited an office building in
    Johannesburg, South Africa, with Ambassador Lyman and Millard Arnold,
    Jr., the senior foreign commercial service officer. We visited two
    floors that were being renovated for the US&FCS. I later learned that
    the US&FCS decided that it did not like this commercial space and moved
    to another site in South Africa. I was never informed of this change by
    the Commerce Department.
        What was the cost of the Johannesburg office renovation project?
    Was there a cost in terminating this lease early, if so what was it?
    What was the cost of new space that the US&FCS acquired? Please
    describe the difference in space in square footage or other attributes
    between the two sites. Is the US&FCS South Africa trade assistance
    center located in this new facility, and, if not, why? What is the
    mission of the trade assistance center?
        Answer. There was no cost to the US&FCS unit for the renovation of
    the 12th floor in the building where US&FCS Johannesburg was located at
    the time of Senator Hollings' visit. The up-front cost for the
    renovation of that space was absorbed by the building landlord at the
    time the lease renewal was signed in 1994 because the landlord was
    eager to have a prestige tenant remain in its building in the Central
    Business District (CBD) of Johannesburg. When US&FCS moved, there was
    no cost for terminating the lease early.
        US&FCS management and post decided to move out of the CBD late last
    year to better serve US&FCS Johannesburg's business clients who were
    increasingly reluctant to visit the office downtown because of concerns
    over crime and the declining infrastructure. Moreover, virtually all
    our competition had already left the CBD for better locations in the
    Northern Suburbs or the Midrand area. The U.S. Consulate is in the
    process of relocating to a new facility in the same general area as the
    US&FCS office for similar reasons.
        The new office site provides greater accessibility, visibility and
    facilities for expanded business services to American companies. The
    facility has already provided enough space and versatility for a number
    of successful single companies and United States Government (USG)
    events.
        The cost of the new office is $142,527 per year compared to $50,325
    per year for the old office, and the net space at the new facility is
    11,302 square feet compared to 6,501 square feet for the old space.
        Concerning the Technical Assistance Center (TAC), we hope to
    establish it under a Memorandum of Understanding with the Agency for
    International Development (AID) by August 1, 1997. The purpose of the
    TAC will be to establish commercial linkages between emerging South
    African companies and U.S. companies as a means toward black economic
    empowerment and expand U.S. private sector involvement in South
    Africa's economy, resulting ultimately in helping small and medium-
    sized U.S. businesses identify export opportunities in the South
    African market.
        We have extended an invitation to the South African Government
    (SAG) to house the TAC in the new US&FCS facility. The SAG is still in
    the process of evaluating our offer.
        Question. Please provide a status report on the International Trade
    Administration's (ITA) Trade Compliance Center (TCC). Please provide a
    discussion of the office's accomplishments. What is the difference
    between what this office does and what the Office of Agreements
    Compliance in the Import Administration is charged with?
        Answer. The following is the status report on our TCC. The new TCC
    is designed to systematically, comprehensively, and proactively monitor
    and evaluate foreign compliance with trade agreements and other
    standards of behavior to ensure that U.S. business and labor receive
    the full benefits of these international trading regimes.
        The TCC is developing methodologies and techniques to
    systematically monitor and report on foreign compliance with specific
    trade agreements, investigating and analyzing specific compliance
    problems, working with American businesses to resolve compliance
    disputes. It also leads Commerce Department compliance advocacy
    efforts. The TCC works with other elements of ITA to identify
    compliance priorities, analyze compliance problems, and propose
    effective solutions, often working in support of the United States
    Trade Representative (USTR).
        The TCC is also developing the government's first comprehensive
    data base of trade agreements and compliance analyses. This data base,
    now reaching prototype form, will allow the USG to expand greatly its
    capability to deal with market access and compliance issues.
        Working in conjunction with the Department's National Institute of
    Standards and Technology, the TCC is developing the Nation's first
    computerized data base of trade agreements, associated documents, and
    compliance analysis.
        The first requirement is that the data base of trade agreements be
    complete. About 200 agreements have been identified so far, and it is
    our expectation that all 200 agreements will be entered into the
    database by the end of the year, utilizing task forces to accomplish
    the objective expeditiously. Through May, thirty agreements had been
    entered into the system.
        One of the more innovative aspects of this new program will involve
    a new kind of public-private partnership. Using the information
    superhighway to provide data and government assistance directly to
    businesses, the TCC is developing a new data base of trade agreements,
    analyses and associated documents to help U.S. companies more readily
    understand what their rights are and what foreign obligations exist
    under the wide variety of existing trade agreements. This data base
    will represent a quantum leap forward in directly helping business gain
    maximum advantage from the 200 trade agreements and declarations
    successfully concluded over the past four years. By making this
    information available in a searchable form via the internet, we will
    empower businesses to use these tools not only to identify barriers and
    get help from the USG, but also as a mechanism for strengthening their
    negotiating positions with foreign governments and businesses. We
    anticipate an initial launch of public access to this information
    during the fall allowing us to discover and correct any system
    difficulties by next spring.
        We are also taking steps to establish links from the TCC to the
    country desks in order to ensure that each and every agreement has an
    individual specified as responsible for its monitoring. Instruction
    cables to all embassies are being prepared to introduce the TCC's role
    and function and to identify the contribution the embassies should make
    in identifying agreements and compliance problems. Also, we are in the
    process of working with our trade development industry desks and
    preparing a letter to industry trade associations inviting each
    association to set up a compliance liaison function.
         difference between trade compliance center and ia's office of
                             agreements compliance
        Question. As part of reorganizing Import Administration (IA), the
    Office of Agreements Compliance was abolished. That Office was charged
    with monitoring compliance with suspension agreements by which IA
    suspended its action in exchange for concessions by the foreign firm.
    The new TCC is designed to systematically, comprehensively, and
    proactively monitor and evaluate foreign compliance with all trade
    agreements (other than IA's suspension agreements and other standards
    of behavior, now handled by another IA unit) to ensure that U.S.
    business and labor receive the full benefits of these international
    trading regimes.
        I have always strongly supported the US&FCS in its mission to
    increase U.S. exports overseas. However, I am concerned of reports I
    have heard that the agency is unilaterally changing its mission to
    include promoting U.S. investment overseas, including establishing
    manufacturing overseas. Has there been a formal policy change in the
    US&FCS or is this an ad hoc policy on a post by post basis? When
    evaluating whether to provide assistance, how does the US&FCS ensure
    that it is not exporting U.S. jobs overseas instead of creating jobs
    here in the U.S.?
        Answer. The US&FCS remains fully committed to its primary mission
    of providing export promotion services to U.S. companies as the
    principal means of increasing U.S. exports. Particular emphasis is
    placed on encouraging small and medium-sized U.S. businesses to explore
    trade openings and gain potentially lucrative markets. The number one
    priority for each of our overseas posts is to promote increased U.S.
    exports to that country, by providing export counseling and market
    information to American firms to promote their expansion in the
    marketplace.
        In addition, and in keeping with the Department's international
    trade priorities, our trade and commercial relations are used to
    promote democracy, peace and freedom in key regions and countries
    around the world. In regions where we may assist in securing political
    stability and peace, as with the Presidential Initiative for Northern
    Ireland and the Border Counties of Ireland, the US&FCS may become more
    involved in facilitating contacts to assist U.S. firms in becoming
    established in the country.
        On other occasions, ``strategic alliances'' may be discussed
    between U.S. and foreign firms as a means to increase the U.S.
    company's international posture. Based on the U.S. firm's ability and
    other company-related variables, the U.S. firm may decide that its
    interests are served more productively by approaching a specific market
    via joint ventures, licensing agreements, or possibly overseas
    production. The firm makes such decisions unilaterally or in concert
    with foreign businesses directly. At no time do we encourage U.S. firms
    to forego the establishment or expansion of production facilities in
    the U.S. in favor of overseas manufacturing. The private sector knows
    its internal limitations and abilities best and the firm ultimately
    decides on the most viable method for approaching a specific market.
        The US&FCS' Office of Multilateral Development Bank Operations
    (MDBO) works to increase U.S. exports of goods and services to projects
    financed by the World Bank and the other four multilateral development
    banks (MDB's)--over $40 billion in projects sponsored by developing
    national governments annually.
        The MDB's also are providing funding to an increasing number of
    privately-sponsored investment projects in developing nations. This
    financing is made on market terms to projects that fit certain
    financial, social and economic criteria established by the MDB's. The
    MDB's will usually fund only about one-third of the total cost of a
    private project. U.S. companies are eligible to tap into this source of
    financing for their investment projects in developing nations if they
    so desire.
        For example, the US&FCS European Bank for Reconstruction and
    Development (EBRD) post in London helped Honeywell Inc. (Minneapolis,
    MN) secure $25 million in equity financing from EBRD to support
    Honeywell's plan to create a series of energy service companies
    (ESCO's) in several Central and East European countries. The ESCO's,
    either Honeywell-owned or joint ventures with local partners, will
    install meters and other energy saving equipment in industrial,
    commercial and government facilities around the region. A substantial
    amount of this equipment will be sourced from the United States.
        US&FCS policy remains committed to encouraging U.S. exports of
    goods and services. Under no circumstance is it ever our policy to
    encourage or suggest that U.S. firms establish production facilities
    overseas at the expense of U.S. firms' domestic employment.
        Question. To this end, I understand that the US&FCS is now
    conducting ``reverse trade missions.'' With these missions, US&FCS
    brings foreign businesses to the U.S. which are seeking markets for
    products. Please provide a list by country since January 1, 1995, of
    these ``reverse trade missions'' missions and the cost and purpose of
    each mission.
        Answer. On a very limited basis, US&FCS has supported ``reverse
    trade missions'' whose primary objective is to introduce qualified
    foreign buyers to U.S. suppliers of goods and services. Hopefully, this
    can be a cost-effective means for U.S. companies to meet with foreign
    buyers and introduce their American-made products leading to sales or
    agent/distributor agreements overseas.
        The Trade and Development Agency (TDA) has a program specifically
    designed to organize or sponsor ``reverse trade missions'' to the
    United States. The US&FCS MDBO and our posts at the Inter-American
    Development Bank (IDB), World Bank and Asian Development Bank (ADB)
    have participated in several TDA-organized missions. In each case, the
    reverse missions consisted of government officials from Latin American
    or Asian countries who were interested in assessing U.S. technology for
    possible purchase. Many of these officials had authority to procure
    goods and services for projects financed by the IDB, World Bank and
    ADB. In these cases, the reverse missions provided a very cost-
    effective way to familiarize foreign government decision makers with
    U.S. technology prior to the international procurement process taking
    place.
        The US&FCS supported the following ``reverse trade missions'' since
    January 1, 1995:
      --November 1995, ``Bridges to Progress'' reverse mission from
            Morocco. The mission of 17 high-level Moroccan business people
            led by Ambassador Marc Ginsberg visited the U.S. to find
            suppliers and possible business partners. All costs associated
            with the mission were covered by fees paid by the Moroccan
            participants.
      --February 1997, ``Bridges to Progress II'' reverse mission from
            Morocco. The mission of 17 high-level Moroccan business people
            led by Ambassador Marc Ginsberg visited the U.S. to find
            suppliers and possible business partners. All costs associated
            with the mission were covered by fees paid by the Moroccan
            participants.
      --April 1997, the Southern African Development Community (SADC)
            reverse mission from Southern Africa. This mission of 12
            ministers and 12 private sector representatives from the SADC
            region came to Washington to discuss with USG officials
            implementation of the organization's free trade agreement,
            known as the SADC Trade Protocol. The travel costs for the SADC
            delegation members were covered by AID. The cost to the US&FCS
            was $5,000 to cover travel costs for the Commercial Minister
            Counselor from Johannesburg who participated in the mission.
        Question. I have always supported the integration of the domestic
    and overseas personnel systems of the US&FCS. I'm pleased that this is
    a goal for the US&FCS too. I am interested in how successful these
    efforts have been. Please provide the total number of civil servants
    that have been integrated into the foreign service by grades. What
    percentage of civil servants that sought admission to the foreign
    service succeeded?
        Answer. The US&FCS has been pursuing its integration policy very
    forcefully over recent years. When we aggregate the numbers, we find a
    very high percentage of civil servants have converted into the foreign
    commercial service after successfully passing a foreign service
    assessment. As a total, we currently have on board 203 foreign
    commercial service career officers (FCSC) of which 98 passed a foreign
    service assessment and then converted from the civil service of the
    Commerce Department. This means that 48 percent of today's total FCSC
    officer corps came from the Commerce Department civil service after
    having passed a foreign service assessment. We have an additional 19
    Commerce Department civil servants currently posted to overseas
    positions on ``limited non-career'' appointments; many of these people
    also have successfully passed our latest March 1997 assessment for the
    foreign service and should be offered the option of converting shortly.
    Here are the current figures broken down according to grade:

    ------------------------------------------------------------------------
                                                       Total
                                                       Career     Total from
                         Grade                      Officers in  USDOC Civil
                                                        1997       Service
    ------------------------------------------------------------------------
    Career Minister...............................            2  ...........
    Minister Counselor............................           13            2
    Officer Counselor.............................           18            5
    FS-01.........................................           48           27
    FS-02.........................................           52           29
    FS-03.........................................           54           29
    FS-04.........................................           16            6
                                                   -------------------------
          Totals..................................          203           98
    ------------------------------------------------------------------------

        Admission to the foreign service is based on successful completion
    of an intensive examination which is referred to as an ``assessment.''
    This assessment includes 5-6 hours of examination exercises. We have
    conducted three assessments limited to internal civil service staff
    with the following results: in August 1995, assessment for commercial
    service staff at GS 14/15--pass rate of 55 percent (11 of 20 passed);
    in November 1995, assessment for commercial service GS 12/13
    employees--pass rate of 50 percent (33 of 66 passed); and in March
    1997, assessment for ITA employees--46 percent (47 of 103 passed).
        Many of the current commercial service officers did not pass the
    assessment on their first attempt.
        Question. What is the current on-board strength of the US&FCS
    (overseas and domestic, U.S. national and foreign national employees)
    as of February 28, 1997, versus September 30, 1996? What is the status
    of the 106 additional FTE that were directed in the Senate
    appropriations report?
        Answer. The figures for the two periods follow:

    ----------------------------------------------------------------------------------------------------------------
                                                       As of February 28, 1997          As of September 30, 1996
                                                 -------------------------------------------------------------------
                                                                          Domestic                          Domestic
                                                  Overseas  Headquarters    field   Overseas  Headquarters    field
    ----------------------------------------------------------------------------------------------------------------
    Foreign Civil Service officers..............       191          12          19       187          14          15
    Foreign Service secretaries.................         7           2    ........         7           2    ........
    Foreign Service nationals...................       496  ............  ........       515  ............  ........
    Civil service employees.....................  ........         162         283  ........         164         275
                                                 -------------------------------------------------------------------
          Subtotal..............................       694         176         302       709         180         290
                                                 -------------------------------------------------------------------
          Grand total...........................
    (2)1,172
    (2)1,179
    ----------------------------------------------------------------------------------------------------------------

        US&FCS's operational FTE ceiling has not been adjusted to reflect
    an increase of 106 FTE. This is prudent in light of ITA's and US&FCS's
    fiscal year 1998 FTE request. Otherwise, the US&FCS would be in the
    position of hiring staff in fiscal year 1997 only to release them in
    fiscal year 1998 in order to comply with its fiscal year 1998 ceiling.
        Question. The State Department regularly sends the Committee
    information on its personnel levels, but US&FCS does not. Please
    provide the number of US&FCS officers by grade (FS-04 through Career
    Minister Counselor) as of September 30, 1992, September 30, 1996, and
    current on-board strength. If there has been an increase in average
    grade levels over this period of time, please explain why.
        Answer. The US&FCS as an organization is a relatively small one as
    compared to State--about 250 versus 8,100 foreign service personnel.
    (This figure for State does not include the agencies of United States
    Information Agency (USIA), AID and Arms Control and Disarmament Agency;
    if it did 10,380 would be the approximate total.) We in the Commercial
    Service are more like the Foreign Agricultural Service (FAS) with its
    190 foreign service personnel. We would be more than happy to adopt any
    standing procedures with your Committee that would be appropriate for a
    small officer corps like ours.
        Here are the three time frames requested and the breakdown of the
    various grades:

    ----------------------------------------------------------------------------------------------------------------
                                                        September 30, 1992   September 30, 1996        Current
                                                      --------------------------------------------------------------
                                                        Career   Noncareer   Career   Noncareer   Career   Noncareer
    ----------------------------------------------------------------------------------------------------------------
    Career Minister..................................         1  .........         1  .........         2  .........
    Minister Counselor...............................         8          1        12          1        13          1
    Officer Counselor................................        15  .........        16  .........        18  .........
    FS-01............................................        45          4        48          3        48          4
    FS-02............................................        52          7        49          8        52          8
    FS-03............................................        25          6        53         13        54         14
    FS-04............................................        24         13        20          2        16          3
                                                      --------------------------------------------------------------
          Totals.....................................       170         31       199         27       203         30
    ----------------------------------------------------------------------------------------------------------------

        The Commercial Service began its career in 1981 and so did many of
    its officers. Since it is a foreign service organization with its ``up
    or out'' promotion policies, people have gradually been promoted
    through the ranks, while others have reached their ``time-in-class''
    and have retired or left the service.
        In analyzing the career and non-career personnel, there is a
    natural rise in the level of officers as the service matures from the
    age of 11 to 16 years. There is also an increase in officers reflecting
    the additional FTE that Congress has given us over the years. We have
    placed many of these additional officers in the Big Emerging Markets
    (BEM). Moreover, we are still using a number of non-career limited
    appointments in the BEM's and other markets such as China, the Middle
    East and the Newly Independent States (NIS) because we have lost many
    specialized officers to the private sector. As with other foreign
    affairs agencies, we have difficulty in replacing their skills quickly
    enough from our career cadre.
        In comparison to the other four foreign affairs agencies
    (Department of State, USIA, AID, FAS), the Commercial Service is in
    line with their grade/rank dispersion. Moreover, 47 percent of all
    commercial service posts overseas are so called ``1-officer posts;'' so
    a commercial service officer must have a significant degree of
    experience and skill to carry out commercial responsibilities as the
    ``one and only.'' The one area, however, where we do not compare well
    with most other foreign affairs agencies is that our senior commercial
    officers have yet to reach the rank of ambassador. After being a
    foreign affairs agency for more than 16 years, we feel our top level
    officers are sufficiently qualified to have at least one of them become
    an ambassador at a commercially significant post.
        Question. In fiscal year 1996 and fiscal year 1997, Congress
    reduced appropriations for the International Economic Policy (IEP)
    division of the ITA significantly. It appears that in spite of dire
    predictions by the Commerce Department, these reductions were
    accomplished without significant employment or program impacts. How did
    ITA manage to sustain IEP personnel levels in spite of reductions in
    funding? What costs have been absorbed by other divisions, such as the
    Trade Development division, to provide relief for IEP? Were such
    actions not submitted to the Committees on Appropriations in accordance
    with Section 605 of the Commerce Appropriations Act?
        Answer. The Market Access and Compliance (MAC), formerly IEP,
    subactivity has had a significant decrease in FTE usage. An apparent
    increase of 16 positions, from 187 in fiscal year 1996 to 203 in fiscal
    year 1997, is not an actual increase. It is due solely to the fact that
    beginning in fiscal year 1997, 28 FTE devoted to AID-funded programs
    administered by MAC (BISNIS--the Business Information Service for the
    NIS, CEEBIC--the Central and Eastern Europe Business Information
    Center, and SABIT--the Special American Business Intern Training
    program) began to be reflected in the MAC's direct (as opposed to
    reimbursable) FTE allocation.
        Thus, this change in accounting for FTE makes it appear that MAC
    had an increase in personnel, when in fact it did not. Net of the AID-
    funded activities, MAC's authorized FTE has actually dropped by 12
    (from 187 to 175). Within that total, by the end of fiscal year 1997,
    MAC will have brought its FTE for the TCC to the 25 directed by the
    Congress which is a gain of 20 from the 5 on board in fiscal year 1996.
    MAC's regional operations have had to absorb this transfer fully in
    addition to the overall reduction in staffing. In fact, MAC's regional
    operations will have dropped by 32 FTE, or 18 percent, by the end of
    fiscal year 1997.
        This reduction cannot be viewed in isolation. MAC's FTE has been
    declining each year since fiscal year 1994. In fiscal year 1996, the
    cut alone was 14 FTE and MAC's regional staff has been reduced in size
    by 46 FTE in two years. The effect has severely reduced MAC's ability
    to address regional market access barriers. As examples, MAC had a
    staff of eight officers working on China in fiscal year 1995 which has
    been reduced to four, and MAC's Japan staff has been reduced from
    thirteen to nine.
        In response to the Congressionally imposed reductions, MAC is
    shifting its mix of work activities by sharply reducing business
    counseling in order to concentrate its remaining resources on
    identifying market access barriers and agreements compliance
    violations, and developing the strategies for overcoming the barriers
    and remedying compliance problems. For example, MAC has closed its
    Japan Export Information Center, which was the only U.S.-based source
    of Japan access information, in order to focus its remaining staff of
    Japan experts on Japanese market access barriers, Japanese compliance
    with existing agreements, and providing expertise for ongoing
    negotiations.
        In January 1997, given the decreased fiscal year 1997 appropriation
    and a set-aside for the TCC, ITA requested a reprogramming of funds for
    MAC. The request was submitted to Congress for $500,000 from funds
    deobligated from ITA's prior year accounts for the purpose of paying
    external North American Free Trade Agreement review panelists. ITA has
    acted in accordance with reprogramming guidance in Section 605 of the
    Commerce Appropriations Act.
        In April, 1997, ITA moved 9 positions from MAC to Trade Development
    (TD) in order to consolidate trade information dissemination in the TD
    unit and further relieve MAC to concentrate on other areas.
        In summary, the declining fiscal years 1996 and 1997 funds
    translated to a significant decrease of foreign market expertise
    available in the organization resulting in a major adjustment and
    reduction in services provided both to the U.S. business community and
    other USG agencies. Our support of USTR has suffered in a number of
    ways. The decreased funds have impaired our ability to support
    negotiations and enforcement of critical sector trade agreements such
    as the U.S.-Japan Medical Technology Agreement which covers a market
    worth $2.6 billion to U.S. medical companies. MAC staff has also
    stopped travel in support of the General Agreement of Trade and Tariff
    and the World Trade Organization accessions involving a number of major
    U.S. trading partners such as the People's Republic of China. We are
    having difficulty providing country-specific analyses of regulatory
    structures and importing regimes of 32 Latin American countries for the
    preliminary Free Trade Agreement of the Americas market access
    negotiations. There are other areas of decreased MAC support of USTR,
    but they are too extensive to mention in this context.
        Question. You state that you are considering reorganizing ITA. Why?
    What are your goals?
        Answer. ITA is considering reorganization to assess the possibility
    of creating a more effective and efficient organization which better
    serves its clients. We are examining a number of scenarios to determine
    which best leads to the improved organization we are seeking.
        One of the primary factors driving our examination of different
    options is our desire to reduce the number of Schedule C appointees and
    the number of deputy assistant secretaries in ITA. This is part of a
    Departmental-wide plan which will be implemented during the next two
    years. Linking these personnel changes with development of our new
    strategic plan may require a reorganization.
        Ultimately, whatever course we take will lead us down the track to
    an organizational structure which puts client service first so that the
    true benefits of increased exporting creates more jobs for U.S.
    workers, more profits for U.S. firms, and a stronger economy in general
    which can more completely reach fruition.
        Question. I've always been pretty impressed with ITA. They do a
    super job. What do you perceive is wrong or can be improved?
        Answer. We feel the program mix delivered by ITA to its business
    clients is currently very strong. As we mentioned above, however, we
    are examining the possibility of performing a reorganization if it can
    be shown to produce a more efficient and effective means of delivering
    the programs.
        Question. You have changed the guidelines for overseas trade
    missions. I believe these missions are very important because they help
    us compete with the Germans, Japanese and French. What has industry's
    reaction been to your policy changes?
        Answer. On March 3, 1997, the new policy guidelines for all trade
    missions run by the Department were announced. These guidelines were
    developed by both political and career employees after a thorough 30-
    day review of all trade mission approval, promotion, recruitment and
    selection activities.
        The guidelines were designed to ensure better and broader
    notification and promotion of our trade missions through the
    Department's trade promotion partners, including trade and industry
    associations and targeted media outlets, as well as more defined
    recruitment and selection processes. The business and industrial
    community have benefitted from these new guidelines by having greater
    access to information about our trade missions through the Internet and
    Federal Register. Most importantly, the guidelines have ensured that no
    political influence is incorporated into the selection process.
        The business and industrial community's reaction to these
    guidelines has been positive, witnessed by the many successes following
    my most recent mission to Latin America, as well as other Departmental
    trade missions held since March 3rd. While the companies that
    participate on these missions provide more information than in the past
    when applying for a mission, including certifying compliance with the
    Foreign Corrupt Practices Act for the mission and providing details on
    their business objectives to ensure that they meet the goals of the
    mission, the results of the missions are more assured.
        The guidelines have helped to sharpen the focus of our trade
    missions on the core business of the Department in this area which is
    to promote the best that American business has to offer to the global
    economy.
           minority business development agency [mbda] effectiveness
        Question. You are reorganizing the International Trade
    Administration (ITA), a program that has been very effective. But in
    the case of MBDA, there is an agency with an important mission that has
    had problems and has been less than effective.
        Have you given any thought on how to reinvigorate this Agency?
        Answer. MBDA has already undertaken concrete steps to reinvigorate
    its program. Over the past several years, MBDA had come to place
    excessive reliance on its Minority Business Development Center (MBDC)
    network as the vehicle for delivering its services to minority
    entrepreneurs. While the MBDC network addresses a critical aspect of
    any comprehensive strategy for minority business development, namely,
    providing minority entrepreneurs with basic management and technical
    assistance, too much of its resources had come to be concentrated in
    this one area.
    The MBDA Mission
        Executive Order 11625 establishes MBDA, specifically its
    predecessor the Office of Minority Business Enterprise, as the overall
    coordinator of Federal Government efforts to promote the growth and
    expansion of the Nation's minority-owned businesses. While MBDA has
    never operated as a large bureaucracy in terms of either staff or
    budget resources, its strategic, research and policy-oriented focus has
    always been the key to MBDA's effectiveness. Early in its history, MBDA
    assisted in the development of a national infrastructure to support
    minority businesses by providing seed funding for such trade
    organizations as the National Minority Supplier Development Council
    (NMSDC) and the Hispanic Chamber of Commerce. MBDA also provided
    technical assistance and guidance to state and local governments
    throughout the country to help them establish their own minority
    business enterprise programs. Many of the programs developed through
    these efforts have gone on to support successfully minority business
    growth long after MBDA's assistance was withdrawn. It is this sort of
    flexible, strategic and highly-leveraged assistance that is the
    cornerstone of MBDA's approach to minority business development, and
    that distinguishes MBDA's programs from the more structured minority
    programs of other agencies, including the Small Business Administration
    (SBA).
        In 1982, MBDA established the Minority Business Development Center
    (MBDC) program. The MBDC's were developed as a strategy for providing
    direct client assistance to individual minority-owned companies in
    order to improve their overall competitiveness. Located throughout the
    country in metropolitan areas having substantial minority populations,
    the MBDC's offered minority entrepreneurs qualified professional
    business consulting through a staff of trained counselors. Under the
    traditional MBDC guidelines, MBDC's are operated by private
    organizations who compete for grants to operate under a competitive
    solicitation process.
    Factors Which Have Eroded the Effectiveness of the MBDC Program
        While the MBDC Program was an effective program when it was first
    established over a decade ago, a number of factors have caused the
    effectiveness of the program to decrease over time. These factors
    include:
        Cost.--The MBDC program has always been overhead intensive and
    costly to operate. Out of the funding which MBDA provided, operators
    had to lease and furnish commercial office space, hire clerical staff,
    purchase computer equipment required under the program guidelines, and
    attempt to attract consulting staff with the necessary credentials to
    assist minority entrepreneurs with their business problems. Because of
    stagnant (and now substantially decreased) appropriations, MBDA has
    been unable to increase the funding levels for the centers in over a
    decade, despite the fact that the operators' costs have been steadily
    increasing. At the same time, however, a full eighty-five percent of
    MBDA's program spending had come to be focused on maintaining the MBDC
    network, impeding the MBDA's ability to deliver other types of program
    services.
        Non-Local Operators.--In addition to the pressures of rising costs,
    the success of the MBDC program came to be impeded by the transience of
    the MBDC operators themselves. The MBDC program guidelines previously
    established no preference for locally-based applicant organizations in
    the competitive solicitation process. This had the effect over time of
    producing a number of centers which were operated by out-of-town firms
    who, because of the fact that awards are recompeted every three years,
    had no real incentive to build the centers as long term resources in
    their local communities.
        Limited Reach.--Funded to its fullest extent, the MBDC network
    consisted of approximately 100 business assistance centers operating in
    markets throughout the country. Recent reports have indicated that
    these centers served less than one percent of the nation's total
    minority business population.
        Failure to Utilize Available State and Local Resources.--Since the
    establishment of the MBDC program more than a decade ago, a number of
    organizations and programs have developed at the state and local level
    with resources to assist minority-owned businesses. These community-
    based organizations include minority and non-minority chambers of
    commerce, economic development groups, state and local MBE programs, a
    variety of non-profit organizations, and others. The traditional MBDC
    guidelines created no vehicle for establishing partnerships with
    community-based organizations; thereby, leveraging MBDC funding with
    locally-generated funding in order to enhance the overall value of the
    MBDC projects that did not exist.
    MBDA's Reinvention Effort
        MBDA has adopted a reinvention plan which essentially focuses on
    (1) updating and improving the effectiveness of the MBDC program, and
    (2) diversifying MBDA programs and services beyond the MBDC program in
    order to return to its more strategic, research and policy-oriented
    focus. In order to achieve these goals, MBDA has adopted a revised menu
    of program services which includes the following four items: Community-
    based MBDC's; expansion of the Minority Business Opportunity Committee
    (MBOC) Program; Internet-based service delivery; and sector
    initiatives.
        The program services are described as follows:
    Community-Based MBDC's
        In order to address the above-cited concerns regarding
    effectiveness of the MBDC's and improve the overall performance of the
    MBDC program, MBDA has adopted the following modifications to the
    traditional MBDC guidelines:
        Ten-Point Bonus For Locally-Based Applicants In The Selection
    Process.--This ten-point bonus will have the practical effect of
    preferring qualified locally-based applicant organizations over
    similarly-qualified non-local applicants. MBDA believes that such an
    approach will further the goals of the MBDC program because familiarity
    with the local market, including knowing where opportunities for
    minority entrepreneurs may exist at any given time, and having
    established relationships with local business leaders who influence
    buying and lending decisions, is a critical component of the MBDC work
    requirements. While the ten-point bonus establishes a preference for
    locally-based applicants, the preference is not so great as to enable
    unqualified or marginally qualified local applicants to prevail over
    qualified non-local firms.
        Establishment Of Forty Percent Cost-Share Requirement.--MBDA now
    requires MBDC operators to produce 40 percent of the annual cost of
    MBDC projects from non-Federal sources as opposed to 15 percent in the
    past. These additional resources will help to expand the scope of the
    projects, and alleviate the budget constraints which have been placed
    on the MBDC's as a result of stagnant MBDA funding levels. Furthermore,
    the ability to meet the 40 percent cost-share requirement will itself
    serve as a screening method for selecting the best operators, since
    those organizations which have been providing the best services to the
    community will be the ones most likely to have local-funding support
    which can be leveraged with the MBDA funding.
        With these two program modifications, the MBDC's will become more
    cost-effective and more effectively integrated into their local
    communities. Furthermore, by diversifying the funding bases of the
    MBDC's and using locally-based service providers, MBDA increases the
    likelihood that the projects will develop as long term resources which
    could potentially continue to serve their communities even in the
    absence of MBDA funding.
    Expansion of the MBOC Program
        The MBOC program was established by MBDA as a vehicle for
    identifying available market opportunities for minority businesses
    within diverse economic regions. Under the MBOC program, the MBDA
    establishes a committee of key business and industry leaders
    representing a cross-section of the industries that are vibrant within
    a particular regional economy. MBDA provides funding to establish an
    executive director and one or more support staff positions. The
    committee then meets on a regular basis, no less than monthly, to share
    information concerning the location of contract, procurement and other
    market opportunities. This information is compiled and disseminated to
    the minority business community through the committee staff.
        Because the membership of the MBOC consists of a diverse cross-
    section of the business community, i.e. banks, utility companies,
    private corporations, port authorities, transit authorities, the
    procurement offices of Federal, state and local government agencies,
    etc., the MBOC's play an important role in helping to coordinate the
    often disjointed efforts of separate organizations to promote minority
    business utilization within a single market. At the same time, the
    MBOC's provide a service that is more cost-effective and less overhead-
    intensive than the MBDC program and one that addresses a critical need
    within the minority business community, namely, access to market leads.
    Many of our minority business clients have indicated that they have
    outgrown the need for basic management and technical assistance, but
    have a continuing need for information concerning where they can most
    effectively market their products or services at any given time. MBDA
    currently has nine MBOC's operating in various markets around the
    country. In view of the success of this program, MBDA intends to
    increase the number of these projects.
    Internet-Based Service Delivery
        In part because of decreased budget resources, MBDA is currently
    developing the capability to provide business assistance to minority
    entrepreneurs nationwide through telecommunications technology
    including the Internet. This system will enable minority entrepreneurs
    to access bid opportunities, register for inclusion in MBDA's database
    of minority firms (which is used as a referral source for contract
    opportunities), and receive interactive training and technical
    assistance on-line.
    Sector Initiatives
        Part of MBDA's mission which is included in the Executive Orders is
    to help minority entrepreneurs access opportunities in specialized
    sectors of the economy offering the unique potential for high-growth
    and profitability. In addition, MBDA has traditionally sought to
    identify strategic initiatives through the deployment of its program
    resources which leverage maximum results for the minority business
    community. Consequently, a core component of MBDA's reinvention
    strategy is a renewed emphasis on sector initiatives in such areas as
    capital formation, franchising, corporate supplier development,
    international trade, and others.
        MBDA is fully committed to improving its performance and has a
    solid program in place for achieving this goal. We share your belief in
    the importance of MBDA's mission and would welcome an opportunity to
    provide you with periodic updates as this reinvention effort moves
    forward.
                             mbda/sba collaboration
        Question. Last year we fenced money in MBDA's budget for programs
    to be run in conjunction with the SBA. How is this effort coming along?
    Could you give us a status report and some concrete accomplishments?
        Answer. MBDA has already adopted a number of successful joint
    projects with SBA under the two agencies' recently-developed Business
    Resource Center (BRC) network. Developed through a partnership
    consisting of MBDA, SBA, NationsBank, Bell Atlantic, Bell South and
    others. The BRC's are state-of-the-art facilities offering
    entrepreneurial training through SBA's SCORE counselors, management and
    technical assistance through MBDA's MBDC program, computer equipment,
    business software, printed resource material and teleconferencing
    capability for workshops and seminars. These one-stop facilities
    combine the resources of the various partners in order to create a
    single focal point within a given market for small and minority
    business development activities. BRC's are presently located in
    Nashville, Baltimore, Charlotte, Charleston, Atlanta and Miami, with
    additional centers now in the planning stages. This joint project has
    proven to be a very effective vehicle for service delivery.
        The two agencies also agreed to establish a series of Executive
    Training Workshops for the Chief Executive Officers of 8(a) certified
    companies, to be held in 13 cities throughout the country. These
    workshops would involve a curriculum that combined the expertise of
    both MBDA and SBA, in particular its Minority Enterprise Development
    (MED) division, by having SBA conduct sessions on marketing to the
    Federal government, Federal contracting procedures and other issues,
    while MBDA would provide training on developing the 8(a) companies'
    portfolio of non-8(a) business. While MBDA remains committed to this
    concept, recent leadership changes in the MED Division at SBA and other
    issues have delayed this project from moving forward.
        MBDA fully supports the notion that it should strive to achieve
    administrative and cost efficiencies through joint projects with the
    SBA, wherever such projects have merit in supporting its respective
    program strategies. However, MBDA does not believe that there is
    substantial duplication of services or overlap between its programs and
    those of SBA.
        While to some degree SBA, like MBDA, administers programs designed
    to promote the growth of minority-owned business, the nature of those
    programs and the manner in which the two agencies operate is
    drastically different. SBA administers both the 8(a) contracting
    program, (a sheltered-market contracting program that provides minority
    companies with access to Federal procurement opportunities), and the
    Minority Prequalification Loan Program, an extension of SBA's 7(a) loan
    guaranty program designed to increase the incentive for financial
    institutions to make loans to minority business borrowers. Both of
    these programs constitute important components of the Federal
    government's minority business assistance efforts. However, both are
    management-intensive programs requiring a substantial commitment of
    staff and budget resources. These are self-contained programs within
    SBA that have permanent statutory authority, and SBA is able to
    administer these programs in large part because of the resources which
    it has available as the lead agency for addressing the issues of the
    Nation's small businesses as a whole.
        As stated in response to the previous question, MBDA's approach to
    minority business assistance is substantially different from that of
    SBA. While SBA manages two of the Federal Government's largest minority
    business programs on an ongoing basis, MBDA's practice, in accordance
    with its Executive Order, is to use a flexible research and policy-
    oriented approach to design strategic initiatives to impact minority
    business growth. For this reason, MBDA (at that time the Office of
    Minority Business Enterprise (OMBE)) was placed within the Department
    of Commerce to facilitate the necessary linkages with sister Federal
    agencies, and give the Agency cabinet-level stature to maximize its
    ability to coordinate the activities of Federal, state, local and
    private sector organizations.
                                noaa--satellites
        Question. Your NOAA satellite program is probably the most
    expensive single item in your Commerce Department budget. For fiscal
    year 1998 you are requesting $321 million and your outyear estimates
    include over $3 billion to procure Geostationary and Polar satellites.
        I am concerned that while you and I pay for this program--it is run
    and controlled by NASA. I cautioned Dr. Baker about this at last year's
    hearing.
        When I look at what has occurred in the past year with the NOAA
    Geostationary Satellite program, I would have to say that I am very
    disappointed. NOAA has proposed one procurement plan that has been
    rejected by NASA. In each case NOAA has changed its plans and just does
    what NASA wants.
        So Mr. Secretary, you've got the budget and responsibility and
    they've got the control. If NASA is going to run your Commerce
    satellite programs, then why don't we just shift the cost for NOAA
    satellite programs to NASA's budget and the VA-HUD Appropriations
    Subcommittee?
        Answer. The satellite programs are an essential element of NOAA's
    operational environmental mission, whereas NASA's satellite programs
    are science, research and development oriented. As the satellite data
    user, NOAA believes that the overall program management must reside
    with NOAA.
        NOAA manages the overall GOES program and controls the flow of
    funds to NASA. NOAA develops the GOES program requirements based on its
    expertise and understanding of operational forecasting needs and
    impacts. NASA then uses its research and development expertise to
    develop specifications, and to procure, produce, launch and deliver
    GOES satellite systems that satisfy NOAA's requirements. It is under
    NASA's procurement authority that these satellites are being acquired.
        Question. I fear we are recreating the situation we had in the GOES
    geostationary satellite program just a few years ago. That's why this
    Committee has consistently said we want reliability and coverage, no
    more R&D with GOES Satellites.
        Answer. Today's situation is much different from ``a few years
    ago.'' Past development difficulties with instruments in the late
    1980's have been successfully resolved and the risks are now well
    understood and controlled. The instruments that are currently
    operational on GOES 8 and 9 continue to provide data vital to the
    protection of life and property. To keep risks to a minimum, and to
    increase reliability, more of the same instruments are being procured.
    These instruments do not require R&D.
        To avoid future repetition of the problems from the past, NOAA will
    pursue a more conservative approach to developing the next series of
    geostationary satellites. This path will maintain an awareness of
    current technological advances, identify risks early, and develop and
    test means to mitigate risks well in advance of formal commitments to
    implement actual instruments designs.
        Question. It was just five years ago that I held a special hearing
    and Secretary Robert Mosbacher said ``I don't know anything, it's not
    my program, ask NASA.'' It's on your watch Secretary Daley, have you
    looked into this situation? Have you asked NOAA satellite managers what
    is the right course of action versus what NASA told them they are
    willing to do?
        Answer. Yes, I have looked into the situation. Following those
    hearings, NOAA created the Systems Acquisition Office to provide
    increased management and financial oversight to ensure that NASA
    implements the program within NOAA's guidelines and constraints. NOAA
    satellite managers work closely with NASA on technical issues and, in
    many cases, conduct their own analyses. The Department is pursuing an
    acquisition strategy for GOES that best meets the needs of the National
    Weather Service while minimizing risk and program costs.
                         performance-based organization
        Question. The Administration is proposing that the Patent and
    Trademark Office (PTO) be made a ``Performance-Based Organization''.
    What does that really mean?
        Answer. A performance-based organization (PBO) is a discrete unit
    of a department that commits to clear management objectives, measurable
    goals, customer service standards, and accountability for specific
    targets for improved performance. The unit remains within a department
    under the policy guidance and direction of the Secretary and is still
    subject to Government-wide regulations, rules, policies, and
    procedures, unless specific waivers are granted. A PBO focuses on
    programmatic operations, not policy-making functions.
        A PBO will have a Chief Operating Officer (COO) and greater
    managerial flexibilities in personnel, procurement and other specified
    areas which will enable it to improve organizational performance. The
    COO will be selected for managerial experience, for a fixed term, and
    will sign an annual performance agreement with the Secretary and be
    accountable for meeting the organization's performance improvement
    goals. In addition to managerial experience, the COO would be selected
    from individuals who have professional experience in patent or
    trademark law. The performance goals would be used as a basis for the
    Secretary of Commerce to evaluate the performance of the COO to
    determine whether to award a bonus and, if so, the amount of the bonus.
        In the case of the PTO, the PBO, to be called the United States
    Patent and Trademark Organization (USPTO) would be an agency of the
    Department of Commerce and would focus on the examination of patent and
    trademark applications and the dissemination of patent and trademark
    information. The USPTO would have greater flexibilities in connection
    with personnel management and procurement, in accordance with special
    statutory language. An Under Secretary of Commerce for Intellectual
    Property would also be established under the Administration's bill. The
    Under Secretary would be responsible for, among other things, granting
    patents, registering trademarks, giving policy direction to the COO and
    advising the President and agencies of the U.S. Government, through the
    Secretary of Commerce, on patent and trademark policy and related
    matters.
        Question. So we are going to let compensation for PTO management go
    up, what else do we expect to get out of it?
        Answer. Maximum levels would be established in the legislation for
    salaries for the COO and the other officers of the USPTO, consistent
    with those paid for comparable positions in the Executive Branch. The
    purpose of the legislation is to improve the efficiency and cost
    effectiveness of the portion of the PTO that examines patent and
    trademark applications and disseminates information about patents and
    trademarks so that the USPTO will be able to operate more like a
    business. More flexible procedures in connection with personnel
    management and procurement would be available to the COO to meet the
    goals that are set by the COO and the Secretary of Commerce in an
    annual performance agreement.
        Question. Will you, the Secretary of Commerce, still have a
    management and oversight role for PTO if it becames a ``Performance
    Based Organization?''
        Answer. The COO and the Secretary of Commerce would enter into an
    annual performance agreement establishing for the USPTO clear
    management objectives, measurable goals, customer service standards,
    and specific targets for improved performance. These would be used as
    the basis for the Secretary of Commerce to evaluate the performance of
    the COO to determine whether to award a bonus and, if so, the amount of
    the bonus. The Secretary also could dismiss the COO for misconduct or
    failure to meet the performance standards established in the annual
    performance agreement. In addition, the USPTO would be under the policy
    direction of the Under Secretary for Intellectual Property on patent
    and trademark matters and would still be subject to governmentwide
    regulations, rules, policies, and procedures, unless specific waivers
    were granted.
        Question. The Judiciary Committees created this Patent surcharge
    for deficit reduction purposes back in 1990, and now the House
    Judiciary Committee is proposing to give these fees back to the PTO.
    What is the Administration's position on this surcharge issue?
        Answer. The Administration opposes the surcharge fee provisions
    incorporated in H.R. 400 and continues to support the concept of using
    patent surcharge fees for deficit reduction. However, we are willing to
    work with the Committee on this issue in the context of establishing
    PTO as a PBO.
                          advanced technology program
        Question. The ATP is sometimes criticized for contracting with
    large firms as well as small ones to help the country develop next-
    generation technologies. Yet other federal technology programs contract
    with large companies when they have the best proposals for meeting a
    public mission. NASA aeronautics, for example, contracts with Boeing,
    General Electric, United Technologies, and others. DARPA, the Energy
    Department, and USDA also contract with large firms. They're often the
    ones with the technological expertise. Do you think it would be
    appropriate to restrict the ATP to only small companies when other
    Federal programs continue to fund the best proposals regardless of the
    size?
        Answer. The ATP has always been ``size-blind'' when making awards.
    ATP competitions are rigorous but fair, and based entirely on technical
    and business merit. Small companies compete just as effectively as
    large companies. Since its inception, 47 percent of all awardees
    (single applicants and joint venture leaders) have been small
    businesses. Companies of all sizes have good ideas and the technical
    capabilities, but they may face disincentives for tackling high-risk,
    enabling technology development. ATP provides a process for independent
    review, approval, and seed funding that pushes large companies to take
    risks they would not have normally taken. Often the large company in a
    partnership is very valuable since it brings its unique capabilities
    for commercialization to the joint venture. Large companies are
    certainly as important to the Nation's R&D effort as small companies
    and for the ATP to make the necessary economic impact it will require
    the engagement of all companies both large and small.
        Question. Please tell us more about the consultations you will now
    undertake regarding the ATP. With whom will you consult, and who will
    lead these consultations? What do you expect will come of these
    discussions?
        Answer. Secretary Daley has asked the Commerce Department's
    Technology Administration (which includes the National Institute of
    Standards and Technology) to review and analyze several features of the
    Advanced Technology Program to ensure the continued strength and
    effectiveness of the Program. The topics to be considered include: the
    ATP budget process; the ratio of new projects to old; whether or not
    big companies should continue to be allowed to compete for ATP awards
    outside of research consortia; whether or not the ATP applicants should
    have first attempted to obtain private funding for their proposed
    projects; and whether or not those states without an existing, strong
    R&D community should be given a better chance to participate in the
    program.
        In gathering information for this study, the Technology
    Administration will draw on the comments and opinions of the scientific
    and technical research communities served by the ATP, including
    industry, universities and non-profit research organizations, and will
    use the existing studies of the ATP that document the effectiveness of
    the program under its current policies as background. The Department's
    goal in undertaking this review is to ensure that the ATP remains well-
    positioned to foster the high-risk, high-payoff technologies that can
    bring broad-based benefits to the nation's economy.
                   manufacturing extension partnership [mep]
        Question. A number of the older Manufacturing Extension centers are
    now reaching the end of their original Federal funding. Yet we know
    that many small firms have yet to be reached by extension centers, and
    we know that private consultants continue to ignore this group of firms
    because they are so small.
        What is the Administration's position regarding the so-called
    sunset, and how will you proceed on this issue?
        Answer. Listed below are the centers affected by sunset in fiscal
    year 1998 and the dates on which they reach sunset: Great Lakes
    Manufacturing Technology Center (OH), January 1, 1998; South Carolina
    Manufacturing Technology Center, January 1, 1998; Mid-America
    Manufacturing Technology Center (KS), April 1, 1998; Michigan
    Manufacturing Technology Center, April 1, 1998; Minnesota Manufacturing
    Technology Center, August 1, 1998; and California Manufacturing
    Technology Center, August 1, 1998.
        Congress previously granted a one-time, three-year waiver for the
    centers in Ohio and South Carolina that reached sunset in fiscal year
    1995 and a one-time, one-year waiver for the centers in Kansas and
    Michigan that reach sunset in fiscal year 1997; in each instance the
    waiver was granted in the annual appropriations legislation.
        Without a modification of the sunset provision, centers will be
    forced either to shift their focus to larger companies that can provide
    sufficient business value to cover outreach costs or to close. Either
    way, small firms, especially those most in need, will be left without
    access to valuable technical assistance.
        The NIST MEP was created by the passage of the Omnibus Trade and
    Competitiveness Act of 1988. At the core of this program are a network
    of not-for-profit MEP centers created with a 50 percent match in the
    first three years between Federal funds and state, local, and private
    sector funding. The Federal share decreases to 40 percent in year four
    and to 33 percent in the last two years of the six-year statutory limit
    on Federal funding defined in the sunset provision of the authorizing
    legislation.
        The Department of Commerce is considering a proposal to seek a
    change in the authorizing legislation that will enable MEP awardees to
    reapply for Federal funding beyond the six-year limit imposed by
    current authorization law. Factors under consideration include merit-
    based criteria for reapplication and selection.
        Congress included language in the conference report covering fiscal
    year 1997 appropriations which reflected their belief that the sunset
    matter is most appropriately addressed through the authorization
    process. NIST concurs that this is a more effective solution than the
    piecemeal approach adopted previously for the MEP centers in Kansas,
    Michigan, Ohio, and South Carolina through the annual appropriations
    process.
        Modification of the six-year limit on Federal funding does not mean
    that NIST intends to fund MEP centers in perpetuity. Centers would have
    to reapply and undergo a rigorous application process. NIST has the
    authority, and has exercised that authority, to terminate Federal
    funding to centers that are not performing up to MEP's published
    criteria of excellence.
        Pending modification of the sunset provision in the authorizing
    legislation, the Administration's fiscal year 1998 budget submission to
    Congress proposes language to be included in the fiscal year 1998
    appropriations legislation that would grant a one-time waiver for those
    MEP awardees facing sunset in fiscal year 1998 as follows: waive the
    six year funding limitation and authorize additional financial
    assistance; authorize funding for a period not to exceed two more
    years; funding rate not to exceed one-third of center's total annual
    costs; subject to positive evaluation of the center; subject to
    reapplication by the center and a successful review of the
    reapplication; and subject to Secretary of Commerce finding that
    continued Federal funding to that center is in the best interest of the
    program.
                                     ______

                Questions Submitted by Senator Patrick J. Leahy
                       circulation and subscriber figures
        Question. Secretary Daley, several issues have been raised
    regarding the NTIS' World News Connection (WNC). I would appreciate
    your answers to the following questions:
        The WNC replaced a paper publication known as the ``FBIS Daily
    Reports.'' What were the monthly circulation numbers for the final year
    of ``FBIS Daily Reports'' and the monthly circulation numbers for the
    WNC since its inception?
        In addition, what was the monthly paid subscriber numbers for the
    ``FBIS Daily Report'' and what are the monthly paid subscriber numbers
    for the WNC since its inception?
        Answer. The requested figures are as follows:

           FOREIGN BROADCAST INFORMATION SERVICE (FBIS) DAILY REPORTS
    ------------------------------------------------------------------------
                                                                  Copies
                   Month/year                     Paying      circulated per
                                                subscribers        month
    ------------------------------------------------------------------------
    October 1995............................             644          35,547
    November 1995...........................             651          29,795
    December 1995...........................             695          30,961
    January 1996............................             546          30,973
    February 1996...........................             453          21,146
    March 1996..............................             470          25,749
    April 1996..............................             475          28,487
    May 1996................................             469          25,407
    June 1996...............................             464          21,060
    July 1996...............................             450          22,513
    August 1996.............................             230          12,599
    September 1996..........................             165           1,540
                                             -------------------------------
          Total.............................  ..............         285,777
    ------------------------------------------------------------------------

    World News Connection

                                                                      Paying
            Month/Year                                       Subscribers \1\

    November 1995...........................................................
    December 1995...........................................................
    January 1996......................................................    46
    February 1996.....................................................    67
    March 1996........................................................   125
    April 1996........................................................   154
    May 1996..........................................................   184
    June 1996.........................................................   204
    July 1996.........................................................   234
    August 1996.......................................................   346
    September 1996....................................................   450
    October 1996......................................................   499
    November 1996.....................................................   547
    December 1996.....................................................   559
    January 1997......................................................   585
    February 1997.....................................................   614
    March 1997........................................................   641
    April 1997........................................................   622

    \1\ WNC is an electronic product, so we do not have figures for copies
    circulated.
    ---------------------------------------------------------------------------
                                   wnc budget
        Question. The WNC operating cost is included in the NTIS budget for
    fiscal year 1998. What is the projected revenue for WNC in fiscal year
    1998 and what is its projected operating costs? In addition, please
    provide the subcommittee with the projected revenue and cost figures
    for fiscal year 1996 and fiscal year 1997 and the actual revenue and
    cost figures for fiscal year 1996.
        Answer. For fiscal year 1996, we projected $600,000 in revenue and
    $417,000 in costs. However, the program was inaugurated later in the
    year than we anticipated. The actual fiscal year 1996 revenue and costs
    were $97,922 and $376,211 respectively. Based on that experience, we
    projected fiscal year 1997 revenue and costs at $419,400 and $675,000
    respectively. Our projections are on target. The projected revenue and
    costs for WNC in fiscal year 1998 are each $800,000. That is, WNC
    should break even in fiscal year 1998.
                                 wnc marketing
        Question. Does NTIS market the WNC? If so, what are the target
    subscriber goals that NTIS seeks to achieve in fiscal year 1998?
        Answer. NTIS does market the WNC. The target subscriber goals for
    fiscal year 1998 are 800 individual subscriptions and 55 networked
    access subscriptions.
                               translation costs
        Question. The Department of Commerce has previously indicated that
    translation costs of articles included in the WNC are not borne by
    NTIS. Why does NTIS not incorporate this cost into the subscription
    rate for WNC? What is the estimated cost for this translation?
        Answer. NTIS does not incur any translation costs with respect to
    WNC. Similarly, translation costs were not charged when the product was
    distributed in paper form. Such costs are borne by the Foreign
    Broadcast Information Service (FBIS), which is part of the Central
    Intelligence Agency (CIA), in accordance with its requirement to
    collect foreign open source literature for federal policy makers. NTIS
    is provided the data feed from FBIS, which consists of the translated
    articles, in order to make them accessible to the public. NTIS is
    unaware of the estimated costs for the translations. This question
    should be referred to FBIS.
              sources in wnc vs. sources in ``fbis daily report''
        Question. What is the number of sources that were included in the
    ``FBIS Daily Report'' and what is the number of sources that are now
    included in the WNC?
        Answer. As NTIS did not produce the ``FBIS Daily Reports,'' it is
    unaware of the number of sources included in the ``FBIS Daily
    Reports.'' This question should be referred to FBIS. There are 3,442
    sources included in WNC.

                              subcommittee recess

        Senator Gregg. We certainly appreciate your time. Thank you
    for your courtesy, and we look forward to working with you.
        Secretary Daley. Thank you, Mr. Chairman.
        [Whereupon, at 2:53 p.m., Thursday, March 13, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                           WEDNESDAY, MARCH 19, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2:05 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Campbell, and Hollings.

                       SECURITIES AND EXCHANGE COMMISSION

    STATEMENT OF HON. ARTHUR LEVITT, CHAIRMAN

                                opening remarks

        Senator Gregg. Why don't we get started. I want to thank
    the chairman for joining us today. We would be happy to get
    your input, unless the ranking member wishes to give an opening
    statement.
        Senator Hollings. No; thank you.
        Senator Gregg. OK. We are pretty casual here, and we are
    interested in your thoughts on what is happening at the
    Securities and Exchange Commission [SEC] and any other ideas
    you wish to bring to us.
        Mr. Levitt. All right. I have a brief, two-page statement.
        Senator Gregg. However you want to handle it. You can
    submit it, read it, or just talk.
        Mr. Levitt. I'll skim it.
        Senator Gregg. OK.

                               summary statement

        Mr. Levitt. Of course, I appreciate the opportunity to
    testify before you this morning on our fiscal year 1998 budget.
    The President's request for the SEC includes $317.4 million in
    fiscal year 1998, which puts us in a no-growth budget with
    respect to staffing levels, but would allow for an increase of
    $12 million above the Commission's fiscal year 1997
    appropriation. Most of that is going toward mandatory increases
    in pay and related personnel benefits.
        The proposed appropriation would hold our staffing at the
    1997 level of 2,797 full-time equivalents. I don't have to tell
    you about our markets and what's happened with the Dow and the
    number of investors.
        Today, one out of every three households invests in mutual
    funds. There is more money in mutual funds today than there are
    in all the bank deposits in America. These broad-based markets,
    I believe, don't happen without broad investor confidence in
    the fairness of our markets.
        I believe that there is a dollar and cents consequence to
    markets that are thought of as being rigged or unfair, and I
    see that in other democratic markets around the world, as
    compared to our own, which are rigorously and fairly regulated.
        The Commission has fulfilled its mission to protect
    investors and maintain fair and orderly markets. My concept is
    that competition within our markets should be both fierce and
    fair. And I think that has characterized our markets for some
    years.
        As a result of bipartisan efforts, last year the Congress
    passed the National Security Markets Improvement Act that
    provides a more stable funding structure to allow us to plan
    better for our future.

                               prepared statement

        The 1998 budget request is the first year that our funding
    is controlled by and fully consistent with that agreement.
    Thank you.
        [The statement follows:]

                      Prepared Statement of Arthur Levitt

        Chairman Gregg and Members of the Subcommittee: I
    appreciate this opportunity to testify in support of the fiscal
    1998 budget of the Securities and Exchange Commission.
        The President's request for the SEC includes $317.4 million
    in fiscal year 1998. This request would put the Commission on a
    ``no-growth'' budget with respect to staffing levels, but would
    allow for an increase of $12 million above the Commission's
    fiscal year 1997 appropriation. Most of that funding would go
    to mandatory increases in pay and related personnel benefits.
    The proposed appropriation would hold SEC staffing at the 1997
    level of 2,797 ``full-time equivalents'' (FTE's), which would
    stretch agency resources to the maximum in order to fulfill its
    responsibilities to investors in the rapidly expanding U.S.
    securities markets.
        Our markets are the deepest, fairest, and most liquid in
    the world. They have experienced considerable growth during the
    longest and most vigorous bull market in history. In the past
    year, the Dow Jones Industrial Average has broken 5,000, 6,000,
    and 7,000 points; the New York Stock Exchange and the Nasdaq
    Stock Market have both seen stock trading volume hit all-time
    highs; and assets in mutual funds have reached record levels of
    $3.5 trillion--a figure that far exceeds the $2.6 trillion
    Americans have on deposit at commercial banks. Compared even
    with the year just before, 1996 set some extraordinary records:
    total dollar volume traded on the exchanges and the Nasdaq
    Stock Market surpassed 1995 volume by 31 percent; registered
    public offerings broke the trillion-dollar mark, rising 36
    percent over 1995 offerings; and initial public offerings rose
    to $50 billion, up from $30 billion in 1995, a 67 percent
    increase.
        The mounting participation of small investors in the
    securities markets fuels some of this growth. Today, one out of
    three American households invests in mutual funds. The number
    of first-time investors grows daily, and will accelerate if
    Congress acts to privatize a portion of the Social Security
    program.
        Whether up or down, such broad-based markets do not happen
    without investor confidence in their integrity. I think that,
    after 64 years of successful regulation, we sometimes take that
    for granted. For a reality check, consider the extreme opposite
    end of the spectrum: As I speak, the government of Albania is
    in crisis, after an open rebellion in the streets. Why? At
    bottom, it is because investors were not protected from pyramid
    schemes, one of the simplest and most common financial frauds
    around. In the U.S., however, thanks to the wisdom of Congress,
    investors are confident that if a pyramid scheme wipes out
    someone's savings, the government will wipe out the pyramid
    scheme--period. That confidence is the cornerstone of our
    markets.
        The Commission has fulfilled its mission to protect
    investors and maintain fair and orderly markets, and it has
    done so with modest staffing and limited resources. I came to
    the Commission after a lifetime in the private sector, and
    though I'm mindful of the differences, I've tried to run the
    Commission like a business. One of the key principles I have
    applied is that, especially when resources are limited, you
    improve productivity. Only by improving productivity has the
    SEC been able to keep pace with what may be the most explosive
    growth ever seen by our markets for three years in a row, while
    its staffing has remained flat.
        Although we believe staffing can safely remain level for
    one more year, the challenges we face will continue to grow.
    These challenges include: the increasing number of Americans
    who invest their retirement savings in mutual funds; the
    special concerns raised by the increasing use of derivatives
    and other complex financial products; facilitating and
    encouraging greater use of communications technology by
    companies, brokers, dealers, and investors; completing our
    mutual fund disclosure initiatives, including fund Profiles and
    more clearly written and presented mutual fund prospectuses;
    considering alternatives to the current model of capital
    formation, including the idea of registering companies as
    opposed to offerings of securities; redesigning the EDGAR
    electronic filing system; securing more foreign listings, and
    signing more cooperative agreements with foreign regulators;
    conducting an aggressive effort to police Internet fraud;
    shining a spotlight on the use of soft dollar payments through
    examinations of investment advisers, institutional investors,
    and broker-dealers; completing our re-evaluation of the Net
    Capital Rule; granting qualified immunity to firms for
    disclosures made on Form U-5; and the reporting of retail price
    and trade information in the municipal bond market, which
    should be in place by next January.
        Thank you. I ask that my formal testimony be submitted for
    the record and I would be pleased to answer any questions.
                                    ------

                      Biographical Sketch of Arthur Levitt

        Following his nomination by President Clinton and his
    confirmation by the Senate, Arthur Levitt, Jr. was sworn in as
    the 25th Chairman of the Securities and Exchange Commission in
    July, 1993.
        Before joining the Commission, Mr. Levitt owned Roll Call,
    the Newspaper of Congress. Mr. Levitt served as the Chairman of
    the New York City Economic Development Corporation from 1989 to
    1993 and the Chairman of the American Stock Exchange from 1978
    to 1989. Prior to accepting the AMEX Chairmanship, Mr. Levitt
    worked for 16 years on Wall Street. He graduated Phi Beta Kappa
    from Williams College in 1952 before serving for two years in
    the Air Force.
        Upon his arrival at the SEC, Chairman Levitt quickly
    established four priorities: improving investor protections;
    reforming the municipal debt markets; raising the standards of
    practice for brokers and strengthening the international pre-
    eminence of the U.S. capital markets.
        During Chairman Levitt's tenure, the SEC has established
    the Office of Investor Education and Assistance and created the
    SEC's World Wide Web site, one of the most popular on the
    Internet, which allows the SEC to make all corporate filings
    available to the public free of charge.
        The SEC has worked to sever ties between political campaign
    contributions and municipal underwriting business, a practice
    known as ``pay-to-play,'' as well as improving the disclosure
    and transparency of the municipal bond market.
        Chairman Levitt has also sought to raise the industry's
    sales practice standards and eliminate the conflicts of
    interest in how brokers are compensated.
        The Commission, together with the industry, has developed
    the ``Profile Prospectus'' and other plain English guidelines
    for investment products in an effort to make disclosure
    documents easier to understand without compromising the value
    of the information provided to investors.

                               Electronic markets

        Senator Gregg. Thank you, Mr. Chairman, and we have great
    respect for what your agency does. As you say, it maintains a
    disciplined marketplace and an honest marketplace, and that is
    absolutely critical.
        As we see the expansion, though, of electronic activities,
    people investing over the Internet, stocks being held
    electronically--where no paper in some instances being used--
    obviously you are facing a brand new set of challenges, and my
    first question is what are your plans for the challenge of this
    explosion of new type of investment activity, and what do you
    need in the way of resources to address this brave new world?
        Mr. Levitt. That's a big question, and there's not a simple
    answer to it because the markets, as I see them, will be new
    kinds of markets. New electronic markets are developing almost
    by the day. Those aren't just using the Internet. They are
    actual new marketplaces that have been organized, and growing.
        As far as the Internet is concerned, we have a special task
    force specifically assigned to monitoring the Internet, to
    evaluate offerings that are being made. And those of you that
    are computer literate know how outrageous some of those
    offerings are, and we're bringing cases wherever appropriate.
        We had a case not too long ago involving the sale of
    several million dollars of investments in a nonexistent eel
    farm. To think that almost 100 investors put up money for this
    bogus scam is unbelievable unless you begin to surf the
    Internet and see the offerings that come through there.
        We have fairly sophisticated means of surveiling the
    Internet, and we have a web site which invites investors to
    report instances of their being subjected to Internet fraud.
        It's not a question of resources, I think, because you
    couldn't possibly--there are insufficient resources to do a
    totally comprehensive job and eliminate all corruption. What we
    can do is be pretty pointed in terms of what we're going after,
    as to what we see as a national phenomena, and bring cases in
    those areas. And I think we can do that with existing
    resources.

                                Organized crime

        Senator Gregg. In another area along this line, we saw
    reports today where there were a certain number of companies, I
    think it was 19 companies, that are being investigated--small
    companies--as potentially involving organized crime, using one
    of the national securities exchanges.
        Can you give us your thoughts as to the penetration of
    organized crime into the use of the national securities
    exchanges, and what your thoughts are relative to your response
    to it?
        Mr. Levitt. The reports that have been documented in recent
    weeks suggest that a number of smaller brokerage firms have had
    some mob influence, some infiltration. I don't think that's
    necessarily particular to this time. I think through the years
    there has been some of that.
        I believe that it's relatively limited. The Commission is
    well aware of this practice. I cannot, at this moment, speak
    about what we are doing, but I would be glad to brief you
    privately in terms of our efforts to get at it. But rest
    assured that it's something that we're very cognizant of, and
    an area where we are taking steps.

                              Mutual fund problems

        Senator Gregg. With the proliferation of mutual funds, and
    this being another exploding area of regulatory oversight, can
    you give your thoughts on the main problems that we have in
    this area, and whether you need additional resources?
        Mr. Levitt. With respect to mutual funds, I guess I worry
    about the millions of new investors who have taken their money
    initially from savings deposits, certificates of deposit in
    savings institutions and banks, at a time when we have
    disintermediation, and they could get better returns on mutual
    funds than they could get in the banks.
        The results were so affirmative that it was a short step
    for them to invest in equity funds, and that worked so well
    that they began to invest in country-specific funds, the
    Singapore fund, the Malaysian fund, the Mexican fund, the
    Brazilian fund, and so forth.
        I guess I worry that there are millions of these investors
    who have not experienced a down market, and I am greatly
    concerned about how they will react when the market does have a
    reaction.
        Markets go two ways. We try to stress that in our investor
    town meetings that we hold all over America. But I think there
    is an inadequate appreciation, for instance, of the value of a
    security that may be traded on the Kuala Lumpur Exchange. It
    simply is not comparable to one traded on the New York Stock
    Exchange. So a process of education has to take place.
        I'm also concerned about the circumstance that, even though
    we have billions of dollars more in mutual funds, the fee
    structure of those funds appears to be going up rather than
    down. That's counterintuitive. It's not appropriate for the SEC
    to tell the industry what they should charge in fees. It is
    appropriate, I think, for us to try to get mutual funds to
    display clearly what they are charging, and allow investors to
    make competitive determinations.
        I think right now most investors have a very inadequate
    notion as to, No. 1, what they're being charged, and, No. 2,
    what an enormous impact even a few points may make in terms of
    the impact on their investments. These are areas that concern
    me.
        We have also been concerned about mutual funds whose names
    really give very little indication as to the direction of fund
    investment. We have put out a proposal that at least 80 percent
    of every fund called a bond fund, has to be in bonds. If it's
    called a foreign fund, 80 percent has to be in foreign
    securities. So I think misleading names are something that
    we're concerned with. These are three very different and very
    general areas that concern me about the mutual fund industry.

                                Mutual fund fees

        Senator Gregg. In the disclosure of fees area, do you need
    any additional legislation or do you feel you have adequate
    authority now to create a playing field where people are
    disclosing fees?
        Mr. Levitt. I think we have adequate authority. We have
    worked well with the self--well, it's really the trade
    organization for the mutual fund industry, the ICI, and they've
    been responsive to problems that we point out. I'd rather get
    some of this through persuasion rather than legislation.
        As you know, when you seek legislation it's necessarily
    pretty indefinite as to what you get, or when you'll get it. So
    I'm reluctant to start down the legislative road unless I
    absolutely have to.
        Senator Gregg. Senator Hollings.

                           Stock market infiltration

        Senator Hollings. With respect to the infiltration, you
    might say, of the Mafia in the securities business, the FBI has
    reported their concern. It intrigues me, why would they want to
    try to get in. How would that be? I mean, you've got the most
    regulated, controlled, overseen, observed industry I know of.
    How could they hope to mislead or take control or really
    benefit?
        Mr. Levitt. Well, I think they can do it in a variety of
    ways. These are very tiny firms. Most people when they look at
    our securities markets today think in terms of Smith Barney or
    Alex Brown or firms like that. But virtually every day there
    are teeny, tiny firms growing up, with two, three, four, five
    people, and very low capital structures. And I think those
    firms that may be hungry for business occasionally are induced
    to do business with people who have questionable backgrounds.
        Senator Hollings. Should you require a higher capital
    structure?
        Mr. Levitt. I don't think in and of itself that would do
    it, because I think we've got to do it by a different means.
    Again, what I would like to do, if it is of interest to the
    committee, is give you a briefing together with the head of our
    Enforcement Division on exactly what we are doing.
        Senator Hollings. At least you should give that to the
    chairman. Because we're looking at that, and we just don't want
    to be caught just looking and not responding.
        Mr. Levitt. I understand.

              National Securities Markets Improvement Act of 1996

        Senator Hollings. With respect to the Improvement Act, is
    it working as you see it?
        Mr. Levitt. Yes; it is working, and I am very grateful for
    your involvement with Chairman Bliley in terms of trying to
    rationalize the irrational.
        Senator Hollings. Well, what's the long-term effect of
    those 6(b) stock registration fees?
        Mr. Levitt. Are you talking about----
        Senator Hollings. The long term.
        Mr. Levitt. The 10-year plan essentially is to lower the
    fees over that period to a point where the Commission will be
    funded almost entirely by appropriated funds.
        Senator Hollings. And right now with everything up, you've
    got more than enough money.
        Mr. Levitt. We do, because volume has been great. We've had
    a one-time aberration in the collection of fees, and we've also
    just kicked in the payment of fees by the NASD which is new
    this year. So we look flush at this point.
        Senator Hollings. But you can't use the money unless the
    chairman here appropriates it.
        Mr. Levitt. That's right.
        Senator Gregg. And I cannot do that unless the ranking
    member tells me how to do it. [Laughter.]

                         preparation for a Market event

        Senator Hollings. After that 1987 crash, Mr. Chairman, you
    were there, and now do we need anything when the market--it was
    down 60 points today, unless you can say something like Alan
    Greenspan and bring it back up 60. We'd be delighted to hear
    that kind of comment. I would welcome that.
        What happens? Do we have adequate safeguards so that we
    don't have to experience another 1987 when we politicians see
    it going up and down 150 points, that kind of thing? We don't
    want it to drop 500 like it did in 1987.
        Mr. Levitt. I don't think there are any such safeguards,
    Senator. I think books will be written on what occurred in
    1987, and probably they will all be wrong. That kind of event
    certainly could happen again, although my experience in the
    markets tells me that no two market events are precisely alike.
        What I can say, however, is that the means of communication
    between the various market centers are vastly improved from
    that period in 1987. So that within a matter of seconds, I can
    be in touch with every major market center in the United
    States.
        I guess I have a greater concern in terms of the
    globalization of our markets, where I worry less about the
    trading between Smith Barney and Chase Bank than I do between
    an American brokerage firm and a Japanese insurance company.
        And I have a very imperfect notion as to the bankruptcy
    laws or the netting agreements in some foreign country. And I
    think with the volume of trading going on there, that is an
    area of concern.
        Senator Hollings. Do you have a special little team within
    the SEC now that is watching that from day to day?
        Mr. Levitt. Yes; we have an international----
        Senator Hollings. Good. Now that I've got money, I want to
    make sure we're doing everything. You and I are usually poor
    mouthing each other. But now that we're rich here this
    afternoon, we ought to have at least a little division, no
    kidding, of experts watching that fellow back out in Thailand
    and wherever.
        Mr. Levitt. We do. But again, markets wouldn't be markets
    if they didn't have the kind of volatility that made them
    markets. I think we are better prepared, but that is no
    guarantee against a market reaction.
        I'm glad you didn't ask me where I thought the market was
    going.

                   Federal/State regulatory responsibilities

        Senator Hollings. To go back to the other extreme, to the
    little State-run securities, you have got the oversight
    responsibilities and the safeguards are adequate?
        Mr. Levitt. I think so. The bill last year relieved a lot
    of the pressure on the industry that was occasioned by
    duplicative regulation from both State and Federal sources.
        And we have gotten the States out of regulating mutual
    funds, and in return for that we've given the States the
    responsibility for the regulation of the smaller investment
    advisers, the most rapidly proliferating part of our markets.
        And we've taken on the responsibility of monitoring the
    largest investment advisers, which represent about 96 percent
    of the dollars in that area. I think that's a rational division
    of responsibility, and I am hopeful that it will work well.
    We're certainly better off than we were before.
        Senator Hollings. Very good. Thank you, Mr. Chairman.
        Senator Gregg. Senator Campbell.

                       Public Utility Holding Company Act

        Senator Campbell. I just had one question, Mr. Chairman,
    and it might not be a major portion of Mr. Levitt's domain. But
    one of the big issues we're dealing with here is the impending
    utility deregulation.
        And your agency enforces the Public Utilities Holding
    Company Act, as I understand it, which has a rather large
    increase of registrations. I was wondering if you could speak
    to that a bit about what you anticipate, what you think it
    might do to the markets, and if your agency is prepared for
    that increased trend as we go to a full blown deregulation?
        Mr. Levitt. Well, Brian, would you like to address that
    yourself? This is Brian Lane, the Director of the Division of
    Corporation Finance.
        Mr. Lane. You were referring to the Public Utility Holding
    Company Act of 1935.
        Senator Campbell. Yes.
        Mr. Lane. The Commission staff conducted a study of the
    act. And in that study, which was given to the Members of
    Congress, the staff recommended several options, including the
    ultimate repeal of the act. There were other options, such as
    giving exemptive authority to the Commission, to exempt
    utilities from some of the provisions of the Public Utility
    Holding Company Act.
        Back in 1935, there was a very diverse universe of utility
    companies, and the act, as it's set up, requires things such as
    that electric utility companies can't own gas companies, that
    all utility lines have to be geographically linked together.
        What we're finding today is the technology exists to permit
    a company that's located in Alabama to sell electricity to a
    customer in California.
        In fact, the States of California, and, I believe, Rhode
    Island as well have been researching things like retail
    wheeling. So the technology is such that it eclipses the act.
        Senator Campbell. So you feel it's sort of outlived its
    usefulness?
        Mr. Lane. Well, the study points out what some of the
    shortcomings are. This is a study that was issued 2 years ago,
    and it has some recommendations from the staff about ways that
    Congress could change the law. If Congress didn't want to
    repeal it, there were other options as well. Turn it over to
    the States for example.
        The States, of course, are very much into ratemaking and
    regulation. There are other agencies like FERC which are into
    ratemaking of the electric and gas markets. In 1935, the
    protections of the 1933 and 1934 acts, the securities laws,
    just giving disclosure to investors about these public utility
    companies, how much money they make, how they do business and
    all that sort of thing, were not as much in place as they are
    today. Today investors are protected by the disclosures that
    the SEC gets under its other statutes.
        So the needed protection is more on the ratepayer, but is
    the SEC the appropriate agency to protect the ratepayer? That
    is the sort of general question the study addressed the SEC,
    within its existing legislative framework, is trying to address
    the technological developments of the public utility companies,
    addressing them on a case-by-case basis, to let the companies
    diversify and take advantage of other sorts of flexibility.
        Senator Campbell. That's all I have, Mr. Chairman.

                                Carryover funds

        Senator Gregg. We were talking a little bit about your
    money situation. I think it is about $48 million you are going
    to carry over, and you are headed toward $71 million. What do
    you plan to do with all this money?
        Mr. Levitt. We can't use it without you, obviously. We've
    kept a pretty reasonable budget, I think. And we don't call on
    those dollars without the approval of our funders.
        Senator Gregg. Does the Office of Management and Budget
    know you have all this money?
        Mr. Levitt. I think they do, yes.
        Senator Gregg. You are lucky you still have it.
        Well, we certainly appreciate your coming down and giving
    us your thoughts. Obviously we are here to try to be helpful
    and supportive as you run into these issues. You are riding a
    tiger, and so to the extent that things change where you need
    more resources for the issues that come at you, gives us fair
    warning, and we will try to help you. The SEC is an extremely
    critical agency, in my view, for maintaining the strength of
    this country and our prosperity.
        Mr. Levitt. I appreciate that, everything you're doing for
    us.
        Senator Hollings. You're doing an outstanding job.
        Senator Gregg. Yes, you are.
        Mr. Levitt. Thank you very much.

                         Additional committee questions

        Senator Gregg. I ask unanimous consent that additional
    questions may be inserted in the record as Senators may have
    them.
        [The following questions were not asked at the hearing, but
    were submitted to the Commission for response subsequent to the
    hearing:]
                Questions Submitted by Senator Pete V. Domenici
          national standards and federal securities litigation reform
        Question. In December 1995, Congress passed the Private Securities
    Litigation Reform Act of 1995 (PSLRA). The legislation was designed to
    limit abusive securities fraud lawsuits in federal court. However, in
    the year since enactment of securities litigation reform, some
    potentially disturbing trends have developed.
        First, securities litigation in state courts appears to have
    increased, particularly in California. Most of this litigation is
    brought by one law firm, which appears in 83 percent of all securities
    litigation brought in that state.
        Second, it appears that trial lawyers have figured out ways to
    circumvent the new law's procedural rules designed to limit frivolous
    lawsuits. Class action attorneys have begun to file parallel lawsuits
    both in state and federal court in order to get around the federal
    law's discovery stay provisions. Trial lawyers then use discovery
    obtained in state court to bolster their federal class action
    complaints.
        Third, trial lawyers still sue high technology companies at an
    alarming rate. One out of three defendants in securities fraud class
    actions are technology companies. This is the same percentage as before
    the new law.
        This leads me to conclude that we need one set of laws to govern
    the procedural and substantive law related to securities litigation.
        In the House, there appears to be bipartisan support for the idea
    of ``national standards.'' A recent letter to President Clinton in
    support of ``national standards'' had the signatures of almost 60
    Democratic members.
        What data can the Commission provide on the increase of securities-
    related litigation in state courts since the enactment of the PSLRA?
    Has securities-related litigation in state courts increased? Have
    potential federal claims migrated to state court?
        Answer. As you may know, the Commission was asked by President
    Clinton to report to him and the Congress on the first year of practice
    under the Private Securities Litigation Reform Act (PSLRA). That report
    will be issued shortly and will provide more detailed information
    relevant to these questions.
        In preparing the report, the Commission staff found it difficult to
    obtain data about the number of securities-related cases filed in state
    court. Although the staff has been closely tracking all federal
    securities class actions (a less difficult task since the PSLRA
    requires that a public notice be given), the staff has relied on data
    compiled by others in assessing the incidence of securities class
    actions in state courts.
        Based on the staff's review, it appears that during the first year
    following enactment of the PSLRA, state courts have seen an increase in
    both stand-alone securities class actions and class actions that are
    parallel to federal actions. One study by the National Economic
    Research Associates found that 78 cases had been filed in the first ten
    months of 1996 (for an annualized total of 94), as compared to 48 for
    the previous year.\1\
    ---------------------------------------------------------------------------
        \1\ Denise N. Martin, Vinita M. Juneja, Todd S. Foster and
    Frederick C. Dunbar, ``Recent Trends IV: What Explains Filings and
    Settlements in Shareholder Class Actions?'', National Economic Research
    Associates (1996), at 7.
    ---------------------------------------------------------------------------
        According to the staff's report, some potential federal claims may
    well have migrated to state court. Following enactment of the PSLRA,
    some plaintiffs appear to have been drawn to state court by the
    potential for obtaining discovery during the pendency of a motion to
    dismiss, a procedure that is not available under the PSLRA. These
    plaintiffs may be able to use state discovery procedures to uncover
    facts necessary to frame allegations sufficient to withstand a motion
    to dismiss, either in the state court proceeding or in a subsequently
    filed federal complaint.
        State court, however, does not always provide a favorable forum for
    plaintiffs. Jurisdiction over the defendants must be established in the
    particular state, and state law must provide a private right of action
    for the plaintiffs' alleged securities claims. Also, some state courts
    have imposed discovery stays similar to those required under the PSLRA.
        Question. Is it appropriate for trial lawyers to file suit in state
    court to evade the federal law's new discovery provisions?
        Answer. In the Commission's view, is it appropriate for trial
    lawyers to use discovery obtained in state court in order to bolster a
    federal securities fraud complaint?
        Question. Can the Commission provide this information without
    improperly commenting on the merits of any pending securities
    litigation cases in a manner which might prejudice the outcome of these
    cases?
        Answer. The Commission has not taken a formal position on these
    issues. In preparing the report, however, the staff found that some of
    the state cases have been brought for the primary purpose of obtaining
    discovery that would otherwise be unavailable in federal court under
    the PSLRA. To the extent that state courts can be used to avoid the
    discovery stay in cases that would otherwise have been brought under
    the federal securities laws, one of the goals of the PSLRA may be
    frustrated. It should be recognized, however, that state courts may
    offer other advantages to plaintiffs, including non-unanimous jury
    verdicts, punitive damages, and aiding and abetting liability,
    depending on the jurisdiction. On the other hand, few states provide
    state law remedies for private plaintiffs that are as broad as the
    federal remedies for securities fraud. For this reason, state court has
    not traditionally been the primary forum for securities class actions.
    If state law provides advantages to plaintiffs in a particular case, it
    is reasonable to expect that plaintiffs' counsel will utilize the state
    courts.
        Question. Is the Commission willing to look at the idea of
    developing one set of national standards for securities litigation?
        Answer. After little more than one year of experience under the
    PSLRA, we think it is simply too soon to tell if state law securities
    actions pose a significant problem. It is important to recognize that
    state securities laws have always provided different standards for
    securities activities from state to state. The states have a
    traditional interest in protecting their citizens, particularly against
    fraudulent activities within their borders.
        The federal securities laws are concerned with preserving and
    strengthening our national securities markets and protecting investors.
    If it is determined that securities actions brought under state law are
    adversely affecting investor protection or are threatening the fair and
    efficient functioning of our markets, we certainly believe the
    Commission should consider an appropriate response--one that is
    carefully tailored to address the specific problem. In the meantime, if
    Congress determines that there is a need for some form of preemption,
    we think that it would be desirable to craft the narrowest possible
    preemption that recognizes legitimate state interests, while addressing
    any abuses that may result from the use of state law in private
    securities actions.
                                     ______

             Questions Submitted by Senator Ben Nighthorse Campbell
                            streamlining initiatives
        Question. Mr. Levitt, I am encouraged by the ``no-growth'' budget
    you propose for the SEC for fiscal year 1998--I wish other agencies had
    similar restraint. You also acknowledge, however, that this budget,
    essentially the fiscal year 1997 level, would stretch your resources to
    the maximum while fulfilling your responsibilities. This is also quite
    encouraging. A government agency maximizing its resources is welcome,
    yet too rare. This encourages me, but gives me pause, because it is
    rare.
        It surely would be nice if the SEC did maximize its resources while
    fulfilling all its responsibilities to the investor. Your budget
    suggests that your resources instead will be sorely tested. And, as you
    rightly point out, the SEC has a vital role in maintaining investor
    confidence in our markets.
        Given that, in the budget estimate, the SEC notes several important
    developments: there is increased internet fraud, increased foreign
    participation in our securities markets, more global activity affecting
    our markets, more defendants choosing to litigate, as well as a marked
    increase in the sheer volume of securities offered and traded. These
    changes are well under way while enforcement of securities laws is your
    primary mission.
        With these new and significant developments adding more pressure to
    your enforcement staff, you must find new ways of maximizing your
    resources. Yet, in the budget, for the ``Prevention and Suppression of
    Fraud'' program, you say you will solve this by ``streamlining
    initiatives.''
        What are these SEC initiatives that need to be streamlined, and why
    do you have initiatives that are not already streamlined? In the same
    program, you tell us that ``other initiatives are needed to ensure
    sufficient support''. What are these initiatives and how long until
    they are implemented? Is there reason to be concerned that there is not
    sufficient support in the meantime?
        Answer. Enforcement of the federal securities laws is not static.
    As with other law enforcement agencies, we must always be ready to deal
    with new enforcement challenges as they are presented. For example, the
    Division recently devoted significant resources to the investigation of
    a variety of issues surrounding the bankruptcy of Orange County and to
    our review of the Nasdaq market and the National Association of
    Securities Dealers. While our resources are finite, we continue to
    believe that one of the strengths of our program is our ability to
    adapt promptly to problems in the capital markets requiring an
    enforcement response. Our allocation of resources is under continuous
    review as we uncover and prioritize to meet new enforcement challenges.
        We believe we have improved our program's effectiveness through
    initiatives undertaken to streamline some of our processes, as our
    budget submission indicates. The examples given were expediting
    authorization for formal orders and for subpoena enforcement. These
    initiatives were the result of a review of our processes undertaken at
    the suggestion of Chairman Levitt. Initiatives which we have identified
    but not yet completely implemented include primarily those that will
    introduce benefits from new technologies to support improved document
    management (including optical scanning) and improved casetracking and
    reporting. These long-term projects currently are underway.
        We always are seeking ways to improve our processes, including
    incorporation of new technology. In our budget submission, however, we
    did not mean to suggest that we were looking at such improvements to
    substitute for our continuous need to allocate resources, or that
    identified proposed improvements to our processes are being ignored.
                        electric industry restructuring
        Question. First, to what extent do you think this trend is in
    anticipation of electricity industry restructuring?
        Answer. We are seeing an increase in the number of registrations
    under the Public Utility Holding Company Act (PUHCA). In particular,
    approval of currently pending and expected merger applications would
    result in five new registered holding company systems. In our view, the
    trend is largely a reflection of industry restructuring. Utilities are
    positioning themselves to compete successfully as the industry evolves
    from a monopoly structure into an energy marketplace with many diverse
    participants.
        Question. In as much as this trend may be an anticipation of
    electricity industry restructuring, there is likely to be an even
    greater increase in the number of registrations this year. Is the
    agency adequately prepared to meet this new trend?
        Answer. As you know, the Commission has called for legislative
    repeal of PUHCA. If the Act is not repealed relatively soon, and
    registrations of utility systems continue to increase, we will likely
    need to allocate additional staff to our Office of Public Utility
    Regulation. PUHCA contemplates detailed substantive review and
    monitoring of numerous activities and transactions by registered system
    companies. Currently, the Office of Public Utility Regulation has only
    16 professional employees. These resources are already stretched in the
    effort to carry out all the measures needed to ensure the registered
    systems' continuing compliance with PUHCA.
                       public utility holding company act
        Question. Finally, do you think PUHCA has outlived its usefulness?
        Answer. Yes, I believe that the burdens imposed by PUHCA
    significantly outweigh its usefulness. Until the advent of full-scale
    competition in the industry, however, the remaining monopoly power of
    utilities will continue to make consumer protection a necessity. The
    Commission supports repeal of PUHCA, accompanied by additional
    authority at the state and federal level for the continued protection
    of consumers, by providing for access to books and records, and federal
    audit and oversight of affiliate transactions.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                           offsetting collection fees
        Question. Chairman Levitt, in last year's Securities Improvement
    Act, we compromised with the House Commerce and Senate Banking
    Committee to create a new funding stream for the SEC. Specifically, the
    6(b) stock registration fees were to be reduced over time and a new
    NASDAQ transaction fee was created.
        How is the new transaction fee coming? What are your revenue
    estimates for fiscal year 1998? Since the NASDAQ over the counter
    market keeps growing so much, won't these fee collections also greatly
    increase above current projections?
        Answer. To the best of our knowledge, the new NASDAQ transaction
    fee is coming along just fine. The National Association of Securities
    Dealers (NASD) has in place a monthly fee tracking and collection
    process that it began with the start of the new fee in January 1997.
    The NASDAQ transaction fee rate is 1/300 of 1 percent of the value of
    each sale. In calendar year 1997, the NASDAQ fee is due to the SEC on
    September 30 for all covered calendar year transactions that occur
    through August 31. In subsequent years, the fee is due on March 15 for
    transactions that occur during the prior September 1 through December
    31, and on September 30 for transactions during the prior January 1
    through August 31.
        The NASDAQ fee estimate for 1998 is $120.3 million. This fee
    estimate is higher than the $93.4 million estimate made just one year
    ago for the same period. Therefore, should the growth in NASDAQ
    continue at as high a rate as it has over the last two years--over 50
    percent in 1995 and over 30 percent in 1996--actual fees received
    should increase above current projections. However, estimates are only
    educated guesses. We cannot project future fee collections with any
    degree of certainty.
        Question. What do you think will be the impact of reducing 6(b)
    registration fees over time?
        Answer. The reduction in 6(b) registration fees may facilitate
    capital formation. With a lower cost for registration, additional U.S.
    and foreign issuers, both large and small, may seek public funds rather
    than more expensive private financing. The reduction will also shift
    the agency's reliance on offsetting collections for its budget
    authority and require additional appropriations.
                      enforcing and regulating the market
        Question. In a recent newspaper article, it reported that SEC had
    concluded an 18-month investigation of the NASDAQ Stock Market, in
    which SEC found that market makers coordinated their quotations so that
    investors paid too much and received too little when they bought and
    sold stock on the NASDAQ Stock Market.
        What is the SEC doing to ensure that this type of activity does not
    happen again?
        Answer. As part of the NASD's settlement with the Commission, the
    NASD agreed to undertake a number of initiatives aimed at eliminating
    the anti-competitive behavior uncovered in the investigation. The
    Commission is closely monitoring compliance with these undertakings.
    Many significant improvements are underway.
        In order to comply with the settlement, the NASD, among other
    things, must devote an additional $100 million over five years towards
    enhancing its surveillance and examination of order handling and trade
    reporting, develop rules regarding the activities and competitiveness
    of market makers, and create an audit trail that is capable of tracking
    an order from receipt through execution. It also split off its
    regulatory function into a unit that is separate from the Nasdaq market
    and has created more balanced boards and committees with 50 percent
    non-member representation.
        In addition, the Commission adopted order execution rules that will
    go a long way in eliminating the ability of market makers to coordinate
    their public quotations. These rules have begun to be phased in. They
    were designed to benefit investors by increasing transparency,
    providing access to the best available prices, enhancing quote
    competition between market makers, and introducing new competition from
    the display of customer limit orders.
        Question. What do you think about current levels of mutual fund
    fees and investor understanding of those fees?
        Answer. Whether mutual fund fees are higher today than in the past
    or whether these fees are generally higher than they should be are
    questions that have been debated by fund observers. Some commentators,
    noting that mutual fund expenses, as a percentage of net assets, have
    increased in the past decade, argue that the cost of owning mutual
    funds has risen. Other observers disagree, pointing out that many funds
    now incur certain sales and marketing costs that were formerly paid
    directly by investors through sales loads. As a result, these observers
    argue, it is not clear whether overall fund costs have risen or fallen.
        Any evaluation of fund fee levels needs to include consideration of
    the types of services investors are receiving for their money. Fund
    investors today seem to be offered services that may well be more
    costly to provide. International funds, an increasingly popular
    category, for example, provide additional opportunity for
    diversification, but are a relatively costly type of fund. In addition,
    many fund groups have introduced new and improved services over the
    past decade, including sweep accounts, telephone redemption and
    exchange privileges, check or wire redemptions, consolidated account
    statements, automated yield quotations, and access to account
    information via the Internet. While most are beneficial to investors,
    these services do tend to increase the cost of holding funds.
        Over the past ten years or so, the Commission's principal focus,
    with respect to fund fees, has been to ensure that they are well
    disclosed and understood. In seeking these goals, the Commission, in
    1988, took the important and innovative step of requiring all mutual
    funds to disclose their expenses in a fee table in the front of their
    prospectuses. We understand from focus groups and surveys that
    investors find the fee table most informative and helpful. As part of a
    recent set of proposed rulemakings designed to improve prospectus
    disclosure, the Commission proposed certain enhancements to the fee
    table.
        Although we believe the mutual fund fee table provides meaningful
    information about fees to fund shareholders, we remain concerned that
    many investors may not understand the operation and effects of fees. A
    1995 joint survey undertaken on behalf of the Commission and the Office
    of the Comptroller of the Currency found, for example, that few fund
    shareholders appreciate the relationship between fund expenses and fund
    returns.
        To deal with this potentially troubling situation, the Commission
    has undertaken a number of initiatives. As noted above, the Commission
    recently proposed enhancements to fund fee tables. We also have
    continued our efforts to educate shareholders about the importance of
    fees. The Commission has published a brochure about investing in mutual
    funds that has been widely distributed and that includes a section on
    the importance of fees. We also have discussed the topic in detail in
    town meetings and speeches across the country. Most recently, we have
    sought to encourage the fund industry to take greater initiatives in
    educating investors about fees.
                                 market growth
        Question. The SEC and others have reported that in the last year
    the stock market has grown to be worth over $10 trillion. However, with
    this huge growth the market hardly seems stable as it periodically
    seems to have substantial drops. For example, in January the Dow Jones
    industrial average tumbled 164 points in two days and on Monday, March
    17, the Market slid as much as 81 points.
        Following the 1987 crash, SEC put in place safeguards to put breaks
    on trading during precipitous sell-offs. Given the growth in the
    markets since 1987, are you comfortable that these safety measures are
    still adequate? What if Alan Greenspan says the wrong thing again?
        Answer. We recognize that every market event is different and that
    it is not possible for regulators to implement procedures to address
    every possible contingency. Nevertheless, the Commission has taken the
    lead in a number of regulatory initiatives since the market break in
    October 1987 that are designed to reduce potential disruptions and
    systemic risks from a severe short-term market decline.
    Coordination and Information Exchange
        Improved Interagency Coordination.--Since 1988, the President's
    Working Group on Financial Markets has provided a useful forum for key
    financial regulatory agencies to share information and coordinate
    responses to market contingencies such as severe market declines.
        Improved Intermarket Communications Systems.--Following the market
    break in 1987, the stock, options, and futures markets implemented a
    new ``hoot-n-holler'' teleconferencing system, known as the Information
    Network for Futures, Options, and Equities (INFOE). The SEC and CFTC
    also have access to this system, which has proven extremely useful for
    distributing information among markets and regulators during recent
    sharp market swings. In 1994, a similar teleconferencing system was
    implemented to link the SEC Chairman with the heads of the nation's
    securities markets and clearing organizations.
    Market Controls
        Circuit Breakers.--Circuit breakers were adopted in 1988 to provide
    for brief, coordinated trading halts to give markets and investors
    opportunities during a severe price decline to assess market conditions
    and any operational or financial difficulties that may have arisen. In
    July 1996, we approved shortening the marketwide circuit breaker halts
    by 50 percent and in January 1997, we approved increases in the trigger
    levels by 40 percent to partially correct for the change in market
    levels from 1988. Currently, circuit breakers call for a 30 minute halt
    if the Dow Jones Industrial Average (DJIA) declines 350 points in a day
    and for a one-hour halt if the DJIA declines 550 points.
        Other Volatility Procedures.--Other volatility procedures also have
    been adopted by the markets since 1987. The stock index futures markets
    have adopted intra-day and daily price limits that are designed to slow
    a severe decline. The New York Stock Exchange (NYSE) also has
    implemented procedures to address program trading during sharp market
    swings. NYSE Rule 80A(c) (``Collar Rule'') requires that, if the DJIA
    moves up or down 50 points from the previous closing value, program
    orders to buy or sell stocks as part of index arbitrage strategies must
    be entered with directions to have the order executions effected in a
    manner that stabilizes share prices. In addition, if the S&P 500
    futures decline 12 points (roughly equivalent to 100 points in the
    DJIA), the NYSE implements its ``side-car'' procedures to temporarily
    route program orders to separate electronic files to assess possible
    order imbalances.
        Expanded Emergency Authority for the SEC.--The Market Reform Act of
    1990 provides the Commission with additional authority to issue rules
    on an emergency basis and, under extreme conditions, to order
    marketwide trading suspensions provided that the President does not
    object.
    Capacity Enhancements
        Increased Market Capacity.--Computer capacity at the securities
    markets has been increased substantially since 1987 and it appears that
    the markets generally are ready for extremely volatile trading days.
    Most exchanges have excess capacity of almost three times or more over
    that needed for an average trading session. The NYSE is averaging 505
    million shares per day and reports that its systems could handle up to
    2.5 billion shares, or five times average capacity. The Chicago Board
    Options Exchange is averaging 733,000 contracts per day and has
    capacity to handle 2 million contracts, or almost three times average
    capacity. Nasdaq has average volume of approximately 622 million shares
    with a capacity of one billion shares without affecting normal system
    operation.
        Increased Capacity at Broker-Dealers.--Our overall assessment is
    that the major broker-dealers' computerized trading systems are ready
    for volatile trading days. The major broker-dealers have around two
    times capacity over that needed for an average trading session. We
    further believe that the major broker-dealers have adequate on-line
    performance monitoring during the trade day which helps identify
    potential choke-points and provide the means to re-route message
    traffic to alleviate queuing. The major broker-dealers have adequate
    capacity modeling and verification of models used, and adequate
    budgeting to procure necessary hardware. The major broker-dealers also
    have taken steps to keep their systems ahead of projected transaction
    message growth rates. When compared to the status of the capacity of
    computerized systems in 1987, the broker-dealers are generally ready
    for extremely volatile trading days.
    Capital and Internal Controls
        Improved Broker-Dealer Capitalization.--In the event of a major
    market downturn, the capital adequacy at the major broker-dealers, the
    market-makers, and the regional firms will be tested. No significant
    broker-dealer failed in 1987, and firm capitalization has increased
    substantially since 1987. The major firms have sufficient capital to
    withstand substantial losses associated with a severe equity market
    drop. As of September 30, 1996, broker-dealers filing FOCUS reports
    with the Commission had approximately $1.6 trillion in total assets and
    $95.6 billion in total regulatory capital (equity capital plus
    qualifying subordinated debt).
        Reduction in Relative Equity Positions at Large Firms.--Equity
    position market value vis-a-vis total assets at these firms have
    diminished since 1987. The market value of equity positions of these
    firms at the end of September 1987 was only a relatively small fraction
    of their total assets--in most cases less than 5 percent of the total
    assets of the firms. The market value of equity positions of these
    firms at the end of September 1996 was smaller than in 1987, comprising
    approximately 2 percent of the total assets of these firms. This
    indicates a reduced market risk exposure on proprietary positions.
        Improved Securities Investor Protection Corporation Financial
    Condition.--In the event of a failure of a retail broker, SIPC has
    taken action to increase the size of its insurance fund. In 1987, the
    SIPC fund totaled approximately $379 million. As of February 15, 1997,
    the SIPC fund had a balance of approximately $1 billion. In addition,
    SIPC has access to a $1 billion line of credit established with a
    consortium of banks and statutory authority to borrow up to $1 billion
    from the U.S. Department of the Treasury, through the Commission.
        Enhanced Internal Controls/Operations.--In the event of a severe
    market downturn, the internal controls and operational procedures of
    broker-dealers will be tested. The advancement of technology also has
    reduced the likelihood of processing/clearing delays caused by the
    break. Clearing firms now have substantially increased clearing
    capacity and are able to handle substantially greater transactional
    volume. In addition, the events of 1987 demonstrated that the SEC's
    customer protection rules worked well. Risk management policies have
    been improved substantially since 1987 at the major securities firms.
    Improvements in Clearance and Settlement
        Adoption of T+3 Settlement.--On June 7, 1995, the Commission
    established a standard three-business-day (T+3) settlement timeframe
    for most broker-dealer transactions. T+3 settlement reduces risks in
    the clearance and settlement system by eliminating two days of
    potential participant default. Clearing organizations and the
    securities industry in general modified their procedures to effectively
    implement the T+3 settlement cycle.
        Same-Day Funds Settlement System.--On February 22, 1996, the
    industry took a major step in addressing the finality of payments in
    the clearance and settlement system and the liquidity requirements of
    clearing members by converting to a same-day funds settlement system.
    Payment is made in funds that are immediately available and final at
    the time of settlement. The goal of SDFS is to reduce risk in the
    clearance and settlement process by simplifying cash management,
    reducing overnight exposure, and achieving close conformity with
    payment methods used in derivative markets, government securities
    markets, and other markets.
        Cross-Margining at The Options Clearing Corporation (OCC).--Since
    1987, OCC has established several cross-margining programs. Currently,
    OCC has entered into cross-margining agreements with the Intermarket
    Clearing Corporation, the Chicago Mercantile Exchange, the Board of
    Trade Clearing Corporation, the Comex Clearing Corporation, and the
    Kansas City Board of Trade Clearing Corporation. The cross-margining
    programs are designed to increase liquidity and depth to markets by
    reducing clearing members' combined daily margin requirements and by
    reducing potential for financial gridlock, particularly during volatile
    markets when clearing organizations may demand additional clearing
    margin from their members. These programs utilize participants' end-of-
    day positions to determine combined daily margin requirements.
        Risk Control Improvements at OCC.--OCC has developed and
    implemented a number of other major system enhancements to reduce risk
    in the clearance and settlement system for options including (1) a
    sophisticated, risk-based, methodology for calculating margin, (2) an
    electronic notification and approval system for settlement processes,
    and (3) a sophisticated risk analysis system designed to help OCC
    clearing members and exchanges manage the risk of their customers and
    members in the same manner that OCC manages its risks.
        Cross Guarantee Agreements.--Cross guarantee agreements are
    agreements between clearing agencies which generally provide that in
    the event of a default of a participant common to both clearing
    agencies, any resources remaining after the failed common participant's
    obligations to one clearing agency have been satisfied will be made
    available to the other clearing agency. The guarantee is generally not
    absolute, but rather is limited to the extent of the resources of the
    failed participant remaining at the guaranteeing clearing agency. The
    principal resources of defaulting participants will be settlement
    credit balances, clearing fund deposits, and collateral. The National
    Securities Clearing Corporation has executed cross guarantee agreements
    with the Depository Trust Company and OCC. Additionally, MBS Clearing
    Corporation, Government Securities Clearing Corporation, Participants
    Trust Company, and International Securities Clearing Corporation have
    amended their rules to allow them to enter into cross guarantee
    agreements with other clearing agencies, including futures clearing
    organizations.
        Collateral Management Service (CMS).--In 1995, NSCC developed CMS
    whereby NSCC collects from and provides to participants and other
    clearing entities information regarding a participant's clearing fund,
    margin, and other similar requirements and deposits at participating
    clearing entities. CMS helps clearing agencies and their participants
    to better monitor clearing fund, margin, and other similar required
    deposits that protect a clearing agency against loss should a member
    default on its obligations to the clearing agency. DTC, Stock Clearing
    Corporation of Philadelphia, Philadelphia Depository Trust Company,
    GSCC, MBSCC, PTC, and OCC have received Commission approval to
    participate in the CMS service.
        Creation of the Securities Clearing Group and Unified Clearing
    Group.--There have been a number of initiatives since 1987 to improve
    cooperation and information sharing among the securities and futures
    clearing organizations. As part of this effort, in 1989 the major U.S.
    securities clearing organizations formed the Securities Clearing Group
    and in 1995 joined with the futures clearing organizations to create
    the Unified Clearing Group.
        Liquidity Improvements at Clearing Agencies.--DTC, NSCC, and OCC
    have substantially increased their total participants/clearing funds
    and their total lines of credit since 1987.
                              mutual fund industry
        Question. Recent mutual funds topped $3.5 trillion. What are your
    greatest concerns about the mutual fund industry?
        Answer. The $3.5 trillion is a reflection of the strength and
    importance of the mutual fund industry. The industry has suffered no
    major problems in over two decades and we should work with the industry
    to continue this excellent record. We have some concerns about the
    industry despite its tremendous growth. We believe we must make every
    effort to encourage fund investors to become educated; make sure fund
    information, including risk, is communicated clearly to investors; and
    maintain the industry's excellent record of compliance in the face of
    the pressures of increasing competition.
        Fund Shareholders.--Our greatest concern is fund shareholders. We
    worry whether the fund industry is doing enough to educate investors
    not only about particular types of funds, but about investing in
    general, how to allocate assets and better understand risk, for
    example. We're trying to do our part on the education front. We're
    continually trying to educate investors through meetings with
    investors, preparing investor brochures, and assisting in the
    development of high school and college courses relating to investing.
        Disclosure.--We have met with investors from throughout the
    country. So many of these hardworking, intelligent people are putting
    their hard earned money into funds as a way of saving for their
    children's college education or their own retirement. We are concerned
    that the expectations these people have about funds may be unrealistic
    and will not be met. That's why we've been pressing so hard for funds
    to use good, clear disclosure in their written documents and for
    sellers of fund shares to be guided by the highest ethical principles.
    Expectations are, after all, shaped by what investors read and are
    told.
        New Entrants.--The fund industry has grown dramatically over the
    past 10 to 15 years. We are concerned, on behalf of fund shareholders,
    that new entrants to the business--like new entrants in any business--
    may not fully understand their obligations in managing fund assets and
    selling fund shares. A survey we saw recently of the CEO's of 1,300
    domestic and foreign banks and thrifts, for instance, indicated that 25
    percent of these institutions have no risk management process for the
    sale of mutual fund shares. Concerns over new entrants have caused us
    to focus more of our fund inspection unit's time and attention on those
    companies.
        Compliance.--Many have pointed to the extreme competition we are
    starting to see in the fund business. The competition may well lead to
    lower fund expenses, which would be most beneficial for shareholders.
    We are concerned, though, that costcutting could also mean cutbacks of
    important functions, particularly compliance. That would be a mistake
    and would hurt the fund business in the long run.
                              investment advisers
        Question. As a result of the National Securities Markets
    Improvement Act, oversight for over 70 percent of all registered
    investment advisers will become the responsibility of the states. The
    SEC will now be responsible for the 8,000 investment advisers that
    manage portfolios over $25 million.
        What impact will this division of responsibility have on the SEC?
        Answer. We will be able to reduce our current examination cycle for
    the advisers who will be registered with the SEC to once every 4-5
    years. In the past, examination cycles ranged from every 7-8 years for
    the largest advisers, to every 44 years for the smaller advisers. The
    advisers who will remain registered with the SEC and subject to this
    enhanced oversight manage approximately 95 percent of the industry's
    assets under management. In addition, we will be able to conduct
    ``targeted inspections'' which identify specific topics of regulatory
    interest (such as with the soft dollar project now underway) as well as
    continue our routine and cause inspections. In a targeted inspection,
    we obtain an understanding of how a practice or activity is performed,
    the types of problems or violative conduct that can arise and whether
    there is further need for regulatory consideration of the practice or
    activity.
        Question. What responsibility will the SEC have to oversee the
    state run programs?
        Answer. We will have no direct responsibility. Each state will be
    responsible for regulating those advisers within its borders that
    manage under $25 million. The SEC will not be responsible for
    overseeing the various state programs. The Improvement Act does,
    however, direct the SEC to make technical and other assistance
    available to the states. We have been active in this effort by
    developing training programs for state regulators, creating SEC
    internships, conducting joint examinations, and sharing information
    about examination techniques and about specific advisers that will be
    solely state-regulated.
        Question. Does this policy change have any budget implications?
        Answer. The changes to the Advisers Act were intended to affect the
    investment adviser program, and not to have a budget impact. This
    legislation has vastly improved our ability to examine and regulate the
    adviser population registered with the SEC. To prepare for the
    legislation, the Commission has reallocated eight existing staff
    positions to the Division of Investment Management to form a task force
    to update the Commission's adviser rules. In addition, $20 million was
    authorized by the Improvement Act for 1997.
        electronic data gathering analysis and retrieval [edgar] system
        Question. The current EDGAR contract expired in January 1997.
    You've stated in your written testimony that EDGAR is 10 year old
    technology and the Improvement Act asked SEC to look into the
    possibility of privatizing EDGAR by April 9, 1997.
        What is the status of the EDGAR recompetition?
        Answer. The SEC is currently evaluating proposals received in
    response to Phase 1 of the solicitation. We are also preparing the
    report to the Congress that will address the issue of the modernization
    of EDGAR through privatization.
        It is anticipated that once the Congress has provided its guidance
    on privatization, the SEC will issue Phase 2 of the solicitation and
    will award a new contract following proposal receipt and final
    evaluations.
        Question. Are there funds requested in the President's 1998 budget
    for the SEC to update EDGAR?
        Answer. The 1998 budget request has carried forward the 1997 level
    of $8 million for the maintenance of EDGAR operations. This funding
    level is not sufficient to carry out an EDGAR modernization program.

                              subcommittee recess

        Senator Gregg. Thank you. Thanks for your time. The hearing
    is concluded.
        [Whereupon, at 2:28 p.m., Wednesday, March 19, the
    subcommittee was recessed, to reconvene at 2 p.m., Thursday,
    March 20.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, MARCH 20, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 2 p.m., in room S-146, the Capitol,
    Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Domenici, Hollings, and
    Lautenberg.

                                 UNITED NATIONS

    STATEMENT OF AMBASSADOR BILL RICHARDSON, U.S. PERMANENT
                REPRESENTATIVE TO THE UNITED NATIONS
    ACCOMPANIED BY PRINCETON N. LYMAN, ASSISTANT SECRETARY FOR THE BUREAU
                OF INTERNATIONAL ORGANIZATION AFFAIRS

                                opening remarks

        Senator Gregg. We will start the hearing. I know there are
    other Members of the Senate that are going to be joining us,
    but I do not want to hold the Ambassador up. Here is the
    ranking member right now.
        Basically we very much appreciate the Ambassador coming by.
    I would just say, as a bit of an opening statement, that we
    have been working with the Ambassador and with the Secretary of
    State on the issue of arrearages. We have a working group
    functioning that has been aggressively trying to resolve the
    problem.
        I hope that by the middle of April we will have some sort
    of an agreed-to position between the Congress and the
    administration on how to address the arrearages question; how
    much we will pay; and the manner of the payments and the
    conditions of the payments.
        I personally do not intend to spend any time or any
    significant time on that issue, although it is deemed to be the
    most controversial. There is so much going on in the way of
    trying to resolve it, that I do not think it is necessary to
    spend a lot of time on it, in my viewpoint.
        However, there are other issues, obviously, which involve
    the United Nations and we appreciate the Ambassador coming
    today. I would yield to the ranking member for any comments
    that he might have.
        Senator Hollings. Thank you, Mr. Chairman. Just the
    reality, Mr. Ambassador, of what we face. A couple of years ago
    we answered up to our responsibilities and Congress took care
    of the arrearages. We appropriated over $1 billion.
        Twofold: now that you've come back, one question, what did
    we get for the $1 billion. No reforms, really. Second question
    is that unless you get this money in a supplemental, in this
    Senator's judgment, you're going to have a tough time.
        You've got drives and moves on foot to cut back period or
    to eliminate, like the Department of Commerce. This is State,
    Justice, and Commerce. And when we get into the final
    conference and all which you have experienced yourself, they
    say, wait a minute, why are we so bothered about arrearages and
    paying that bill when we don't even pay our own bills here in
    the United States.
        And the flexibility of trying to get a conference report,
    and the bill passed, falls right on that particular U.N.
    amount.
        And we go out on the floor, Senator Kassebaum, on two
    occasions. Once she got 17 votes, I think, and another time,
    21. So we tried. We're not acting in opposition. It's a real
    problem. Suggestion: please put the pressure on in that
    supplemental where we can get it done and not put it in the
    overall budget.
        Thank you, Mr. Chairman.
        Senator Gregg. OK. We'll be happy to get your thoughts, Mr.
    Ambassador, in any manner in which you wish to express them.

                   opening statement of ambassador richardson

        Ambassador Richardson. Well, first of all, Mr. Chairman,
    and members of the subcommittee, let me just say it's good to
    be back home in the Congress. I've been away 1 month, and this
    is a very challenging job, as U.N. Ambassador.

                                  U.N. arrears

        As the chairman mentioned, in the executive branch we're
    undergoing a process of negotiating with the congressional
    leadership, the appropriators, the authorizers, on a package,
    as the chairman mentioned, that involves the arrearages issue,
    and subsequent reforms.
        And our hope is that we can come up with an agreement,
    hopefully, within 30 days.
        I would only want to make one point, and not go into an
    opening statement, because I think it's more relevant to answer
    your questions, plus, as my colleagues may know, I am faced
    with a potential Middle East resolution in the National
    Security Council, and if possible I'd like to go back once I'm
    adequately finished here.

                                  U.N. reform

        The only point I would like to make to the members of the
    subcommittee is that we do have a Secretary General that is
    reform minded, that has taken the lead on reforms. And, I know,
    Senator Hollings, you've expressed some disappointment with
    those reforms, but I do think that what Annan has put forth,
    and some reforms that our Government has pushed in the last 2
    years under Secretary Albright, have resulted in a leaner,
    meaner United Nations.
        Let me just go through very briefly these reforms that
    Secretary General Annan announced on Monday which I think are
    significant and should be the basis of negotiations along with
    the Senate, the House, and the administration.
        No. 1, the United Nations has a negative nominal growth
    budget, the budget cap. This is historic. It's $2.608 billion.
    They've stuck to it. We think in the next biennium, which is 2
    years from now, there will also be a budget cap.
        One thousand posts were eliminated. Now, these are jobs
    which will not be filled again. Secretary Annan will go to the
    General Assembly and try to get these posts eliminated so that
    they can never be replaced.
        No. 2, a 13-percent reduction of administrative costs, from
    38 percent to 25 percent by the year 2001, with the annual
    savings directed to substantive programming.
        No. 3, 25 percent reduction in U.N. documents and paperwork
    by December 1998.
        No. 4, the establishment of a code of conduct, and I know
    this is very important to Members of the Senate. This is
    basically a code of conduct for U.N. employees involving
    financial disclosure, all types of employee behavior, perks
    that would be eliminated which is considered significant.
        No. 5, the merging of three separate development
    departments into one. This will improve the accounting. This
    will consolidate three departments of the United Nations on
    economic issues into one. The merging of the Conference
    Services Division, General Assembly Affairs Division, another
    effort at consolidation.
        Restructuring the Department of Public Information, country
    level coordination of U.N. programs, centralized management
    system, coupled also with other reforms that we stand behind,
    such as, besides the budget cap, a stronger oversight inspector
    general operation with the United Nations--the OIOS. Inspector
    general services, investigation oversight services, which goes
    in, roots waste out.
        They recently did, in the Rwanda war crimes tribunal, three
    individuals were dismissed because of mismanagement. This is an
    operation that we want to see have more teeth and that we're
    strongly supporting.
        In addition to that, there are initiatives that deal with,
    as I mentioned, consolidations, having departments at the
    United Nations run more efficiently, the merging of other
    economic and social council agencies.

                                  Peacekeeping

        I would also like to mention peacekeeping, which I know has
    been a big issue in the Congress and in this committee with
    many of you taking leadership roles in peacekeeping operations.
    We have reduced our role in peacekeeping.
        We have right now about $280 million in our cost of
    peacekeeping--this is the U.S. contribution. In the mid-1990's,
    it was up to $1 billion. Instead of there being 75,000
    peacekeepers, there are 25,000 right now in the whole U.N.
    system.
        We asked the tough questions on peacekeeping. Every day I
    spend at the National Security Council where we discuss
    peacekeeping missions, we ask the questions, what is the exit
    strategy. What's it going to cost? Command and control. Have we
    consulted the Congress? What is the mandate?
        These questions, through a U.S. effort, are being asked. We
    do have a more efficient, reform-oriented United Nations.

                                    summary

        Let me just summarize: without us dealing with the arrears
    issue--and the modalities of how we deal with it, I suspect,
    will be the subject of negotiations--without us paying the
    arrearages, we cannot go to the United Nations and retain our
    leverage to pursue our interests at the United Nations, which
    are substantial; we will not be able to get the scales of
    assessments reduced for all members.
        You know, Senator Hollings, we want to pay less in U.N.
    dues and in peacekeeping. We want a fairer share for the United
    States vis-a-vis other countries. In the peacekeeping area, we
    want to go from 31 percent--close to 31 percent--to 25 percent.
        In U.N. dues we want to go down to 20 percent from
    approximately 25 percent, to conform with what this Congress
    has wanted us to do.
        So we're making progress, and I need that leverage. I need
    a tangible, good faith financial effort to show that part of
    these reforms will be an investment in the future, but that our
    interests in the United Nations, preserving our interests in
    peacekeeping, preserving our interests in keeping sanctions on
    Iran and Iraq, and dealing with North Korea, and monitoring
    elections, and bringing smallpox eradication.
        And I know, Senator Hollings, trade issues are very
    important to you, protecting worker rights and the
    International Labor Organization. And making sure that we find
    ways that the United Nations works for the American people.
    There is a civil aviation entity within the United Nations that
    deals with airline travel--40 percent of all travelers in the
    air are American.

                               prepared statement

        I could go on and on, but I guess my very abbreviated
    statement has gotten a little longer. I need your help, and the
    administration needs your help to forge a bipartisan agreement
    where we can put this U.N. arrears issue and reform issue to
    bed in a bipartisan fashion.
        And this committee is key in this happening.
        [The statement follows:]
                Prepared Statement of Ambassador Bill Richardson
        Mr. Chairman, Members of the Subcommittee: Thank you for inviting
    me here today. This is my first opportunity to appear in front of you
    since assuming my new duties, and it is both a little strange and a
    little nostalgic to be sitting on the other side of the dais to discuss
    the matters before this committee.
        After a month in New York, what I have confirmed for myself is that
    the U.N. remains an institution that is enormously useful for the U.S.,
    and where it is important that we remain engaged.
        In recent weeks, we have been able to maintain full sanctions by
    the international community on Iraq and Libya. We are making sure that
    the very important U.N.-sponsored peace agreement in Guatemala is able
    to go into effect, so that American taxpayers do not have to spend
    money averting problems that are close to home. And in El Salvador,
    because of a U.N.-brokered and guaranteed peace accord, a military that
    a few short years ago was fighting a civil war, may soon be
    contributing to international peacekeeping around the world.
        Even prior to my current position, I had already seen firsthand how
    the United Nations helps further our interests. In North Korea,
    inspectors from the International Atomic Energy Agency have helped
    verify that the North Koreans are living up to their commitments not to
    produce nuclear weapons. In remote parts of Sudan to which Americans
    have little or no access, I have seen how U.N.-affiliated bodies help
    protect and feed the victims of terrible humanitarian disaster. In
    Burma, I have seen how the nations of the world through the U.N.
    General Assembly have brought hope to embattled democrats by justly
    condemning a brutal and repressive regime.
        Mr. Chairman: With all of those considerations in mind, today I
    come to discuss with you the Administration's funding request for
    international organizations and conferences for fiscal year 1998.
        I want to spend a few moments outlining the Administration's
    proposal for the appropriations we are requesting to meet our fiscal
    year 1998 annual requirements for international organizations and
    conferences. We are providing additional detail in writing and I ask
    that it be included in the record.
        I am also joined today by Ambassador Lyman, Assistant Secretary for
    International Organizations, who, along with myself, will be happy to
    answer any further questions you might have on these issues.
        Our proposal includes: for Contributions to International
    Organizations (CIO), $969,491,000, which would fully fund our assessed
    contributions for calendar year 1997; for Contributions for
    International Peacekeeping Activities (CIPA), $240,000,000; and for
    International Conferences and Contingencies (ICC), $4,941,000.
        In addition to these annual requirements for fiscal year 1998, the
    Administration is requesting funding to pay our recognized arrears
    under the CIO and CIPA accounts in full. We seek $100 million in fiscal
    year 1998 funds, $54 million for U.N. regular budget arrears in the CIO
    account and $46 million for CIPA; and an fiscal year 1999 advance
    appropriation of $921 million, as an fiscal year 1997 supplemental, to
    pay the remaining arrears in both accounts.
        Mr. Chairman: This request reflects our commitment to accomplishing
    three ambitious and demanding tasks over the next few years:
        First--the substantial reform and reinvigoration of the U.N. System
    so that it is prepared and able to meet the challenges of the 21st
    Century. These include vital security, health, crime and drug control
    activities--all of great importance to the American people;
        Second--reaffirming and sustaining vigorous American leadership
    within the United Nations. Whether defending our trade interests,
    maintaining sanctions against aggressor states, or controlling the
    proliferation of weapons of mass destruction, our leadership is
    indispensable to protecting our interests;
        Third--bringing U.S. financial support of international
    organizations to a level that is sustainable and supportable by the
    Congress.
        Mr. Chairman, as you know, under the leadership of then-Ambassador
    Albright, major progress was made towards reforming every aspect of the
    way the U.N. conducts its business.
        I can report to you today that, last Monday, U.N. Secretary-General
    Kofi Annan took a significant and unprecedented step towards the kind
    of structural reform that will help the U.N. do more, better and for
    less.
        He had already made a public commitment to carry out those reforms
    that are within his authority--a commitment he made to Congressional
    leaders in January. Now, in a detailed and thorough blueprint, he
    specified a series of ten reform benchmarks. He will begin to implement
    these benchmarks very soon and extending over the next several years:
      --The presentation of a negative nominal growth budget proposal for
            the 1998-1999 biennium and the elimination of 1,000 posts.
      --A 13 percent reduction in administrative costs, from 38 percent to
            25 percent by 2001, with the annual savings directed to
            substantive programming.
      --A significant 25 percent reduction in U.N. documents and paperwork
            by December 1998.
      --The establishment of a Code of Conduct.
      --The merging of three separate development departments into one.
      --The merging of Conference Services Division and General Assembly
            Affairs Division.
      --The restructuring of the Department of Public Information.
      --The country-level coordination of U.N. programs.
      --The establishment of a centralized management and issues capability
            to handle matters that cross departmental lines.
        This is a plan that indicates that the U.N. Secretary-General has
    heard, loud and clear, the message from member states and is now taking
    bold and effective action. It is a plan that encompasses many of the
    most important reforms the United States has advocated and worked for
    over the last three years. Thus, he has answered the call for
    leadership on reform and is prepared to exercise the powers of his
    office in an affirmative and appropriate manner.
        We recognize that implementing some of these proposals will indeed
    meet resistance. It is my commitment to you today that we will spare no
    effort to ensure that the U.N. delivers on these reforms.
        We are also very pleased that since his appointment, Mr. Annan has
    wielded his authority as Chief Administrative Officer to root out
    incompetence and inefficiency.
        He has already cut several senior positions from his Executive
    Office. We were also impressed by the swift removal of inept officials
    at the Rwanda War Crimes Tribunal. We are pleased at his establishment
    of a policy coordination group--an idea we have strongly supported--to
    bring cohesion and authority to the decision-making process.
        Mr. Chairman, this is a good start, and sets the kind of example he
    expects of the entire institution. But many of the broader structural
    and organizational reforms are beyond the authority of the Secretary-
    General. They must be negotiated with other member states as well as
    the governing councils of affiliated organizations. We are already
    working to eliminate outdated functions, consolidate duplicative and
    overlapping programs and ensure that goals and priorities that are
    clear and achievable are set across the organization.
        This is why a fully functioning, strong and effective Office of
    Internal Oversight Services remains so vital and we have repeatedly
    indicated to the U.N. the importance of Inspector General Karl
    Paschke's work. We are very pleased that even within the budget cap,
    OIOS is being provided the resources necessary for full staffing and
    for its investigative, monitoring, and audit activities. We will
    maintain our strong efforts to ensure that the Office continues to be
    provided with a level of resources sufficient to allow the OIOS to
    fulfill its mandate effectively.
        However, Mr. Chairman, based on my first four weeks in New York, I
    must tell you that the pace and scope of this kind of real progress
    towards reform will not continue without progress of our own towards
    paying our arrears. Our failure to pay is also impeding our efforts to
    achieve a more equitable and fair scale of assessment, a key part of
    our proposal to bring contributions from the CIO account down to $900
    million for fiscal year 1999, with no arrears at that level. It is also
    increasingly affecting every other interest we have at the U.N. and
    harming vital relationships that we have worked to build over many
    years with U.N. delegations, entities, and related groups.
        Recently, I briefed U.N. delegates in New York on the
    Administration's proposal to schedule our arrears, reduce budgets, and
    achieve further U.N. reforms. The first reactions I got were blunt, and
    can be summarized this way: ``Even if we give the United States all
    that it is seeking, why should we believe that it will honor its
    commitments, when it has not done so in the past?''
        The question is a fair one. Our ability to get what we want at the
    U.N. is impaired because member states are not convinced that, in the
    end, even with reform, we will pay our share. I have explained to
    delegates that that is one reason why the President's budget calls for
    advance appropriations--so that member states will have some assurance
    that we really will make substantial payments toward our arrears as
    reforms are implemented. They also understand how our government works
    and they are well aware that it is Congress, not the Administration,
    who will provide the necessary appropriations. And they understand that
    reforms are essential.
        The problems are particularly apparent as we work to adjust the
    scales under which countries are assessed for U.N. costs, including a
    reduction of the U.S. assessment rates for regular budget activities
    and peacekeeping. The Administration believes that the U.N. assessment
    system should reflect recent changes in the global economy and that the
    U.N. would function better with a broader base of shareholders who have
    a more significant financial stake in the international system.
        But to achieve this, we need the approval of 184 other member
    states, many of whom would have to pay more if we pay less. Without the
    leverage of a credible U.S. commitment to pay our outstanding arrears,
    we have little chance of convincing them.
        Other delegations have indicated to me that they understand, even
    if they do not yet accept, our requirements and they are willing to
    work with us. But they are firm in insisting that first, there be a
    credible commitment that the United States will honor its treaty
    obligations--to both pay arrears and meet our commitments in the
    future.
        I hope that I can bring back to New York a message that, while
    reforms are being debated, while questions and concerns remain to be
    addressed, there is bipartisan support for the U.S. making a financial
    commitment in which U.N. members can place their confidence.
        I can assure you that the willingness and commitment of the
    Chairman and other members of this Committee to become engaged in the
    reform and financial process at the U.N., has already played an
    important and positive role. The meetings that have already occurred
    between Members of the House and Senate and Secretary-General Annan and
    General Assembly President Razali were useful and productive. I hope
    that the dialogue that you have started will continue.
        Mr. Chairman, President Clinton has made repaying our debt to the
    international organizations a foreign policy priority because the
    multi-lateral system, more than ever, makes an important difference on
    the vital issues that we care about. As you well know, our total
    contributions to international organizations amount to about one-tenth
    of one percent of the Federal budget--value for money made even more so
    as we proceed in the direction I have outlined today.
        This is why we are committed to revitalizing the United Nations by
    reforming every aspect of its operation, paying what we owe and
    avoiding future debt--and guaranteeing a sustainable level for our
    contributions. I am looking forward to working with you to achieve
    these goals.
                                     ______

               Biographical Sketch of Ambassador Bill Richardson
        Bill Richardson was named United States Permanent Representative to
    the United Nations by President Bill Clinton on December 13, 1996. He
    is a member of the President's Cabinet and is also a member of the
    National Security Council. Ambassador Richardson was sworn in to office
    on February 13, 1997 by Vice President Gore.
        Prior to becoming the U.S. Permanent Representative to the U.N.,
    Bill Richardson served New Mexico's 3rd Congressional District--one of
    the largest and most ethnically diverse in the country--and was elected
    eight times. As a member of the United States Congress, Richardson held
    one of the highest ranking posts in the House Democratic Leadership. He
    was a member of the Resources Committee, the Commerce Committee, the
    Permanent Select Committee on Intelligence and the Helsinki Commission
    on Human Rights. During the 103rd Congress, he chaired the Subcommittee
    on Native American Affairs. He has been described as one of the most
    ``prolific legislators in the House,'' with numerous bills and
    amendments enacted in the environment, energy, Indian, health, foreign
    policy and defense areas.
        Admired for his work as President Clinton's special envoy on many
    sensitive diplomatic missions, Ambassador Richardson was nominated for
    the Nobel Peace Prize a second time in January, 1997. As a diplomatic
    ``trouble shooter'' he has worked to free hostages in several countries
    including Bangladesh, Burma, Iraq, and North Korea. Most recently
    Ambassador Richardson successfully secured the release of three Red
    Cross workers taken hostage in the Sudan. In 1996 he held a historic
    meeting with Cuba's Fidel Castro during which he successfully
    negotiated the release of three political prisoners and visas for their
    families. Ambassador Richardson has also chaired U.S. observer teams
    for elections in Guatemala, Nicaragua, and East Germany.
        Ambassador Richardson received a B.A. (1970) from Tufts University
    and an M.A. (1971) from The Fletcher School of Law and Diplomacy.
        Ambassador Richardson is fluent in Spanish, with good speaking and
    reading abilities in French.
        Ambassador Richardson currently resides in New York with his wife
    Barbara.

                                  U.N. credit

        Senator Gregg. Thank you, Mr. Ambassador. Following up on
    that point, and I do not expect to spend a lot of time on it,
    but I do have a couple of questions. You received a credit from
    the United Nations for an overpayment of $27 million. Now, for
    some unknown reason, we have been hearing from the Secretary of
    State, and when she was U.N. Ambassador we heard about the lack
    of leverage. We have heard from you about lack of leverage as a
    result of not paying our arrears. And yet, when the State
    Department got a $27 million payment refund, it was applied to
    next year's obligations, instead of being applied to the
    arrearages; that makes no sense.
        Are you going to adjust that, and go back and do what makes
    sense, which is to reduce the arrearages by $27 million?
        Ambassador Richardson. Let me also mention that Assistant
    Secretary Princeton Lyman is here. His jurisdiction is all
    international organizations. He answered this question
    yesterday very effectively, I thought, in the House
    Appropriations Committee.
        These are $27 million that, as I understand it, we have
    said we may need to deal with in a new fashion. So is that OK,
    Mr. Chairman?
        Mr. Lyman. Senator, what we did, we applied that $27
    million against the assessments we have for this year, and,
    therefore, lowered the fiscal year 1998 request by $27 million.
    We could have applied it to arrears. Then we would have had to
    increase our request to you this year by $27 million.
        Either way, the $27 million would be credited to the United
    States. If the Congress prefers, we could go back and have that
    credited to the arrears, but then it would mean that we would
    have to increase the request for fiscal year 1998, because we
    just subtracted it from that.
        Senator Gregg. Well, that makes sense, from our standpoint.
    Basically you have attempted to take the arrearages out of the
    budgeting process by advance funding them, which is, I think, a
    very big mistake and creates all sorts of budgetary problems
    for this committee.
        So now by doing this, you've just aggravated the problem
    another $27 million, in my opinion.

                             Unencumbered balances

        How about the unencumbered balances?
        Mr. Lyman. The unencumbered balances, Senator, represent
    amounts against which all the billing has not come in.
    Therefore, we don't know how much of those balances would be
    needed for future billing. I mean, they are against
    peacekeeping operations, either still underway, or closed out,
    but all the bills haven't come in.
        We expect, from the best estimates we have, that most of
    those unencumbered balances will be used for bills related to
    those operations. Once the billing is closed, then we can
    dispose of those unencumbered balances, but the amounts that
    are now in there don't represent a kind of cash surplus. They
    are against expected or anticipated billings.
        Senator Gregg. Well, we do not have a number for what they
    stand at now in anticipation of billings. Do you have that
    number?
        Mr. Lyman. I know what the total of them are. They're in--
    off the top of my head, as I recall, it's about $200 million.
    We expect most of that will go against billings.
        But let me get you a more detailed list of that.
        Senator Gregg. Yes; we would like a detailed list of what
    the unencumbered balances are by accounts, and then if you also
    can give us what the anticipated billings are that you know are
    in the pipeline.
        Mr. Lyman. As much as we can, because some of it hasn't
    been calculated. But we will give you the best information we
    have at this time.
        Senator Gregg. As you know, we are going to have this
    problem with finding approximately $900 million. We are going
    to have to scour around, and certain accounts are going to be
    easier to scour in than other ones. It might make sense to use
    this money instead of trying to look for it somewhere else, and
    then come back and pay these bills in a future appropriations
    process. We have got to know what the numbers are before we can
    do that.
        Mr. Lyman. These funds have been set against very specific
    peacekeeping operations. But let me get you the specific
    information, Senator.
        [The information follows:]

        The following table lists the latest unencumbered balances
    (by U.N. peacekeeping operation) which have been obtained from
    the U.N. These amounts are overall figures from which the
    United States would be entitled to a 31 percent share (equal to
    the U.N. 31 percent rate of assessment) for peacekeeping.
    Future assessed charges are expected to use up all the
    unencumbered balances for all operations, except the completed
    operations in Mozambique and Haiti. When all assessed bills for
    these completed operations are paid, and if there is money left
    over, then the U.N. General Assembly may decide to return these
    amounts to the contributing member states.

                                   FINANCIAL INFORMATION--U.N. PEACEKEEPING OPERATIONS
    ----------------------------------------------------------------------------------------------------------------
                                            Unencumbered
             U.N. Force/Operation            balance \1\         Document date                 U.N. document
    ----------------------------------------------------------------------------------------------------------------
    UNDOF--Golan Heights..................   $3,487,000   Feb. 21, 1997.............  A/51/684/Add.1.
    UNIFIL--Lebanon.......................  ............  Dec. 18, 1996.............  A/51/535/add.2.
    UNIKOM--Iraq/Kuwait...................    4,603,000   Nov. 6, 1996..............  A/51/658/add.1.
    UNAVEM--Angola........................   18,927,000   Jan. 30, 1997.............  A/51/494/Add.3.
    MINURSO--Western Sahara...............   19,393,000   Dec. 23, 1996.............  A/51/763.
    UNPF--Phasedown/closeout \2\..........  102,000,000   Dec. 2, 1996..............  A/51/701/add.1.
    UNMIBH--Bosnia-Herzegovina............    6,517,000   Feb. 21, 1997.............  A/51/519/Add.3.
    UNTAES--Eastern Slavonia..............   18,820,000   Feb. 21, 1997.............  A/51/520/add.2.
    UNPREDEP--Former Yugoslavia Republic      5,260,000   Mar. 5, 1997..............  A/51/508/Add.2.
     of Macedonia.
    UNFICYP--Cyprus.......................      385,000   Dec. 18, 1996.............  A/51/755.
    UNSMIH--Haiti Support Op..............      ( \3\ )   ..........................  ..............................
    UNOMIG--Georgia.......................    1,056,000   Feb. 4, 1997..............  A/51/793/Add.1.
    UNAMIR--Rwanda........................   15,813,000   Jan. 31, 1997.............  Secretariat Handout.
    UNMOT--Tajikistan.....................    2,860,000   Feb. 11, 1997.............  A/51/784/Add.1.
    UNOMIL--Liberia.......................  ............  Feb. 4, 1997..............  A/51/756/Add.1
                                           --------------
          Total assessment offset.........  199,121,000
                                           ==============
    ONUMOZ--Mozambique....................   19,052,000   Feb. 25, 1997.............  A/51/807.
    UNMIH--Haiti..........................    7,023,000   Dec. 27, 1996.............  A/51/764.
                                           --------------
          Total may be returned...........   26,075,000
    ----------------------------------------------------------------------------------------------------------------
    \1\ Unencumbered and surplus balances are the net of assessments and other income less operating costs.
      Projected costs are used when available to provide more current estimates of balances. These balances are not
      equivalent to cash on hand which is the amount of assessments received less cash payments.
    \2\ Note that there is more than $200 million in unassessed commitment authority for UNPF which would more than
      offset this unencumbered balance.
    \3\ No financial performance report as of this date.

    SOURCE: Data provide by U.N. 4/25/97.

                        International police task force

        Senator Gregg. I have some other questions on the inspector
    general and also on the international organizations, but let me
    defer to Senator Hollings.
        Senator Hollings. Very good. I welcome the Ambassador. We
    were there in January 1995 when you were Ambassador to South
    Africa.
        With respect to Secretary Cohen, who was just upstairs at a
    caucus that we had, he was talking about the commitment to
    withdraw from Bosnia, a firm commitment, starting with the
    drawdown beginning the first of the year.
        He also alluded to the fact that while militarily we're
    quite resolved in doing it, in a commendable fashion, then
    money for the economic revival of the area had not come forth,
    and we were going to need a police force.
        And he no way was going to allow his defense force to
    become a police force. Question: Does that then fall upon the
    United Nations? And is that, if it does fall upon it,
    Ambassador Richardson, is that in your request here now? Or
    what?
        Ambassador Richardson. Senator, what we're talking about
    here is what's called the IPTF. This is a police monitoring
    force. And we're talking as part of a recent--in northern
    Bosnia, the Brcko implementation. And what we want to make sure
    of is that our troops not be jeopardized.
        We're talking about police monitors and human rights
    monitors. We're not talking about an extended operation. We're
    talking about just implementing this agreement that will bring
    some stability to that part of northern Bosnia.
        And we're talking about a very limited operation.
        Senator Hollings. And that's included in the request here
    before the committee?
        Ambassador Richardson. Yes.
        Senator Hollings. Thank you, Mr. Chairman.
        Senator Gregg. Senator Lautenberg.

                                  U.N. arrears

        Senator Lautenberg. Thank you, Mr. Chairman.
    Congratulations, Mr. Ambassador. Our relationship has suddenly
    gotten formal. I used to like it when we were just plain old
    Bill and Frank. But I like seeing you in that job. I have a lot
    of confidence in you, having seen you on some of our Helsinki
    travels.
        I think also it is fair to say that the U.N. functioning
    has, I think, become more respected here. Change is taking
    place. There are so many things going on around the world that
    I think we need help in picking up our responsibilities.
        And I'm frankly distressed that we don't pay our bills.
    It's, to me, it's akin to citizens withholding their taxes
    because they want a change in the structure of Government. I've
    heard that appeal many times.
        And I just think that if you're going to--to use a
    whimsical expression--you're going to belong to the club,
    you're going to have to pay the dues. Otherwise you have no
    voice.
        And I hope that we will figure out a way, a bipartisan way,
    if that's possible, to get these arrearages up to snuff, or at
    least appropriate the money. I don't understand the delay in
    paying it if you owe it--especially from past obligations.
        But I would hope that the United States can comport itself
    like the leading power in the world that we are, and not be
    deadbeats on bills that we owe. It does, as you said, Mr.
    Ambassador, reduce your leverage.
        It's kind of a hollow thing when you owe money and you're
    continuing to order from the menu.
        So we wish you luck, and I hope that we will be able to
    help restore some of the confidence that I think we should
    have.
        Mr. Ambassador, you've got an abundance of problems to deal
    with in the United Nations. And it seems to me that again the
    obligation has expanded substantially.

                             Israeli housing issue

        Did you say today there's going to be a National Security
    Council vote on the----
        Ambassador Richardson. Well, what's happened, Senator, is,
    as you recall, 2 weeks ago the United States vetoed a
    resolution on the Israeli housing issue, a resolution we
    thought would not be helpful.
        Our view has been that in the Middle East process it's
    better to have the parties negotiate themselves rather than the
    National Security Council getting involved. We felt that the
    issue at hand is a final status negotiation that should happen
    at the end with the parties themselves.
        This morning I had a meeting with the Arab Ambassadors,
    trying to persuade them not to offer a subsequent resolution
    that deals with the actual construction of the housing, which
    is taking place.
        And my hope is that we can work this out, and not deal with
    another resolution. Because our view is that there is an
    impetus to peace--the President, in his meetings with Arafat
    and with King Hussein and with President Mubarak and
    Netanyahu--that the parties themselves are the best agents for
    that peace process, based on the Oslo accords, and based on the
    Camp David agreements, and the Madrid meetings and not to
    inject it within the National Security Council.
        We talked about that this morning in the National Security
    Council, and I suspect, hopefully, a positive resolution of the
    issue, and that is, hopefully, not a resolution. Perhaps a
    Presidential statement.
        We were concerned, as a matter of policy, with this
    construction. We let it be known to the Government of Israel.
    But we don't feel that the National Security Council is the
    place to achieve any positive results on the Middle East peace
    process.
        Senator Lautenberg. I think that was an important veto, Mr.
    Ambassador, because it was followed on by the meeting in Gaza
    with people who are forced to take a side by their very
    presence there, including the United States. And I did object
    to the meeting.
        And I'm not at all condoning Israel's actions in this case.
    I think it could have been handled a little more delicately,
    and a little more correctly. That's the way I think that things
    ought to go on there--through face to face negotiations. There
    is no constructive value in bringing in other countries and
    excluding Israel to decide what's good. And the United States
    ought to, by virtue of our position, veto proposals that are
    determined by nonfriends of Israel as being the right way to
    go.

                              War crimes tribunals

        I would just ask one other thing, Mr. Ambassador. Your
    predecessor was a strong supporter of U.N.-established and
    funded international criminal tribunal for former Yugoslavia.
    She was actively involved in securing the arrest and transfer
    of war criminals to the tribunal for prosecution.
        We're not getting a lot of cooperation, as you know, from
    Croatia or Republika Srpska. Do you intend to continue an
    active role in that area?
        Ambassador Richardson. Senator, I commit to you a very
    strong, active role in that area. We are concerned about the
    lack of movement there. We are concerned with the
    implementation of that tribunal. We would like to see more
    speedy movement in the dealing with some of those criminals,
    and I commit to you a very vigorous effort on my part,
    hopefully, a trip there soon, where I can first hand get some
    impressions of how we can specifically move ahead.
        But we are debating and reviewing this within the executive
    branch right now, how we can make this process work better.
        Senator Lautenberg. We wish you luck, Mr. Ambassador, and
    I'm confident you're going to do the right job.
        Ambassador Richardson. Thank you, Senator.
        Senator Gregg. The Senator from New Mexico.

                                DOD's resources

        Senator Domenici. Mr. Chairman, and Mr. Ambassador, I'm
    sorry I was late. I was at another meeting, and I hope I don't
    duplicate anything that was said.
        Let me first, Mr. Ambassador, suggest, before we talk a
    little bit about U.N. arrearages and major reforms as you see
    them, let me suggest that I think everybody in positions like
    yours, not just the Defense Department, ought to know what a
    situation like Bosnia does to the United States military.
        Because we did not have anything in reserve for these kinds
    of efforts, and because we didn't plan to have money there,
    $2.8 billion has been spent out of this year's budget by the
    President on Bosnia that comes out of every day O&M, operations
    and maintenance and training money.
        Before we're finished, it will be over $6 billion, from
    what I understand. I think it's really important that we
    understand that that kind of commitment is not just a neutral
    event because it's a big, important event. We're in a very
    drastic situation right now.
        If we don't have some reprogramming in the Defense
    Department and some rescissions, we've got a substantial
    portion of the training and operation and maintenance money of
    the U.S. military used up there. Because the President needed
    ready money, not budget authority, and so it comes out of the
    one-for-one ratio programs. That's almost all training and
    operation and maintenance and the like.
        We don't have a place to just go pluck the money now. We
    have to go back through defense, and if it worked right, you're
    going to have to cut defense in a whole bunch of places to pay
    for this.
        That will be a tough problem, because what we're going to
    have to do is probably take a lot of items that have long pay
    out in order to get some--because there's no other money that
    will do the job. We're going to have to cut some real dollars
    out in program authority to get this $2 billion in outlays that
    has been spent.
        So I only share that with you because frequently we make
    these commitments. You aren't part of this directly. I'm saying
    we should all know together, when we make these kinds of
    commitments that there ought to be some real effort to say how
    we're going to pay for it, rather than let it be done in the
    way that this one is happening.
        I don't expect you to say anything or do anything. I just
    want to share that concern with you.

                                  U.N. reforms

        I understand we have a difference of opinion in the Senate
    versus the administration on how much arrearage we owe. I don't
    choose to argue the point, but I guess there is a bipartisan
    group working together up here and you're there, aren't you,
    Mr. Chairman.
        Senator Gregg. Right. We're trying to work that out.
        Senator Domenici. I believe that you know that there is a
    difference of opinion on whether we're going to put all that
    money in at one time, or whether we're going to pay it over
    time.
        I think all of this comes about because--and I'm just
    giving you my version--because we don't want to reform
    entitlement programs and save real dollars, so we end up taking
    appropriated accounts. Everywhere we turn we have less and less
    money available.
        That situation puts all these kinds of programs in
    jeopardy, including the budget for this subcommittee. Could you
    tell us, of the reforms that the United Nations is
    contemplating, what two or three are apt to save the most money
    over time?
        Ambassador Richardson. Senator, let me mention that there
    are two types of reform the United Nations is pushing, the ones
    that were announced by Secretary General Annan last Monday.
    These are reforms that Annan can do on his own as Secretary
    General. They involve Secretariat functions.
        And the second set of reforms he is going to be pushing
    will be before the end of July, and these are reforms that he
    would have to submit to the General Assembly for approval, to
    all the member states--185 member states.
        Princeton is our expert on what the most important ones
    are. My sense, Senator, is the most important ones are the
    reforms that consolidate the departments. The chairman is very
    interested in accounting issues. I think to consolidate is very
    important. There are a lot of departments at the United
    Nations.
        Just one of his reforms was three separate development
    departments were merged into one. I would say the staff
    reduction of 1,000 people, which reduces the U.N. staffing by
    about 10 percent. We're talking about a high several years ago
    of 11,200 employees. We're now down to about 9,000.
        These are positions that he is going to try to eliminate
    altogether. It's not just vacancies that go unfilled. I think
    those two, in my judgment. I mentioned also a 13-percent
    reduction of administrative costs that will save about
    $138,000.
        Senator Domenici. Before Senator Hollings leaves--Senator
    Hollings, I would just want to remind everyone that it was in
    this subcommittee when you were chairman and I was your ranking
    member that we first indicated that we were not going to fund
    the United Nations any longer unless they had some bookkeeping,
    accounting, and efficiency reforms.
        Senator Hollings. You and I put $1 billion there a couple
    of years ago.
        Senator Domenici. That's right.
        Senator Hollings. And got them up to snuff, and we can see
    how our position on Boutros. But that's the whole point. Once
    we've won out and we've got a good Secretary General, we've got
    to be able to back our team up there and give them some
    credibility.
        And I just don't know where the money is going to come from
    unless we get it out of the supplemental. This installment
    payment plan is not going to do right well, I think, at the
    United Nations.
        Senator Domenici. Could we ask Mr. Lyman, the expert, if he
    has any thoughts?
        Mr. Lyman. Thank you, Senator. I would just add one point
    to what Ambassador Richardson said about steps that will save
    us money, and that's changing the scale of assessment. We are
    now assessed for the regular budget at 25 percent for almost
    all these organizations, and the United Nations assesses us at
    close to 31 percent for peacekeeping, because the permanent
    five members of the National Security Council have a surcharge
    for peacekeeping.
        You know Congress has put that 25 percent cap on
    peacekeeping, but as long as the United Nations keeps billing
    us at 31 percent, the arrears build up.
        This year, and this is the year we've got to do it, we're
    going to get the United Nations to agree--that's our
    objective--to lower that scale of assessment, across the board.
    Not only in the United Nations in New York, but also the U.N.
    specialized agencies.
        If we do that, we bring down the U.S. costs of this whole
    structure, very close to the level that Congress in its wisdom
    gave us last year and the year before. Then there would be no
    arrears at that level, and that's our objective, and that saves
    the United States money.
        Senator Domenici. Do you think you can do that?
        Mr. Lyman. I think if we give Ambassador Richardson here
    the backing and credibility he needs.
        Ambassador Richardson. If I get some bucks, Pete, I'll have
    the leverage to lower the scales, which would be by the end of
    this calendar year.
        Senator Domenici. In other words, you would be saying,
    we're paying our dues, now we want you to bill us right.
        Ambassador Richardson. Right. Fairly.
        Senator Domenici. I think that's it. I thank you very much.

                              offsets for Arrears

        Senator Gregg. I have a couple of other additional
    questions. First off, I think Senator Hollings' comment as he
    left is very pertinent, because he has been on this committee
    for a long time and he understands the dollars. I have been
    concerned about this. As you know, I have expressed it at every
    meeting that we have had.
        I think what we need to get from you, working with OMB, is
    what the offsets are going to be. Where are you going to find
    the money? If this is so important that we pay these
    arrearages, then why didn't you want to put it all in this
    year, or at least a large part of it, in this year?
        And, second, why did you use this budgeting gimmick of
    advance funding where there are no offsets? I think we have to
    get some specific offsets. I suggest that we get that pretty
    soon, because I think the effort to reach a good-faith
    agreement is going to depend on our knowing where this money is
    going to come from and how it's going to be paid.
        We seem to have an awful lot of affiliated organizations.
    You are talking about consolidation. Something I would like to
    be able to get--and maybe we have this, but we do not have it
    effectively--is for the affiliated organizations which are
    clearly peripheral, things like the copper study group, the
    cotton group, the grain group, Institute of Unification of
    Private Law, the vine and wine group, the rubber group; you
    know what I'm talking about?
        Ambassador Richardson. Yes.

                         Withdrawal from organizations

        Senator Gregg. I'd like to get the number of people who
    work in these organizations; the number of people who contract
    out to work with them; what countries are their origins from;
    the number of employees; and where they have facilities.
        We need to know what we are dealing with here, relative to
    bureaucracy. It seems to me that a lot of these are very
    marginal, and in need for support. If you're looking for a
    place to consolidate, that would be where to do it.
        Now, relative to the inspector general, he's been limited
    by his resources and by his number of personnel. What do you
    expect to happen in that area?
        Ambassador Richardson. Senator, on your first point, just
    for the record, we did get out of three or those organizations.
    UNIDO being one--the U.N. Industrial Development Organization,
    we felt it was not appropriate to stay in. The Pan American
    Railway Congress Association and the World Tourism
    Organization.
        We have targeted another one, the International Cotton
    Advisory Committee, but there was a little bit of concern in
    Congress, so we cut that back.
        Senator Gregg. Well, target it again. You can put vine and
    wine, you can put copper, cotton, grain as far as I am
    concerned.

                     Office of Internal Oversight Services

        Ambassador Richardson. We'll get that data for you. Let me
    also say that we attach great priority to this Office of
    Internal Oversight Services. We think it's very important.
        We have worked with--and this is one of our major reform
    initiatives, when Princeton started in this job. And we're
    trying to get resources for this organization. We're actually
    advocating an increase in resources for it, because we think
    ultimately it will save money.
        Senator Gregg. How much?
        Ambassador Richardson. Well, we're----
        Mr. Lyman. We're going to be filling seven new
    investigative positions this year. And they have come to an
    agreement that in the 1998-99 budget, the inspector general,
    Paschke, will have the resources he feels he needs to carry out
    investigations at his own initiative.
        Senator Gregg. Is that the whole world of U.N. activity?
        Ambassador Richardson. No; just the Secretariat.
        Mr. Lyman. He only has authority through the Secretariat
    and some of the operational funds and programs that come under
    it. We have to work through the other specialized agencies to
    get the same kind of capacity built into them. We're making
    progress, but we're not there yet, and that's one of the things
    that's high on our list in these other specialized
    organizations.
        But the inspector general doesn't have authority over them.
    They have their own governing councils, their own structures,
    and we have to work through them.
        Ambassador Richardson. We're trying to give his office--we
    pushed to give his office more independent authority, more
    teeth, more resources so that he can function like an inspector
    general in our departments. We haven't reached that.
        But Mr. Paschke is a very committed manager and reformer.
        Let me also mention, Mr. Chairman, that I'm trying to
    persuade you to come to New York to see first hand how this
    office operates, along with the Under Secretary for Management,
    Joseph Connor, who is a former Price Waterhouse chairman, who
    is involved with management. I think he's also a Republican.
    I'm not sure. I don't know if he's from New Hampshire.
        But we have Maurice Strong, too, a very well known
    international expert on accounting. We have some very active
    people at the United Nations. that are part of the U.N. system.
    And I must say we have a very good team on our staff, headed by
    Victor Marrero, who is I think here, and at the State
    Department that are pushing reform.
        Every day I give a speech on accountability and reform. You
    may find that difficult to believe, but I do. Within the U.N.
    system, we're pushing these issues very hard.
        Senator Gregg. I congratulate you for that. We hope there
    will be results from the pushing, especially in expanding the
    inspector general's portfolio and his support, because we think
    it has been very limited.
        Mr. Lyman. I just want to mention that we welcome the GAO
    study that is beginning now, at the request of the Senate, on
    the functioning of the OIOS office, and giving us some
    guidelines as to how it should grow over the years. We'll be
    very interested in that study.
        I gather we'll have the results sometime toward the end of
    the summer.
        Senator Gregg. I know you have to get back to New York. We
    appreciate your taking the time out of your busy day.
        Ambassador Richardson. Thank you, Senator.

                              subcommittee recess

        Senator Gregg. We look forward to working with you on these
    issues.
        I ask unanimous consent that we be allowed to submit
    additional questions for the record.
        The hearing is concluded.
        [Whereupon, at 2:38 p.m., Thursday, March 20, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, APRIL 10, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10 a.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Domenici, Campbell, Hutchison,
    Hollings, and Mikulski.

                             DEPARTMENT OF JUSTICE

                        Federal Bureau of Investigation

    STATEMENT OF LOUIS J. FREEH, DIRECTOR

                     Immigration and Naturalization Service

    STATEMENT OF DORIS MEISSNER, COMMISSIONER

                        Drug Enforcement Administration

    STATEMENT OF THOMAS A. CONSTANTINE, ADMINISTRATOR

                                opening remarks

        Senator Gregg. We will get started. We appreciate everybody
    being here early. That is great.
        This is a hearing involving basically the core law
    enforcement community of the country: the Federal Bureau of
    Investigation, the Drug Enforcement Administration, and the
    Immigration and Naturalization Service. So we should all feel
    very safe, at least for the hour that we are here in the
    hearing.
        We appreciate the Director's and the Commissioner's joining
    us this morning. We want to go over budgets. We decided to do
    this as a panel so that we could save you time and, hopefully,
    move the process along. I am going to pass on giving an opening
    statement also to move things along.
        Senator Hollings. Me, too.
        Senator Gregg. Do you have any opening comments?
        Senator Campbell. Well, not to read an opening statement as
    much as thank you to all of these three agencies, Mr. Chairman,
    for a coordinated effort with the Denver police. It was very
    successful. It culminated, after 5 months of intensive
    investigation, dealing with a drug project called the Crofton
    project, and resulted in, as I understand, 51 heroin dealers
    being collared and 66 others deported, and a number of cases
    are now in the process. The heads of these three agencies, of
    course, were a big help to help reduce the drug flow in our
    State, particularly in our major city, and I just want to thank
    them.
        Senator Gregg. Why don't we start with you, Director? We
    will work our way right to left.

                       Director Freeh's opening statement

        Mr. Freeh. Thank you, Mr. Chairman. Thank you very much.
    Members of the subcommittee, good morning. It is a pleasure to
    appear before you, particularly with my two friends and
    colleagues in the Department of Justice.
        I have a somewhat lengthy prepared statement which I would
    submit for the record, with your permission, and perhaps in
    just a few minutes I will go over some of the highlights of our
    request, and then I will certainly be happy to answer your
    questions.
        The FBI's 1998 budget request is for $3 billion and 24,839
    positions--including 10,524 agents. The budget proposes program
    increases of $142 million and 522 positions.
        As you know, since the hiring freeze was lifted at the FBI
    in July 1994, we have been hiring in the greatest burst of
    hiring in the history of our institution. Since the hiring
    freeze was lifted, we have hired about 6,020 individuals. Those
    are all employees who, of course, require drug screening,
    polygraph examinations, as well as the full background for a
    secret clearance because of our counterintelligence
    responsibilities. We have hired 2,446 agents and 3,574 support
    personnel during that period.
        Our hiring plan for 1997 is on track with respect to the
    agents; we expect to hire all 1,057. With respect to the
    support personnel, we expect to hire 2,607 for 1997. At this
    point, we are on track with respect to the hiring, including
    the 1,110 positions for our criminal justice information
    services [CJIS] facility in West Virginia. There is a
    possibility we will fall 200 or 300 short with respect to the
    support hiring, even though at this point we are on track and
    hopeful and confident to have them all on board. But it is a
    very, very busy time.
        We certainly appreciate this subcommittee's support in that
    personnel infusion, which was desperately needed for us to
    maintain our mission and take care of new responsibilities.

                     Telecommunications carrier compliance

        The 1998 budget can be broken down into seven initiative
    areas. The first area is the telecommunications carrier
    compliance request, which is for $100 million. As I said, Mr.
    Chairman, last year, and as I certainly repeat this year, this
    is a critical part of our budget. It is really not simply an
    FBI item, although it is in the FBI budget. This is an
    initiative which we undertake on behalf of all law enforcement,
    including the agencies represented here, and, more important,
    the thousands of State and local departments who utilize court-
    authorized electronic surveillance and who would lose its
    efficacy if the technology is not available to deal with the
    new digital telecommunications systems. So we ask for that for
    1998.
        This committee and the Congress created the
    telecommunications carrier compliance fund last year. I am also
    pleased to report that we have been able to get contributions
    from other agencies which will help defray the cost of
    retrofitting the embedded telecommunications base equipment.
    Administrator Constantine from the DEA has promised $15
    million; the U.S. Postal Inspection Service has given $1
    million; and the Department of the Treasury has promised $1.8
    million. The Attorney General and I are working very hard,
    particularly with the national security agencies, to make sure
    that they make some contributions, since a lot of the
    technology is directly related to the mission we perform for
    them.

                          Technology crimes initiative

        The second area is the technology crimes initiative. We
    spoke a little bit about this at the hearing on Tuesday, which
    I was pleased to attend and which I again compliment you for
    holding, on child pornography on the Internet. As we said at
    that hearing, we are entering a new venue in terms of
    cybercrime and cyberspace, and the FBI agents of the 21st
    century who are now being hired, thanks to your resources. We
    will need the technology and the know-how to chase fugitives
    not only over back fences but through cyberspace. The computer
    crimes initiative, which includes the ``Innocent Images''
    matter that we discussed on Tuesday, and the general trend for
    more and more crimes being committed on technologically
    difficult investigative areas is a big burden for us and a big
    challenge and one that we want to meet by being prepared now.
        We have cases where people in St. Petersburg, Russia, break
    into Citibank accounts in New York City with a laptop computer
    and move millions of dollars out of the country before the bank
    even knows they are gone. We have other people using laptop
    computers who, from a foreign country, come into the United
    States without leaving their apartment and get into northern
    Florida and shut down 911 systems. These are systems which
    deliver not only police services, but emergency services.
        Telecommunications fraud is a problem. If somebody wants to
    hire a murderer or engage in some crime, the Internet and the
    availability of technological means now makes that a very
    attractive area for criminals, not just child pornographers.
        So our technology crimes initiative will help us get
    prepared for that. We have set up computer squads in three
    cities--New York, San Francisco, and Washington, DC. These are
    unique squads for the FBI. They do not have a particular
    programmatic assignment--bank robberies, mail fraud, et cetera.
    They are there to deal with crimes and assist agents in dealing
    with crimes in this new area.
        We also have our Computer Investigations and Infrastructure
    Threat Assessment Center [CITAC] in Washington, DC, which will
    give us the technology and the training and the coordination to
    work those crimes. So it is a very important area, and I
    certainly appreciate your past support for that.

                         International law enforcement

        The third initiative is international law enforcement. In
    the international law enforcement area, we are completing the
    4-year joint FBI and Department of State plan which was
    submitted to and approved by the Congress last year. As I said
    last year the FBI's mission in the 21st century includes
    investigating counterterrorism, narcotics, and financial crimes
    that now span the globe. It is my very strongly held belief
    that we need agents in other countries to protect Americans, to
    have a perimeter of defense for Americans, and enable us to
    conduct investigations--not for other countries, but on behalf
    of the United States. And the plan that we are pursuing and the
    expansion of the legal attache offices at really a very
    relatively modest investment will give the FBI and the United
    States the capability to investigate a crime scene in Saudi
    Arabia, as we did last summer, and to find a fugitive in
    Tanzania who is a member of a notorious D.C. drug gang, one of
    whose members was responsible for killing two of my FBI agents
    and a police sergeant in November 1994. We want these agents
    and resources overseas to protect Americans. We also get
    benefits in terms of liaison and training.
        In the La Cosa Nostra initiative, we have asked for some
    additional resources to implement a 5-year counterorganized
    crime initiative, which has been very, very successful. Over
    the last 15 years, we have arrested and convicted 177 major
    organized crime bosses, under bosses, and consiglieres. The new
    strategy targets labor unions and particular industries where
    there has been increasing infiltration by organized crime
    interests, including the stock market. A recent arrest in New
    York showed that they were targeting stockbrokers as opposed to
    more traditional areas, and this is a very strong organization.
    There are over 2,000 La Cosa Nostra members still active. We
    have less than 12 percent of the membership and leadership
    convicted and under incarceration. The goal is to reduce the
    strength of the La Cosa Nostra over the next 5 years, and
    particularly to intervene in the industries where they are very
    active and where the costs of doing business will increase
    because of their power.

                          Southwest border initiative

        The fifth initiative is the Southwest border initiative,
    which I share with my good friend, Tom Constantine. We have
    asked for some additional resources to deal with not only the
    drug trafficking, but also the public corruption which is
    involved in that regard. We have had some extremely successful
    initiatives there, including the Zorro II case. Our agencies
    are totally integrated--I emphasize totally integrated--with
    respect to that strategy, to include the leadership, the
    preparation, and the utilization of resources. It is a good
    example of how components not just in the Justice Department,
    but including the Customs Service, and particularly the INS,
    have put together a strategy that, at least on our side of the
    border, has become very, very important in our war against
    drugs.

                                  Construction

        Another initiative is construction. We are asking for the
    last segment of funding for the construction for our new $130
    million FBI laboratory at Quantico. The amount we ask for in
    1998 is $32.6 million, which will complete the funding
    required.
        The site preparation will begin in the fall. This will be a
    state-of-the-art teaching laboratory where, in addition to
    performing Federal and FBI forensic examinations, we will
    provide an enhanced capability to teach and share technologies
    with the State and local scientists. We are very proud of our
    FBI laboratory. It conducts over 600,000 examinations a year.
        As I mentioned on Tuesday, one of those 600,000 matters was
    the palm print of Richard Allen Davis, which was taken from a
    wall and used to solve the Polly Klaas murder in Petaluma, CA.
    The laboratory does that on a routine basis every day.
        We are certainly mindful of problems in our laboratory. The
    inspector general's report, I believe, is going to be issued
    next week. We will review that report, and we will take the
    criticism very seriously. We will make changes. We have already
    made changes to deal with some of those issues, but as I said,
    I am extremely proud of our laboratory and the work that it has
    done. I think the new facility at Quantico, which will be
    constructed with a view toward improving evidence maintenance
    as well as avoiding contamination problems, will really give us
    the facility that we need to do the job for the Government in
    the 21st century. The goal is to have it open and operating by
    the summer of 2000--which I guess is not that far away, but
    every time I say it, it seems like it is very far away.

                           Infrastructure initiative

        The last two items, very briefly. The seventh of our
    initiatives is an infrastructure initiative. This includes
    security investigations of FBI and contract employees. As I
    said, we have hired over 6,000 people since July 1994. They all
    have secret clearances. It is the best time in terms of the
    employment process to determine problems, to identify people
    who are not suitable not only for Government work but for work
    requiring a secret clearance. We are asking to hire what we
    call background investigation contract service [BICS]
    investigators or former Federal investigators to conduct these
    background investigations. They do it at one-half the cost of a
    current on-board agent. They also free up our agents to do
    investigations which do not necessarily relate to backgrounds.
        Part of the infrastructure initiative is the national
    backstopping program. That is the means we use to protect our
    undercover agents and put together for them credible and
    protective backgrounds so when the bad guys check them out,
    they are able to survive and perform their very dangerous
    missions.
        We have asked for replacement of microwave radio equipment
    as the Government auctions off megahertz of radio spectrum,
    without any reimbursement to the Federal agencies. We require
    funding to relocate and replace microwave equipment so we can
    continue the radio communications vital to operations despite
    the shrinking spectrum allocation.
        The other aspect is some additional funds to comply with
    the electronic Freedom of Information Act [FOIA] which the
    Congress now, I think very wisely, has put in place. It will
    give us the ability to respond to FOIA requests quicker. We
    have a very large backlog in the FBI which we are trying to
    deal with, and this will require us to move quicker, and we
    would like some additional resources to respond to that.

                               prepared statement

        Those are the highlights in seven different initiatives of
    our overall budget. I just want to say again how appreciative I
    am personally, and the FBI is institutionally to you, Mr.
    Chairman, Senator Hollings, and other members of the
    subcommittee, for what has been extraordinary support over
    several years. Our budget has grown very, very significantly,
    certainly in the almost 4 years that I have been Director. We
    have used that money prudently and wisely and we will endeavor
    to complete all of our assignments and use that money with the
    very clear understanding of the difficulty that it takes to
    appropriate those funds and give them to us. And we are very
    appreciative of your support.
        Thank you.
        Senator Gregg. Thank you, Director.
        [The statement follows:]
                      Prepared Statement of Louis J. Freeh
        Good morning, Mr. Chairman and members of the subcommittee. I
    welcome this opportunity to appear before you today and discuss the
    1998 budget request for the FBI.
        At the outset, I would like to thank both Chairman Gregg and
    Senator Hollings for their continued strong support of the FBI during
    the 1997 budget process.
        The additional resources you provided for the FBI are being used to
    protect the nation and its citizens against the threat of terrorism, to
    keep international crime away from the borders of the United States
    through expansion of our legal attache offices, and to attack drug
    trafficking and public corruption along the Southwest border.
        I am grateful for your efforts to fund the telecommunications
    carrier compliance initiative, which was my top budget priority for
    1997, and for your continuing support for the construction of our new
    laboratory facility. Both of these initiatives will provide
    immeasurable benefits to our state and local law enforcement partners.
                              1998 budget request
        For 1998, the FBI is requesting $3 billion in direct budget
    authority, 24,839 permanent positions--including 10,524 agents--and
    23,770 direct funded workyears. This amount represents a net increase
    of $204.3 million from the 1997 enacted levels.
        To build upon the work started with the 1997 budget, as well as to
    address new and increasing investigative responsibilities and provide
    necessary infrastructure services, the 1998 budget proposes direct
    program increases totaling $142.1 million and 522 permanent positions,
    of which 161 are agents.
        This is a relatively modest increase in new positions that will
    allow us to enhance our efforts in some of our highest priorities,
    including computer crimes, La Cosa Nostra, and Southwest border. This
    level of new hiring will also allow us to begin providing specialized
    training of new agents that were brought on board during 1995, 1996,
    and 1997, as well as other agents for which such training was deferred
    due to new agent hiring and training requirements.
                                1998 initiatives
        The 1998 budget proposes increases that support seven initiatives,
    including: telecommunications carrier compliance, technology crimes,
    international law enforcement, La Cosa Nostra, Southwest border,
    infrastructure, and construction.
                     telecommunications carrier compliance
        For 1998, we are asking for a total of $100 million for
    telecommunications carrier compliance activities to support the
    Communications Assistance for Law Enforcement Act (CALEA). Through this
    initiative, we are working to preserve the ability of law enforcement
    to conduct court-authorized wire-taps, pen registers, and trap-traces.
    These capabilities are critical to all law enforcement, not just the
    FBI.
        Forty-one states, the District of Columbia, the U.S. Virgin
    Islands, and Puerto Rico have laws allowing for court-authorized
    interception of communications by state and local law enforcement. In
    1995, state and local law enforcement accounted for 44 percent of the
    applications for wiretaps in criminal cases.
        The loss of these capabilities would be especially devastating to
    the nation's efforts to combat drug trafficking. Approximately 69
    percent of the criminal applications for wiretaps in 1995 were for
    narcotics investigations.
        These techniques are equally important to protecting the nation's
    security. Over the past ten years, 59 percent of all federal wiretap
    applications were in support of national security investigations.
        In many cases, there is no substitute for the use of court-
    authorized electronic surveillance in gathering evidence, preventing
    crimes, protecting victims, and in bringing to justice the persons
    engaged in violent crimes, terrorism, drug trafficking, and espionage.
        The CALEA implementation plan, which was requested in the 1997
    conference report, was recently provided to each member of the
    Committees on Appropriation and Judiciary in both the House and Senate.
    We await your approval of the plan so that we may begin entering into
    cooperative agreements with industry and obligate the funding you
    provided for this important initiative.
        This past January, the FBI issued the second notice of capacity
    requirements. We are now in the process of reviewing comments from
    industry and the public. We are now preparing to publish final cost
    recovery rules for the telecommunications carriers that establish the
    procedures for the cooperative agreements that will be used to provide
    reimbursements for costs incurred by carriers in complying with CALEA.
    We continue to be fully engaged with industry in developing necessary
    standards that will guide CALEA compliance efforts. Finally, we are
    also working with other federal agencies to identify eligible funding
    for transfer to the telecommunications carrier compliance fund that you
    authorized in the 1997 Omnibus Appropriations Act.
        This past November, the Attorney General sent a letter to all
    eligible agencies advising them of the fund and asking their support by
    transferring available funding. The FBI has received firm commitments
    from several agencies, including the United States Postal Inspection
    Service, the Drug Enforcement Administration, and the Department of the
    Treasury for the United States Customs Service and United States Secret
    Service. These commitments total $17.8 million. I am hopeful that other
    agencies will also be able to make additional funding available this
    year.
        I believe we have made much progress over the past year in working
    with industry, the Congress, and other interested groups. Now is the
    time to begin the process of actually implementing the solutions
    envisioned by Congress when it passed CALEA. All of us here recognize
    the consequences if law enforcement loses its ability to effectively
    conduct court-authorized electronic surveillance.
                               technology crimes
        The 1998 budget also proposes additional agents and funding to
    enhance our capabilities to address a growing workload in the area of
    computer-related crime, ranging from criminal attacks to acts designed
    to disrupt or disable the national information infrastructure. We
    currently have three computer crime squads located in San Francisco,
    New York City, and Washington, D.C. The additional agents requested
    will allow us to establish teams in other key field offices so that
    there is a core capability for investigating computer-related crimes
    across the nation.
        Assisting our field computer crime agents is the Computer
    Investigation and Infrastructure Threat Assessment Center (CITAC). This
    center, which operates at FBI headquarters, was among the
    counterterrorism capabilities supported by the committee in 1997.
        As you know, going after the type of criminals, terrorists, and
    others involved in cyber-crime often requires very specialized and
    technically trained investigators and support staff. We are
    supplementing our staff with contract telecommunications and computer
    science experts. This is a very dynamic area, where the potential
    threats are broad and challenging. CITAC will provide the FBI with a
    much needed resource for countering these threats. Funding requested in
    our 1998 budget will support ongoing CITAC operations and efforts.
                         international law enforcement
        Last year, Congress approved the FBI's four-year plan to increase
    our presence overseas as part of our efforts to prevent foreign crime
    and terrorism from reaching the United States. In 1997, we are
    proceeding with the opening of new FBI legal attache offices in
    Estonia, Saudi Arabia, the Ukraine, Poland, India, and South Africa. I
    am pleased to report that legal attache offices will be operational in
    all of these locations this year. At present, we have agents in every
    location except New Delhi and Pretoria, which will open later this
    spring.
        Funding is requested in 1998 to implement the third year of this
    plan by opening eight new legal attache offices in Brazil, the Czech
    Republic, Denmark, Kazakhstan, Turkey, South Korea, Nigeria, and
    Uzbekistan. We are also planning to assign additional staff to eight
    existing locations.
        I recently visited several Middle Eastern countries, including
    Egypt, Israel, and Jordan, where I had the opportunity to talk with
    foreign government leaders and law enforcement officials. These leaders
    and officials were very pleased that Congress was supporting our plan
    for new FBI overseas offices. They remain enthusiastic and committed
    toward building the ``cop-to-cop'' relationships that are possible
    through our legal attache program. With your support in 1998, we can
    improve our ability to protect American cities and communities against
    the impact of international crime.
                                 la cosa nostra
        The La Cosa Nostra remains the most powerful and dangerous,
    organized criminal threat to American society. Our investigative and
    intelligence information indicates that La Cosa Nostra families that
    were previously damaged by prior FBI and other law enforcement
    investigations and prosecutions are attempting to rebuild their
    criminal enterprises.
        Last year, the FBI began implementation of a strategic plan, named
    ``Operation Heaven's Gate,'' that is focused on reducing the influence
    of the La Cosa Nostra over labor unions and certain industries, as well
    as toward reducing the members of all La Cosa Nostra families. The 1998
    budget includes additional agents and funding to support our efforts to
    achieve these objectives.
        To illustrate the success that exemplifies the ``Operation Heaven's
    Gate'' strategy, this past December, FBI agents in Fort Lauderdale
    arrested Nicky Corozzo and eight others following their indictment for
    conspiracy to murder the FBI's cooperating witness and other charges.
    At the time of his arrest, Corozzo was alleged to have been one of the
    three-man ruling commission for the Gambino family in New York City due
    to the conviction of John Gotti. These arrests came after a two-year
    investigation of loansharking, credit card fraud, trafficking in
    untaxed cigarettes, and other criminal activities.
        In June 1996, the acting boss and 18 other members and associates
    of the Genovese family in New York City were indicted on racketeering
    charges. The indictment also seeks the forfeiture of numerous assets,
    including $20 million that represents the proceeds of the charged acts
    of racketeering.
        I mention these cases because our investigative successes were
    achieved, in large part, by using some of the most important tools
    available to attack organized crime, namely, cooperating witnesses
    willing to provide us information, undercover operations that get us
    inside these close-knit groups, and court-authorized electronic
    surveillance to collect evidence of criminal wrong-doing. Funding is
    requested in our 1998 budget to strengthen our capabilities to support
    undercover operations and to provide the necessary and adequate
    safeguards to the brave agents who undertake those types of dangerous
    roles in an effort to make our communities safer.
                                southwest border
        The Southwest border project is a joint FBI, DEA, and United States
    attorney initiative targeting the activities of four major Mexican drug
    trafficking organizations operating along the United States and Mexican
    border. This past January, one of the targets of this investigation,
    Juan Garcia Abrego, was sentenced in federal court to 11 life terms and
    fined more than $128 million after being found guilty of various drug-
    related offenses. While the conviction and sentencing of Garcia Abrego
    sends a strong message to other Mexican drug traffickers, we still have
    much unfinished business.
        Through the joint Southwest border project, we are pursuing a
    comprehensive effort against drug trafficking by the major Mexican drug
    organizations. Additionally, we are also focusing on violent crimes
    that are being committed to support these drug trafficking activities
    and the corruption of government officials, including law enforcement,
    that allows drug traffickers to operate without fear of detection,
    arrest, and prosecution.
        Last year, you provided the FBI with 70 new agents for the
    Southwest border project. Our 1998 budget proposes another 70 agents to
    build upon the work already started and to expand our focus to second-
    tier drug traffickers.
                                  construction
        Overall, the FBI is proposing $49 million in 1998 for construction
    projects. This request includes $32.6 million to complete the funding
    requirements of the new FBI laboratory facility, which is projected to
    cost approximately $130 million. We have selected a design concept for
    the new facility that was developed by our architectural and
    engineering firm. We expect to break ground later this summer. Our goal
    is to have the new FBI laboratory ready for operation by the summer of
    2000.
        Construction of this new state-of-the-art facility will
    significantly improve the operations of the FBI laboratory and the
    quality of forensic services the FBI provides to the entire law
    enforcement community.
        Additionally, construction funds are proposed to begin the
    renovation of space in the FBI headquarters building that is being
    vacated by the relocation of fingerprint identification and related
    operations to West Virginia, to expand and realign space for the FBI
    field office in Los Angeles, California; and to continue necessary
    upgrades and maintenance at the FBI Academy complex in Quantico,
    Virginia.
                                 infrastructure
        Within our infrastructure initiative, funding is being proposed for
    several important projects, including: security reinvestigations of FBI
    employees and contract personnel; the national backstopping program
    that supports undercover operations; the replacement of microwave radio
    equipment that must be changed due to the loss of spectrum assignments;
    and achieving compliance with the recently enacted Electronic Freedom
    of Information Act.
                           freedom of information act
        The FBI faces a backlog of approximately 16,000 Freedom of
    Information and Privacy Act (FOIPA) requests. Congress provided 129 new
    positions in 1997 to help us reduce this backlog. We are well on the
    way to filling these positions and I am confident we will have all of
    these employees on board by the end of this year. All 129 positions
    will be line employees dedicated to reducing the backlog.
        Additionally, with your concurrence, I moved responsibility for
    management of our FOIPA program to our Office of Public and
    Congressional Affairs. I did this to increase management oversight over
    the process. Since that move became effective in late October, a number
    of streamlining initiatives have been undertaken and the work flow
    process is being redesigned. Our goal, which is optimistic but
    achievable, is a 40 percent improvement in processing productivity by
    the end of fiscal year 1998.
        Last year, Congress enacted the Electronic Freedom of Information
    Act. This act requires government agencies to provide public
    information to requesters in an electronic format, such as computer
    diskettes or compact disks, and places other requirements on government
    agencies. A new pilot automation project has proven the viability of
    producing the records in an electronic format.
        To comply with the new law, the 1998 budget requests both
    additional staffing and funding to implement an automated document
    processing system that can produce FOIPA releases in an electronic
    format. The additional positions and funding for automated document
    processing, coupled with the other numerous initiatives, will permit us
    to reverse the current trend and come into compliance with the law.
    Without the additional staff and funding, we cannot meet the mandates
    of the law.
                                   conclusion
        Mr. Chairman, I would like to again express my gratitude for the
    committee's support and confidence in the FBI. I am hopeful that we can
    continue to build upon our successes and serve the American people
    proudly and effectively. As tough as our job is, I know that it would
    be that much harder were it not for the willingness of the committee to
    support us with the resources needed to meet our investigative,
    national security, and law enforcement service responsibilities.
        This concludes my opening remarks. I would like to respond to any
    questions that you may have.

        Senator Gregg. Administrator.
        Mr. Constantine. Senator, like the Director, I have a
    lengthy statement to file.
        Senator Gregg. We will put all statements in the record.

                 Administrator Constantine's opening statement

        Mr. Constantine. OK. Thank you. I want to thank you,
    Senator Hollings, and the other members of the subcommittee for
    your support on behalf of all DEA agents around the world who
    know that your support has gone past mere words. There has been
    substantial financial support for DEA programs, and it has been
    very much appreciated.
        Our budget for fiscal year 1998 is focused on three primary
    operational issues that really reflect the impact of drug
    trafficking in the United States and addresses it through law
    enforcement programs.

                         International organized crime

        The first is the substantial international organized crime
    syndicates that control and direct virtually all of the major
    narcotics trafficking within the United States.
        Cocaine and heroin are not grown in the United States. They
    are not manufactured in the United States. Both are
    manufactured and grown outside of the United States, and the
    importation of those drugs and the management of the
    distribution in the United States is not controlled, for the
    most part, by citizens of the United States, but by the
    leadership of powerful organized crime syndicates the likes of
    which I have never seen before in my law enforcement career.
    And I think as the Director mentioned, the efforts that we have
    made over the last 30 years on the LCN groups have been
    substantial. It has been proven that we can make an impact on
    organized crime.
        What we have done in the area of narcotics trafficking is
    take the same model that has been so successful against
    organized crime. The most substantial program in our budget
    request for this year is labeled the Southwest border strategy.
    I suspect that if I were going to define that operation today,
    I would not call it the Southwest border strategy. As we
    started with it, we recognized that about two-thirds to three-
    quarters of all of the narcotics entering the country was
    coming across the Southwest border. Drug trafficking was
    originally controlled by organized crime syndicates out of
    Colombia who had asked organized transportation groups out of
    Mexico to merely smuggle cocaine across the border and then
    turn it back over to Colombian organizations. Those
    organizations have their branch offices in New York, Chicago,
    Detroit, Los Angeles, and Houston.
        Over the last 3 or 4 years, the situation has changed
    fairly dramatically, especially with the leaders of the groups
    from Cali, Colombia, having been arrested. More and more we see
    the powerful syndicates being controlled out of the families in
    Mexico.
        The Southwest border strategy is, in reality, all of those
    investigations, which for the most part are jointly conducted
    between the FBI and DEA. These are major technology-driven
    investigations, which are joined later by Immigration, Customs,
    and the Criminal Division of the Justice Department. We have
    been able to identify to a major degree the leadership in the
    United States and the command and control individuals who
    reside outside of the United States.
        We have to recognize that these groups we are investigating
    and attempting to arrest and prosecute make a profit somewhere
    between $7 to $10 billion a year, tax free, and they have hired
    the best technical experts. They have intelligence systems or
    counterintelligence systems that certainly surpass anything in
    domestic law enforcement outside of the Federal agencies, and
    in many ways would rival that of a second-level country. And
    they continue to build these defense systems.
        The DEA has asked for 96 agents and a substantial number of
    intelligence analysts for the Southwest border strategy. We are
    also requesting technology infrastructure support for DEA.

                       National drug trafficking problems

        The second area is what we call national drug trafficking
    problems. Recognizing that the management of many of these
    organizations at the higher level still comes from Colombia and
    Mexico, there are two primary drug problems. For some strange
    reason, they are divided geographically. The first in the West
    and the Southwest, and beginning in the Southeast now, is
    methamphetamine, a drug formerly controlled by motorcycle gangs
    with a very limited usage. That changed dramatically in the
    early 1990's. It has become the drug of choice in California,
    the No. 1 drug of addiction. And for the first time in the
    history of us recording drug-trafficking issues, we find that
    the addiction in the female population exceeds the addiction in
    the male population. We also have a tripling of hospital
    emergency incidents and a doubling of overdose death rates.
    Also what we have is, because of the impact of this drug on
    individual long-term usage, we have this delusional, paranoid
    state that many addicts wind up in, and they become very
    dangerous----
        Senator Mikulski. What is this drug?
        Mr. Constantine. Methamphetamine. It is a chemical compound
    out of the precursor drug ephedrine or, increasingly,
    pseudoephedrine. It is a drug similar to crack cocaine but its
    effect is longer in duration. When police officers try to make
    arrests, or in domestic violence situations, methamphetamine
    produces violence and is a danger to the victims as well as
    police officers. I think as Senator DeConcini knows, the
    troopers from the New Mexico State Police chased somebody from
    Albuquerque to Sante Fe----
        Senator Mikulski. Domenici.
        Mr. Constantine. I am sorry.
        Senator Mikulski. They all want to be Ambassadors.
    [Laughter.]
        Mr. Constantine. I had gotten a call yesterday from Senator
    DeConcini, and that is how I kind of lost that.
        Senator Gregg. That is OK. He always calls me Senator Judd.
    [Laughter.]
        Senator Domenici. I used to. I don't anymore.
        Mr. Constantine. There had been a high-speed pursuit by the
    police department out there in which the defendant eventually
    decapitated his own son under the influence of this drug. Meth
    is controlled to a large degree by organized crime groups out
    of Mexico, but they turn it over to groups in the United States
    for street-level distribution.
        The second drug problem is heroin, which has always been a
    problem in the United States dating back to the 1920's and
    1930's. Within the past 4 or 5 years heroin that used to come
    from Southeast Asia and Southwest Asia, now for the first time
    comes from South America, specifically Colombia. And heroin
    that used to be 7 percent pure is now 90 percent pure, and we
    are seeing increasing addiction rates. It is primarily a major
    drug problem on the east coast of the United States, and,
    Senator Mikulski, unfortunately, Baltimore is one of the
    leading per capita heroin addiction cities in the United States
    today. Today's heroin is controlled by Colombians, and it is
    sold to illegal aliens from the Dominican Republic who control
    the distribution up and down the United States.
        Our budget request includes a major enhancement for
    methamphetamine enforcement programs and also for heroin
    enforcement programs. Recently, we conducted hearings with
    Congressman McCollum in the Caribbean, the Director and I,
    along with the Coast Guard and Customs. In addition to our
    problem on the Southwest border, increasingly we have this
    problem in the Caribbean region. The traffickers seem to float
    their distribution systems back and forth between the Southwest
    border and the Caribbean. Both the Lesser and the Greater
    Antilles Islands are being used as major embarkation points for
    the drugs into the United States.

                                 Infrastructure

        The other major increases are in the area of
    infrastructure. The DEA, like every enforcement agency, when
    times were tough with money, our philosophy, right or wrong,
    was the agents were our first priority. We did that often at
    the cost of our own infrastructure needs. The Attorney General
    has been very emphatic to myself, the Director, and the
    Commissioner, that we rebuild this infrastructure which is so
    important in the out-years.

                               prepared statement

        That is the nonagent, nonpersonnel component of our budget
    request, and I will be glad to answer any questions. I
    appreciate your support.
        Senator Gregg. Thank you.
        [The statement follows:]
                  Prepared Statement of Thomas A. Constantine
        Mr. Chairman, Members of the Subcommittee: It is a pleasure and a
    privilege to appear before you today to discuss details of the fiscal
    year 1998 budget for the Drug Enforcement Administration. Before that
    discussion, however, it is important to assess the current drug
    situation and discuss several lessons we have learned over the past
    several years, lessons which are shaping our current approach to drug
    law enforcement at home and overseas.
        But first, I would like to take a few moments to express our deep
    appreciation to you, Chairman Gregg and Senator Hollings, and to the
    other members of the Subcommittee for the extremely generous support
    DEA received in our fiscal year 1997 budget. Your advocacy for our
    budget resulted in the first billion dollar budget for DEA and provided
    us with 261 additional new Special Agents to work in American
    communities and overseas in areas where the world's most sophisticated
    drug traffickers are headquartered. Additionally, you provided us with
    funding to build the Justice Training Center at the FBI Academy at
    Quantico, which will give DEA the space necessary to train Special
    Agents, state and local partners, and international drug law
    enforcement officials. This center is more than just a building to DEA:
    it is a testament to the professionalism and creativity of DEA's
    Special Agents and is a tangible symbol of your support for our
    mission. On behalf of the men and women of the Drug Enforcement
    Administration, you have our sincere gratitude.
        During today's hearing, I would like to provide you and the Members
    of the Subcommittee with a picture of how today's international
    organized crime syndicates operate, how they rely on national drug
    trafficking organizations within the United States to carry out their
    business, and how violent trafficking groups have transformed many of
    our communities into virtual war zones. I will also discuss how the
    Drug Enforcement Administration is working around the world to target
    and build cases against the world's most notorious drug traffickers,
    focusing attention on the major traffickers operating along the
    Southwest Border of the United States.
                         international organized crime
        Powerful international drug syndicates continue to operate around
    the world, supplying drugs to American communities, and employing
    thousands of individuals to transport and distribute drugs. The most
    significant international drug syndicates operating today are far more
    powerful and violent than any organized crime groups we have ever seen
    before. Frequently, these organized crime groups are referred to as
    ``cartels'' or ``federations''--titles that do not capture the full
    range of their criminal activities, and give these vicious drug
    traffickers a veil of respectability.
        Today's leaders of major international organized crime syndicates
    trafficking in narcotics are simply the 1990's versions of mob leaders
    U.S. law enforcement officials have fought since the beginning of this
    century. However, there are stark differences between major
    international groups and their domestic counterparts. Members of
    international groups in Colombia and Mexico, have at their disposal,
    sophisticated technology--encrypted phones, faxes, and other
    communications equipment--that even the best law enforcement
    departments in the U.S. do not have access to. Additionally, they have
    in their arsenal, aircraft, radars, weapons and an army of workers who
    oversee the drug business from its raw beginnings in South American
    jungles to the urban jungles within the United States. Mob leaders
    operating in places like New York, Chicago or Las Vegas called their
    business shots on American soil; major traffickers from Colombia and
    Mexico make decisions from the safety of their headquarters in Cali or
    Guadalajara. Law enforcement officers in the U.S. were eventually able
    to identify, target, arrest and prosecute mob bosses, and today,
    organized crime in America is a shadow of what it once was. The new
    international drug syndicate leaders, in some countries, are virtually
    untouchable because their operations are headquartered in foreign
    countries and the likelihood that these leaders will ever face justice
    in their countries, or in the United States, is remote.
        With the intense law enforcement pressure focused on the Cali
    leadership by brave men and women in the Colombian National Police
    during 1995 and 1996, all of the top leadership of the Cali syndicate
    are either in jail, or dead. The fine work done by General Serrano, and
    other CNP officers, is a testament to the commitment and dedication of
    Colombia's law enforcement officials in the face of great personal
    danger, and a government whose leadership is riddled with drug
    corruption.
        Since the Cali leaders' imprisonment, on sentences which were
    ridiculously short and not nearly commensurate with the seriousness of
    their crimes, traffickers from Mexico have taken on greater prominence.
    The alliance between the Colombian traffickers and the organizations
    from Mexico had benefits for both sides. Traditionally, the traffickers
    from Mexico were involved in smuggling marijuana, heroin and cocaine
    into the United States, and had established solid distribution routes
    throughout the nation. Because the Cali syndicate was concerned about
    the security of their loads, they brokered a commercial deal with the
    traffickers from Mexico, which reduced their potential losses.
        This agreement entailed the Colombians moving cocaine from the
    Andean region to the Mexican organizations, who then assumed the
    responsibility of delivering the cocaine into the United States. In
    1989, U.S. law enforcement officials seized 21 metric tons of cocaine
    in Sylmar, California; this record seizure demonstrated the extent and
    magnitude of the Mexican groups' capabilities to transport Colombian-
    produced cocaine into the United States. This huge shipment was driven
    across the Mexican/U.S. border in small shipments and stored in the
    warehouse until all transportation fees had been paid by the Cali and
    Medellin cartels, to the transporters from Mexico. Now, trafficking
    groups from Mexico are routinely paid in multi-ton quantities of
    cocaine, making them formidable cocaine traffickers in their own right.
        The majority of cocaine entering the United States continues to
    come from Colombia through Mexico and across U.S. border points of
    entry. Most of the cocaine enters the United States in privately owned
    vehicles and commercial trucks. There is new evidence that indicates
    traffickers in Mexico have gone directly to sources of cocaine in
    Bolivia and Peru in order to circumvent Colombian middlemen. In
    addition to the inexhaustible supply of cocaine entering the U.S.,
    trafficking organizations from Mexico are responsible for producing and
    trafficking thousands of pounds of methamphetamine, and have been major
    distributors of heroin and marijuana in the U.S. since the 1970's.
        In addition to the sophisticated groups operating in Mexico and
    Colombia, there are numerous international drug trafficking
    organizations headquartered in Southeast and Southwest Asia. With the
    vast quantities of opium production in these regions of the world, and
    with the relative isolation of countries like Burma and Afghanistan,
    heroin trafficking flourishes. The influence and power of heroin
    traffickers such as Khun Sa, the world's most notorious heroin
    trafficker, are unparalleled.
        In 1994, DEA Bangkok and the Royal Thai Police initiated Operation
    Tiger Trap, which was an operation designed to disrupt the heroin
    trafficking capability of the Shan United Army (SUA). The objectives of
    the operation were to disrupt and immobilize the SUA infrastructure in
    Thailand and to arrest and extradite members of the organization under
    indictment in the U.S. Tiger Trap primarily targeted the heroin
    traffickers on the production and wholesale levels. To date, 15 targets
    of Operation Tiger Trap have been arrested.
        As a result of Tiger Trap and other influences, in 1995, the SUA,
    formerly the principal producer of Southeast Asian heroin, experienced
    a number of setbacks. Its northern bases were attacked by the Burma
    Army and United Wa State Army (UWSA). Thailand restricted the flow of
    supplies to the SUA by maintaining a closed border policy with Burma's
    Shan State that began in 1994. Months of secret negotiations between
    the Government of Burma and the SUA, resulted in Burma Army troops
    peacefully occupying the Ho Mong headquarters of the SUA on January 1,
    1996.
        Khun Sa, surrendered to Burmese authorities. These arrest of key
    members of his trafficking organizations denied Kuhn Sa the ability to
    market his heroin and collect monies owed from prior transactions. Many
    of the other SUA troops surrendered. Nevertheless, heroin production
    has continued, albeit at reduced levels, in the Shan-controlled areas.
    Law enforcement action further weakened the Shan marketing
    infrastructure in Thailand.
        While Asian heroin trafficking organizations are a formidable force
    in international narcotics trafficking, the proximity of trafficking
    groups from Mexico and Colombia pose the greatest, most immediate
    threat, to both the national security of the United States and the
    quality of life in many American communities.
                     trafficking organizations from mexico
        A number of major trafficking organizations represent the highest
    echelons of organized crime in Mexico. Their leaders are under
    indictment in the United States on numerous charges. The Department of
    Justice has submitted provisional warrants, to Government of Mexico,
    for many of their arrests and only one, Juan Garcia Abrego, because he
    was a U.S. citizen, has been sent to the U.S. to face justice. The
    other leaders are living freely in Mexico, and have so far escaped
    apprehension by Mexican law enforcement.
        The most powerful drug trafficker in Mexico at the current time is
    Amado Carrillo-Fuentes, who, as recently reported, allegedly has ties
    to the former Commissioner of the INCD, Gutierrez-Rebollo. His
    organized crime group, based in Juarez, is associated with the
    Rodriguez-Orejuela organization and the Ochoa brothers, from Medellin,
    as well. This organization, which is also involved in heroin and
    marijuana trafficking, handles large cocaine shipments from Colombia.
    Their regional bases in Guadalajara, Hermosillo and Torreon serve as
    storage locations where later, the drugs are moved closer to the border
    for eventual shipment into the United States. The scope of the
    Carrillo-Fuentes' network is staggering; he reportedly forwards $20 to
    $30 million to Colombia for each major operation, and his illegal
    activities generate ten's of millions per week. He was a pioneer in the
    use of large aircraft to transport cocaine from Colombia to Mexico and
    became known as ``Lord of the Skies.'' Carillo-Fuentes reportedly owns
    a fleet of aircraft and has major real estate holdings.
        Miguel Caro-Quintero's organization is based in Sonora, Mexico and
    focuses its attention on trafficking cocaine and marijuana. His
    brother, Rafael, is in prison in Mexico for his role in killing DEA
    Special Agent Kiki Camarena in 1985. Miguel, along with two of his
    other brothers--Jorge and Genaro--run the organization. Miguel himself
    was arrested in 1992, and the USG and GOM cooperated in a bilateral
    prosecution. Unfortunately, that effort was thwarted when Miguel was
    able to use a combination of threats and bribes to have his charges
    dismissed by a federal judge in Hermosillo. He has operated freely
    since that time.
        The Caro-Quintero organization specializes primarily in the
    cultivation, production and distribution of marijuana, a major cash-
    crop for drug groups from Mexico. The organization is believed to own
    many ranches in the northern border state of Sonora, where drugs are
    stored, and from which drug operations into the United States are
    staged. Despite its specialization in marijuana cultivation and
    distribution, like the other major drug organizations in Mexico, this
    group is polydrug in nature, also transporting and distributing cocaine
    and methamphetamine. Miguel Caro-Quintero is the subject of several
    indictments in the United States and is currently the subject of
    provisional arrest warrants issued by the United States Government. In
    an act of astonishing arrogance, he called a radio station in
    Hermosillo, Mexico last May stating that he was bothered by statements
    I had made, and indicated that he was an innocent rancher and that
    charges made against him by DEA were untrue. He then had the audacity
    to give his address and invite law enforcement officials from Mexico
    and the United States to visit him--yet he remains at large.
        The Arellano-Felix Organization (AFO), often referred to as the
    Tijuana Cartel, is one of the most powerful and aggressive drug
    trafficking organizations operating from Mexico; it is undeniably the
    most violent. More than any other major trafficking organization from
    Mexico, it extends its tentacles directly from high-echelon figures in
    the law enforcement and judicial systems in Mexico, to street-level
    individuals in the United States. The AFO is responsible for the
    transportation, importation and distribution of multi-ton quantities of
    cocaine and marijuana, as well as large quantities of heroin and
    methamphetamine, into the United States from Mexico. The AFO operates
    primarily in the Mexican states of Sinaloa (their birth place),
    Jalisco, Michoacan, Chiapas, and Baja California South and North. From
    Baja, the drugs enter California, the primary point of embarkation into
    the United States distribution network.
        The AFO does not operate without the complicity of Mexican law
    enforcement officials and their subordinates. According to extradition
    documents submitted by the Government of Mexico in San Diego,
    California, key family members reportedly dispense an estimated $1
    million weekly in bribes to Mexican federal, state and local officials,
    who assure that the movement of drugs continues to flow unimpeded to
    the gateway cities along the southwestern border of the United States.
        The Arellano family, composed of seven brothers and four sisters,
    inherited the organization from Miguel Angel Felix-Gallardo upon his
    incarceration in Mexico in 1989, for his complicity in the murder of
    DEA Special Agent Enrique Camarena. Alberto Benjamin Arellano-Felix
    assumed leadership of the family structured criminal enterprise and
    provides a businessman's approach to the management of drug trafficking
    operations.
        Ramon Eduardo Arellano-Felix, considered the most violent brother,
    organizes and coordinates protection details over which he exerts
    absolute control. Ramon Arellano's responsibilities consist of the
    planning of murders of rival drug leaders and those Mexican law
    enforcement officials not on their payroll, as well as AFO members who
    fall out of favor with the AFO leadership or simply are suspected of
    collaborating with law enforcement officials. Enforcers are often hired
    from violent street gangs in cities and towns in both Mexico and the
    United States in the belief that these gang members are expendable.
    They are dispatched to assassinate targeted individuals and to send a
    clear message to those who attempt to utilize the Mexicali/Tijuana
    corridor without paying the area transit tax demanded by the AFO
    trafficking domain.
        A joint task force composed of the Drug Enforcement Administration
    and the Federal Bureau of Investigation has been established in San
    Diego, California, to target the AFO; the Task Force is investigating
    AFO operations in Southern California and related regional
    investigations which track drug transportation, distribution and money
    laundering activities of the AFO throughout the United States.
        The Amezcua-Contreras brothers, operating out of Guadalajara,
    Mexico head-up a methamphetamine production and trafficking
    organization with global dimensions. Directed by Jesus Amezcua, and
    supported by his brothers, Adan and Luis, the Amezcua drug trafficking
    organization today is probably the world's largest smuggler of
    ephedrine and clandestine producer of methamphetamine. With a growing
    methamphetamine abuse problem in the United States, this organization's
    activities impact on a number of the major population centers in the
    U.S. The Amezcua organization obtains large quantities of the precursor
    chemical, ephedrine, utilizing contacts in Thailand and India, which
    they supply to methamphetamine labs in Mexico and the United States.
    This organization has placed trusted associates in the United States to
    move ephedrine to Mexican methamphetamine traffickers operating in the
    U.S. Jose Osorio-Cabrera, a fugitive from a Los Angeles investigation
    until his arrest in Bangkok, was a major ephedrine purchaser for the
    Amezcua organization.
        Like most organized crime groups, major drug traffickers in
    Colombia, Mexico and Southeast Asia rely on corruption and intimidation
    to further their goals. The problems of corruption and violence are
    particularly acute in Mexico.
        Since 1993, twenty-three major drug-related assassinations have
    taken place in Mexico, particularly in the Tijuana area. Virtually all
    of these cases are unsolved. In the February 24, 1997 issue of U.S.
    News and World Report, an article titled ``An Inferno Next Door''
    reports that ``Mexico's drug gangs buy the officials they can--and kill
    those they can't.'' In a particularly grisly episode, the article tells
    the story of Hodin Gutierrez, a young prosecutor who was one of eight
    law enforcement officials recently killed in Tijuana. After winning a
    conviction against a corrupt state police officer and investigating the
    murder of a police chief who had refused a bribe, Gutierrez was shot
    120 times and his killers then repeatedly ran their vehicle over his
    dead body. The killers were allegedly working for Mexican drug
    traffickers.
        Unfortunately, the violence that is attendant to the drug trade in
    Mexico is spilling over the border into U.S. towns, like San Diego,
    California and Eagle Pass, Texas. Last summer, ranchers along the
    Texas/Mexico Border reported they were besieged by drug organizations
    smuggling cocaine and marijuana across their property--fences were torn
    down, livestock butchered and shots were fired at the ranchers' homes
    at night. Ranchers reported seeing armed patrols in Mexico with night
    vision equipment, hand-held radios and assault rifles that protected a
    steady stream of smugglers back packing marijuana and cocaine into the
    United States. The problem became so acute that the State of Texas and
    the federal government, sent support in the form of additional U.S.
    Border Patrol Agents, DEA Special Agents, Officers from the Texas
    Department of Public Safety and the Texas National Guard. Life has
    returned somewhat to normal in that area, as the drug gangs reacted to
    law enforcement pressure and have moved their operations elsewhere.
               organized crime's surrogates in the united states
        The international drug trafficking syndicates cannot operate
    effectively without an infrastructure in the United States composed of
    high level managers, transporters, accountants, communications experts,
    storage experts and enforcers. The Colombian traffickers, and to a
    large extent the traffickers from Mexico who are currently dominating
    the international drug traffic, establish bases of control in major
    U.S. cities, and rely on an intricate network of cells, similar to the
    structure employed by international terrorist organizations. Cell
    managers maintain close communication with organized crime figures in
    Colombia and Mexico, and are in some sense, the ``foreign service'' of
    these drug organizations, representing the syndicate's interests
    abroad.
        These managers use an effective system of communications to
    coordinate daily operations. Cell phones, beepers, pay phones and faxes
    ensure that U.S. representatives are given the most recent information
    on loads, prices, storage locations and contacts in order to conduct
    the complex business of drug trafficking. A cell director typically
    reports directly to the cartel's principals in Colombia and oversees a
    city-wide area of operation. He directs specific functions including
    accounting, financial movement, storage of the product, a motor pool
    and other logistical matters requiring high level attention and
    discretion.
        Both Colombian and Mexican organizations headquartered overseas
    rely on their networks in the U.S. to distribute vast quantities of
    cocaine, heroin, methamphetamine and marijuana. At the present time,
    Colombian organizations are responsible for supplying heroin and
    cocaine to traffickers on the East Coast of the United States. Mexican
    organizations dominate the cocaine trade in the Western portion of the
    U.S. and the methamphetamine business, which is rapidly growing
    throughout the West, Midwest, Southwest and increasingly, Southeast
    sections of the United States. Colombian trafficking organizations are
    now providing free samples of South American heroin as part of their
    cocaine transactions in order to introduce users to their high potency
    and relatively inexpensive product. In the methamphetamine trade, large
    organizations in Mexico, which produce methamphetamine, distribute the
    product to Mexican groups within the United States for distribution in
    California, the Southwest and the Southeast regions of the country.
        Primary bulk cocaine distribution centers within the United States
    include Southern California, Southern Texas, New York City and Southern
    Florida. From these centers, cocaine is shipped throughout the United
    States for delivery to lower level distribution groups in secondary
    source cities. Distribution groups within the United States usually
    include street gangs and ethnic groups, and in the case of New York,
    primarily Dominican traffickers with strong ties to Colombian
    organizations.
        A recent case in New York illustrates the flexibility of these
    trafficking organizations and demonstrates clearly how the structure of
    trafficking groups changes to meet new situations and opportunities.
    Just last month, nine members of a cocaine distribution ring operating
    in New York City were arrested and over two tons of cocaine was seized.
    What was different about this organization was the fact that Mexican
    traffickers were supplying lower-level Colombian distribution groups in
    New York City. In most previous cases, Colombian traffickers in the
    U.S. controlled the top supply and distribution levels, relying on
    traffickers from the Dominican Republic to distribute cocaine at lower
    levels.
        Many of the most significant drug trafficking cases made today
    begin, not in foreign countries, but on the streets of our major cities
    where the surrogates of the drug mafias are operating a multi-billion
    dollar enterprise. By making strong cases against the top mafia
    representatives operating in the U.S., large conspiracy cases can be
    constructed and indictments against the mafia principals can be handed
    down. However, mafia leaders understand that the larger the number of
    surrogates operating within the U.S. who are directly tied to the
    leaders in Colombia, Mexico, or Burma, the greater the vulnerability of
    the entire operation.
          violent drug trafficking organizations in the united states
        Violence and the drug trade go hand-in-hand, and while overall
    crime figures are down for the fifth year in a row, drug-related
    violence continues to be an extremely difficult problem facing too many
    American communities.
        While violence permeates every level of drug trafficking, it is
    particularly acute at the local level where drug dealers use violence
    as a method to gain control of the trade, or rectify differences. Many
    violent drug dealers are themselves users, and their violence is fueled
    by crack or methamphetamine.
        If the drug trade is seen as a seamless continuum, it is evident
    that the violent drug dealer operating on the streets of Los Angeles,
    New York, Chicago, the Southwest Border--or in rural areas such as
    Sandy Level, Virginia, or Rocky Mount, North Carolina--is connected
    directly or indirectly to the major traffickers headquartered in Cali
    or Guadalajara. In some cases, there is a direct link between homicides
    committed within the United States and the orders of drug lords across
    international borders.
        Along the Southwest Border, there have been many incidents of
    violence and intimidation carried out by representatives of the major
    traffickers in Mexico; last summer, there were numerous press accounts
    of ranchers along the Texas/Mexico border who were targeted by drug
    organizations smuggling cocaine and marijuana across their property.
    Livestock were killed and gunfire was aimed at the ranchers' homes. The
    problem was so serious that additional law enforcement resources from
    the state and federal government were sent to improve the situation.
        In San Diego, a violent group called the ``Logan Heights Calle 30''
    was acting on the orders of the Arellano-Felix group to carry out
    executions and maintain security for their distribution efforts. Six
    members of this group were arrested by DEA and the San Diego Police
    Department for the murder of a man and his son in San Diego. A total of
    49 members of ``Calle 30'' have been arrested by the San Diego Task
    Force on drug trafficking and violent crime charges.
        In recent years, the San Diego area has been the scene of much
    drug-related violent crime. In 1993, twenty-six homicides related to
    the methamphetamine trade were committed. As recently as December of
    1996, the Arellano-Felix organization ordered the death of an
    individual who was shot in the face five times during a rush hour
    homicide in an exclusive community in Coronado, California.
        Drug-related violence is not limited to the Southwest Border of the
    United States. Puerto Rico has experienced a dramatic increase in
    violent crime as the drug trafficking situation there is worsening.
    Violence is also not limited to urban areas; during last year's
    appropriations testimony we discussed the tragic situation in Sandy
    Level, Virginia, where violent crack dealers had terrorized the
    residents of this small town which had been settled by freed slaves.
    Increasingly, areas of the country, once immune from the effects of
    drug-related violence, are now reeling from murders, assaults and other
    violent crime related to the drug trade. With the spread of
    methamphetamine to rural areas in Georgia, Missouri, Tennessee and
    other states, drug-related violence is quickly following.
                             emerging drug problems
    Methamphetamine
        Within the past several years, the problems of methamphetamine
    production, trafficking and use have significantly increased. Between
    1990 and 1995, methamphetamine related hospital emergencies tripled.
    During this same time period, there was a dramatic increase in the
    number of meth-related deaths in cities such as Los Angeles, Phoenix,
    and San Diego. Even in cities relatively untouched by drug abuse,
    methamphetamine was taking a terrible toll. From January 1993 to June
    1994, Oklahoma City witnessed 14 meth related deaths; in the next year,
    the number increased to 36, an increase of over 150 percent. Similar
    patterns were beginning to emerge around the country as methamphetamine
    spread. In Arkansas, meth-related investigations rose from 543 in 1988
    to over 2,000 in 1995. Missouri authorities tripled their lab seizures
    between 1994 and 1995. In 1995, 80 percent of Iowa's drug
    investigations were meth-related.
        The methamphetamine problem had previously been relatively isolated
    to places like California, and some rural areas where outlaw motorcycle
    gangs had operated small labs and supplied small quantities of the
    drug. However, during the past several years, drug traffickers from
    Mexico have taken over the meth trade and have expanded it
    significantly, increasing not only the supply of meth, but the violence
    associated with the trade. As previously indicated, in 1993, a total of
    26 murders took place in the greater San Diego area, all of which were
    the result of rivalries among meth trafficking organizations. Numerous
    incidents, such as the death of DEA Agent Richard Fass in 1994 and a
    recent killing of two Riverside Sheriff's deputies by a meth-crazed
    gunman, graphically illustrate the tragedies spawned by
    methamphetamine.
        DEA has irrefutable evidence that sophisticated trafficking
    organizations based in Mexico dominate the U.S. methamphetamine market.
    They operate labs in Mexico and California and these traffickers have
    plans to expand production and trafficking eastward. Recent seizures in
    Florida, Georgia and Iowa are proof that methamphetamine is no longer a
    West Coast problem.
        In 1996, DEA hosted a national conference on methamphetamine, at
    which time, representatives from state and local departments provided
    DEA and other law enforcement agencies with information on the meth
    problem, and suggested ways to address it. Many of these suggestions
    were incorporated into the President's national methamphetamine
    strategy and were included in the Comprehensive Methamphetamine Control
    Act of 1996, which Congress passed last year.
    Heroin
        The heroin problem is also a serious law enforcement challenge.
    Heroin has been an issue for over two decades, but today's version of
    the heroin threat is critical because of the wide availability of the
    drug, as well as its high potency and low price. In 1995, retail heroin
    had an average nationwide purity close to 40 percent, over five times
    higher than the 7 percent which was common only a decade ago. There has
    been a marked increase in the number of heroin-related overdose deaths
    as well. Over 4,000 people died of heroin overdoses in each of the last
    three years. Today's mortality figures are the highest ever recorded,
    surpassing the totals in the mid-1970's when deaths reached over 2,000.
    Emergency room admissions for heroin have doubled between 1990 and 1995
    and the impact of increased heroin availability has been evident in
    cities such as New York, Boston, Philadelphia, Baltimore and smaller
    cities, such as Orlando, Florida.
        One of the most serious developments in the heroin problem has been
    the emergence of South American heroin as a significant segment of the
    heroin supply. During 1995, 62 percent of the heroin seized in the U.S.
    was of Colombian origin, up from 32 percent the previous year. It is
    cheaper, purer and more widely available than the heroin we have
    previously seen in the U.S. Using already-established trafficking
    networks and contacts within major urban areas, Colombian traffickers
    have successfully assumed the lion's share of the lucrative heroin
    market in the northeast corridor of the United States, using techniques
    such as brand names, free samples and cut-rate prices to lure a new
    heroin clientele. Heroin this pure can be smoked, a method of delivery
    which appeals to a wider range of drug users who do not wish to inject
    heroin.
        At a recent heroin conference sponsored by the Drug Enforcement
    Administration, state and local law enforcement officials repeatedly
    told participants that the heroin problem was growing more severe in
    their areas of jurisdiction, and many reported that South American
    heroin was widely available from New England to South Florida and that
    overdose incidents were dramatically increasing.
              the u.s. law enforcement response to organized crime
        DEA is working with a number of other federal law enforcement
    entities--the FBI, the U.S. Attorneys' offices, the Criminal Division
    at the Department of Justice, the U.S. Customs Service, the Border
    Patrol--and a host of state and local law enforcement organizations, to
    respond to the significant problems posed by organized crime groups
    from Mexico. In order to effectively meet the challenges presented by
    sophisticated drug trafficking organizations, it is necessary for us to
    attack the command and control mechanisms of these organizations.
        Organized crime groups from Mexico operate in a similar manner to
    their Colombian counterparts, compartmentalizing their operations to
    reduce the possibilities of damage should one element of the operation
    become vulnerable. Working together, federal law enforcement agencies
    are conducting court-authorized wiretaps that target the communications
    systems of the organizations, ultimately identifying them from top to
    bottom. In so doing, it is possible for law enforcement to track
    criminal syndicates working from boardrooms in Colombia, to their
    distribution rings within the United States.
        Based on the tested premise that the only way to impact these
    criminal organizations is to go after their top leadership and U.S.
    based infrastructure, the Southwest Border strategy is highly
    successful in targeting the leadership of these groups operating within
    the U.S. However, without commensurate, consistent action by law
    enforcement in Mexico, the world's most significant drug traffickers
    will remain at liberty to conduct their business. We have seen
    important changes in the Colombian drug trade which are the result of
    the Cali leaders' incarceration. It is our goal to effect similar,
    dramatic changes in the organized crime groups from Mexico.
        Later in this testimony, details of Operation Zorro II, a prototype
    of an organized crime investigation used in our Southwest Border
    Strategy, will be discussed. Investigations such as this one are
    intensive and expensive, but are worth the investment. Currently, there
    are additional ongoing investigations, the details of which can be
    shared with the committee in closed session.
    Highlights, 1996--A Year of Results
        During the past year, DEA, working with state, local and
    international counterparts, targeted high level drug traffickers around
    the world. A number of significant cases came to fruition, leading to
    the arrest and incarceration of major drug traffickers.
        Operation Zorro II.--As part of the inter-agency Southwest Border
    initiative, on May 2, 1996, federal, state and local law enforcement
    agencies successfully completed a unique operation which targeted a
    Mexican-run cocaine smuggling and distribution network within the
    United States with ties to the Colombian drug mafia. Using over 90
    court-authorized wiretaps, law enforcement personnel were able to
    arrest 156 traffickers from Los Angeles, Chicago, El Paso, Houston and
    other cities, and seize 5,600 kilograms of cocaine, over a thousand
    pounds of marijuana and almost a kilogram of crack cocaine. Operatives
    of organized crime groups in Mexico smuggled cocaine over the Mexican/
    U.S. border and once in the U.S., the cocaine was stored in the LA area
    for eventual distribution to Miami, Chicago, Philadelphia, New York,
    Newark and Richmond, by representatives of Mexican organized crime and
    the Cali Colombia syndicate. Zorro II involved over 40 state and local
    law enforcement agencies, DEA, the FBI, the DOJ Criminal Division, 10
    U.S. Attorney's Offices and seven other federal agencies. This case was
    extremely significant because it simultaneously dismantled both the
    organization that owned the cocaine, as well as a second organization
    that ran the transportation system.
        Operation Global SEA.--In an important heroin case, federal, state
    and local law enforcement officials disrupted a Nigerian-run narcotics
    network which stretched from Thailand to the U.S. Working with
    international law enforcement officials, the DEA, FBI, U.S. Customs
    Service and the United States Attorney's Office targeted the heroin
    organization which was responsible for trafficking multi-kilogram
    quantities of heroin from Thailand to Chicago. Typically, heroin
    couriers working for the Nigerian organization traveled with heroin-
    laden suitcases through Europe and Mexico before bringing the heroin
    over the Mexican/Texas border for distribution in Chicago. Forty-four
    individuals were arrested in the United States and abroad. The total
    amount of heroin seized in Operation Global SEA was worth between $20
    to $25 million on the streets of the United States.
        Mobile Enforcement Teams.--On the homefront, DEA's Mobile
    Enforcement Teams (MET's) made a positive impact in many American
    communities. Based on the premise that drug trafficking and drug
    related violence contribute to the degradation of the quality of life
    in too many American communities, DEA's response has been to
    aggressively target and build cases against individuals involved in
    violent drug trafficking activities.
        The MET's were developed to assist state and local law enforcement
    agencies in their efforts to address the problems of drugs and drug-
    related violence. Since their initial deployment in 1995, these teams
    have worked with state and local law enforcement agencies to address
    drug-related violence in cities and rural areas around the nation. In
    places such as Spartanburg, South Carolina; the Rampart section of Los
    Angeles; Galveston, Texas and Toledo, Ohio, MET teams have, to date,
    deployed 85 times, arrested 2,577 individuals and seized over $3
    million in currency and 250 weapons. The MET program, which was fully
    funded by Congress in fiscal year 1997, is based on the belief that
    those who distribute drugs on the streets of the United States and
    commit violent activities are part of a seamless international
    continuum of drug trafficking organizations headquartered in Colombia,
    Mexico and Southeast Asia.
        During 1996, in just one example of how drug law enforcement
    efforts can make a significant difference, a MET deployment in the
    Rampart area of Los Angeles assisted state and local law enforcement
    officers to help combat drug-related crime and the violence associated
    with open-air drug markets. The neighborhood had been ravaged by drug
    dealing and drive-by shootings, and was the most dangerous area of Los
    Angeles. Between April and July of 1996, DEA, working with the ATF, INS
    and the Los Angeles Police Department of Corrections, made 412 arrests
    ranging from minor offenses, to violations of federal law. DEA arrested
    141 individuals on drug charges, including gang members. The entire
    operation netted $70,000 in U.S. currency, 28 weapons, 1,270 grams of
    black tar heroin, 640 grams of cocaine, 104 pounds of marijuana and a
    small quantity of methamphetamine.
        After the deployment, crime and violence in the area dropped
    immediately, and for the first time in five years, there were weeks
    when no homicides were committed. Aggravated assaults, sexual assaults
    and burglaries were down significantly.
             fight against global drug trafficking: lessons learned
        Over the past several years, there have been major successes in law
    enforcement across the board, and many of the lessons learned from
    increasingly sophisticated responses to violent crime and drug
    trafficking have had an impact on DEA's operations, and the operations
    of other law enforcement agencies. It is very clear, after years of
    intensive and smart law enforcement efforts, that law enforcement
    works. This is particularly true in places such as New York City, where
    dramatic reductions in the crime rate confounded many who thought law
    enforcement could not be an effective answer to the crime problem. It
    was also clear that effective law enforcement costs money, and requires
    that infrastructure needs be maintained in order to ensure that
    personnel have the tools necessary to do the job. We have also learned
    the importance of identifying and acting against emerging drug threats
    in order to get ahead of the curve--a hard lesson we learned from our
    response to the crack epidemic.
        Law Enforcement Works.--During the late 1980's and early 1990's,
    when drug-related violence rose to unprecedented levels, communities
    supported the premise that federal, state and local law enforcement had
    to act decisively to address crime. Consistent, energetic and targeted
    law enforcement efforts resulted in dramatic decreases in the crime
    rates in many cities: in New York, the murder rate has fallen by 50
    percent in five years; in Houston, 49 percent; and in Boston, 62
    percent. The overall crime rate in our nation has fallen to its lowest
    level since 1969.
        How did this happen? Communities began fighting back, and making a
    difference, with smart, targeted law enforcement programs. In New York
    City, a widespread philosophy of aggressive law enforcement was begun.
    Increases in the police force and in the number of prison beds were
    approved. No crime was too small to go unpunished. From panhandling, to
    turnstile-jumping, to graffiti--all quality of life crimes were
    considered serious offenses against the public good. Arrests went up
    across the board, and precinct commanders were made responsible for
    reducing crime numbers in their jurisdictions. Since many crimes are
    committed by the same criminals, police sought to identify patterns in
    these crimes, and were able to link crimes to specific individuals. By
    all accounts the New York City experience is a solid example of what
    happens when law enforcement targets all levels of violators, including
    those who degrade the quality of life in communities: citizens can see
    measurable gains. Increased numbers of police, more prisons and tougher
    crime policies have paid off.
        DEA contributed to the decline in crime rates by working with
    state, local and other federal law enforcement agencies to aggressively
    target drug traffickers operating within the United States. Through
    task forces and DEA's REDRUM program, drug trafficking organizations,
    and violent drug trafficking rings, were identified and dismantled
    during the past decade.
        Sophisticated Targets Require Sophisticated Investigations.--Drug
    trafficking networks, controlled by sophisticated organized crime
    leaders headquartered in Colombia, Mexico, and in many other countries,
    have sophisticated technology and modern equipment at their disposal.
    Organizations rely on an intricate system of communications devices--
    cell phones, faxes, encrypted messages--to carry out their day-to-day
    operations.
        In order to penetrate these organizations, and gather information
    to make solid cases against their leadership, DEA must compete on a
    level playing field. Effective investigations, such as Zorro II and
    Operation Global SEA, are expensive and labor-intensive. The Zorro
    case, which took three years from beginning to end, depended in large
    part on wiretaps. This investigation was extremely complex and labor
    intensive with an estimated cost of $13 million. Many hours also go
    into building complex cases: over 103,000 hours were devoted by DEA
    Special Agents, and another 10,300 by Intelligence Analysts. These
    costs and manpower estimates do not take into account contributions
    made by state and local agencies.
        In Operation Global SEA, wiretaps were used over a forty-day period
    in which 23,000 calls were recorded between members of the trafficking
    organization and the source of supply. A total of $2 million was spent
    on wiretap-related services, such as translations and lease lines.
        It is Critical to Identify and Act Quickly Against Emerging Drug
    Threats.--Drug trafficking, use and abuse patterns change quickly, with
    newer, cheaper, and more lethal drugs rapidly entering the scene. The
    rapid growth of the cocaine and crack trade during the course of the
    1980's caught law enforcement officials largely off-guard and proved to
    have a devastating impact on the citizens of this country. In just a
    few, short years, law enforcement and public health attention has been
    refocused on methamphetamine, heroin and synthetic drugs--drugs which
    have caused misery, addiction, and all too often, violence in many
    American communities.
        Aggressive, Effective Law Enforcement Requires Sound
    Infrastructure.--The success of ongoing drug enforcement efforts is in
    large part predicated upon the quality of operational support systems
    law enforcement organizations have in place. Over the years, the
    majority of resources provided to law enforcement have been directed
    towards placing more Special Agents and police officers on the streets,
    often times at the expense of the critical support and infrastructure
    systems necessary for long-term enforcement productivity. Without
    state-of-the-art technical investigative equipment, intelligence,
    automated data processing systems and operational support facilities,
    law enforcement's ability to make significant inroads in its efforts to
    dismantle the operations of major drug trafficking organizations is
    greatly diminished.
        The drug traffickers operating on a global scale today have, at
    their disposal, technology, transportation capabilities and
    communications equipment which are the envy of many U.S. corporations.
    Law enforcement capabilities must match, or exceed, the capabilities of
    major traffickers. However, with rapid changes in technology, such as
    digital communications systems, and encrypted equipment, and with only
    modest assistance from U.S. manufacturers, law enforcement is facing a
    difficult situation which, unless quickly addressed, will impede our
    ability to do business in just a few, short years.
        DEA, like many other law enforcement agencies, has had difficulty
    meeting infrastructure needs over the years. Many of these needs have
    taken a back seat to operational or personnel needs, and they have
    finally become critical. Two such areas are the DEA laboratory system,
    which is key to the success of DEA cases being made against major drug
    traffickers around the world, and the DEA computer system which is fast
    becoming the lifeblood of DEA investigations.
       dea's fiscal year 1998 budget: equipping the agency for the future
        DEA's fiscal year 1998 Budget request includes funding for
    important initiatives to target the most significant drug traffickers
    operating along the Southwest border of the United States, address the
    methamphetamine and heroin problems which adversely affect so many
    communities across the nation, and restore DEA's infrastructure needs.
    DEA is requesting a total of $1,145,830,000 in direct funding,
    including 7,216 positions, of which 3,358 are Special Agents. This
    request includes an enhancement of 382 positions (168 Special Agents)
    and $87,042,363 in new program initiatives and represents and overall
    increase of $91,812,000 over DEA's 1997 appropriation level.
        DEA's budget is spent on program efforts which are dedicated to
    assisting communities across the nation, and fifty nations around the
    world in their efforts to identify, target and dismantle the most
    significant drug trafficking organizations operating at home and
    overseas. DEA's budget includes support for over 7,200 personnel; a
    series of state and local task forces which serve as a multiplier
    effect in major cities and rural areas of the United States; DEA's
    Mobile Enforcement Teams which are dedicated to addressing drug-related
    violent crime; and special programs including marijuana eradication,
    training, demand reduction and international investigations. DEA's
    budget is also spent on technical equipment, vehicles, aircraft, and
    supplies which assist DEA personnel in their day-to-day investigations
    and investigative support functions.
        The $87 million DEA is requesting in new program funding, is broken
    into five strategic funding initiatives. These initiatives include the
    Methamphetamine Initiative, Southwest Border Initiative, Heroin
    Initiative, Infrastructure Initiative and a Laboratory Reconstruction
    Initiative.
    Methamphetamine
        To address the explosion of methamphetamine abuse, I am requesting
    $11 million and 74 positions, including 60 Special Agents. These
    resources will allow DEA to expand its domestic enforcement efforts,
    reduce the availability of the chemicals that feed the illicit
    ``kitchens'' that pollute the bodies of our citizens and our
    environment, and provide for the safety of law enforcement personnel
    through specialized hazardous waste handling training. An all out
    effort against this highly addictive and dangerous drug will save
    lives, protect the environment, and help ensure a safe future for our
    youth. This initiative fully supports the National Methamphetamine
    Strategy and is vital to stalling the momentum of this growing drug of
    choice.
    Southwest Border
        To expand our continuing interagency effort on the Southwest
    Border, I am requesting $29.7 million and 192 positions, including 96
    Special Agents. These resources will purchase investigative equipment,
    enhance intelligence gathering, provide increased air support to this
    vast open border, and provide additional agents and support staff to
    deal with the increase in investigative caseload. The increasing
    concentration of DEA, FBI, and INS resources working cooperatively
    along the 2,000 mile border with Mexico is not only getting results, it
    demonstrates that federal law enforcement can save resources, share
    information, and work effectively in joint investigative efforts. These
    additional resources are the next installment in our growing border
    presence and are sorely needed to cope with the huge volume of drugs
    transiting this area.
    Heroin Strategy
        To address the growing availability of increasingly pure and cheap
    heroin, I am requesting the resources to continue to build upon our
    Domestic Heroin Enforcement Strategy, begun last year. For fiscal year
    1998, I am requesting $5 million and 60 positions, including 12 Special
    Agents. The growth in popularity of this deleterious and addictive drug
    is an ominous sign to those of us who are aware of heroin's
    destructiveness and the huge costs it brings to our nation's health
    care system. This reemerging menace cannot be allowed to go
    unaddressed.
    Vital Infrastructure
        For many years, DEA has been forced to build its investigative
    force by eroding vital infrastructure resources and redirecting them
    into operational enforcement activities. Last year, you helped us
    address this problem for the first time by providing significant new
    resources to restore our eroded infrastructure base. While some of the
    funding for these critical investigative support components was
    provided, I am requesting $33.4 million and 19 support positions to
    further strengthen our infrastructure in support of law enforcement
    efforts. These funds are absolutely essential if DEA is to field a
    modern investigative work force. Our Special Agents must have the
    computers, aircraft, and tools of technology to do their job. These
    tools must be maintained, replaced, and upgraded periodically if they
    are to multiply our agents effectiveness. Most importantly, I need
    sufficient funds to relocate Special Agents when the job requires them
    to change their place of duty. Career Special Agents should not be
    denied the opportunities for development, training, advancement and
    protection afforded by periodic changes of duty station.
    Laboratory Reconstruction
        Last year, you provided nearly $31 million in construction funding
    to build a much needed training facility at Quantico, Virginia, and
    seed money to begin bringing obsolete laboratories up to acceptable
    health and safety standards. I am pleased to report that construction
    at Quantico will begin in early April. Our laboratory reconstruction
    effort is also well underway. I am requesting an additional $4 million
    this year to continue the financing of a multi-year, $21 million effort
    to rebuild unsafe and inefficient laboratory facilities. We owe our
    chemists and support staff a safe working environment and we owe the
    nation facilities that can handle the increased volume of drugs and
    evidence flowing from burgeoning investigations.
        In closing, I would like to again thank the Committee for its long
    standing support of DEA and urge your support of these important
    initiatives. I will be happy to answer any questions the Committee may
    have at this time.

                   Commissioner Meissner's opening statement

        Senator Gregg. Commissioner.
        Ms. Meissner. Thank you, Mr. Chairman and members of the
    subcommittee. I would like to begin today by reporting on my
    recent participation in a very successful visit to the United
    States-Mexico border led by Representative Jim Kolbe and other
    members of the House Appropriations Committee. The trip was
    important because it allowed the members and the staff of the
    House committee to see firsthand the progress that INS has made
    in just 3 years in fulfilling one of its toughest and highest-
    priority missions. I would like to invite members of this
    subcommittee to make a similar visit, if that is at all
    possible, because it really is the best way to demonstrate the
    improved competencies of the Immigration Service since 1994,
    when we began to undertake significant management reforms of
    the agency and when this subcommittee and the administration
    began working together to provide the resources that INS has so
    long needed.
        I was particularly pleased because the Southwest border
    strategy is, in many senses, a microcosm of the work that we
    now know this agency is truly capable of performing.

                               facing Challenges

        The multiyear comprehensive enforcement strategy that we
    began implementing 3 years ago, centering on the busiest
    illegal crossing point on the entire border, San Diego, CA,
    contains all of the challenges facing the agency as a whole. It
    includes the challenge of hiring and training unprecedented
    numbers of new agents and other personnel, redesigning and
    streamlining outmoded systems and procedures, developing,
    installing, and adapting new equipment and technologies to make
    us more efficient, and working cooperatively with other Federal
    and local agencies, especially the Customs Service, the DEA,
    the FBI, and local law enforcement officials.
        These are all difficult tasks. They all started from a base
    of serious performance deficiencies, and they all have occurred
    against the backdrop of historically high migration pressures
    from around the world.
        The story of the Southwest border challenge and our
    response is the story of INS overall. Mr. Chairman, as you
    know, I am keenly aware of the agency's historic management
    weaknesses and the problems that have emerged in attempting to
    address the dramatic surge that we have experienced in our
    naturalization applications. We are working internally and
    drawing on help from outside experts to address these problems.
        But while the problems of the citizenship program reflect
    longstanding infrastructure and management weaknesses of the
    Immigration Service, they do not accurately reflect the
    agency's overall abilities and progress at this time.
        The reality is that on many fronts, just as at the border,
    we are meeting the challenges that both the administration and
    the Congress have set out for us. We are applying effective new
    strategies to meet a historic rise in enforcement and service
    delivery needs, including implementing a new immigration law
    that requires developing more than 60 new regulations and 70
    new forms and training almost 20,000 staff to use them
    properly.
        We are effectively managing unprecedented growth in
    technology and personnel resources, and most importantly, we
    are facing and fixing chronic, decades-old management problems
    that have plagued INS efforts in the past. And we are doing all
    these things at the same time.
        I am proud of the progress that we have made, working
    together with the Congress, and I am pleased that that progress
    has been recognized by a distinguished panel of the National
    Academy for Public Administration with whom we contracted to
    analyze the INS budget and priority processes that we
    established in 1994. Their January report signaled approval of
    our new initiatives and has provided valuable guidance on next
    steps for continuing the advances.
        At the same time, we know that we face major challenges in
    improving the accountability, the effectiveness, and the
    professionalism of the agency. Key steps to ensure that a
    culture of accountability takes hold include the following:

                               Management reforms

        We have built back our Office of Internal Audit and created
    a new INSpect program with resources dedicated to top-to-bottom
    reviews of all field offices on a regular 2- and 3-year cycle.
    I have concluded that we need further organizational and senior
    personnel changes and have developed a plan for that, which
    will be forwarded to the subcommittee in the coming weeks. It
    will strengthen field management and send a strong signal about
    my expectations for effective management and integrity of INS
    work processes.
        We are also implementing competency-based criteria for
    promotions as a means of overcoming seniority as the sole basis
    for career advancement in the agency.
        These and many other measures build on a myriad of steps
    that have already been taken to bolster accountability and
    professionalism in the Immigration Service.
        In support of strong management reforms such as these, the
    Service's fiscal year 1998 budget request contains critical
    infrastructure proposals that we hope the committee will grant.
    They include continued equipment and technology infusions and
    status verification and files cleanup and centralization
    initiatives.

                               prepared statement

        Mr. Chairman, let me close by stating that our problems are
    not intractable, as we have demonstrated in many areas of our
    work, but they do require multiyear, often laborious step-by-
    step efforts. INS has come a long way in 4 years. With your
    continued support, I am confident we will go even further.
        Thank you.
        [The statement follows:]
                      Prepared Statement of Doris Meissner
                                  introduction
        Thank you Mr. Chairman, and Members of the Subcommittee, for the
    opportunity to appear before you today to discuss the President's
    fiscal year 1998 budget request for the Immigration and Naturalization
    Service (INS).
        Mr. Chairman, I have now been with INS for almost four years. When
    I came to this agency, I was aware of the problems I was inheriting.
    The INS has had a long history of neglect and management problems. In
    the January 1991, GAO Report to the Congress: Immigration Management,
    the auditors highlighted the history of problems at INS--I quote:
    ``Over the past decade weak management systems and inconsistent
    leadership have allowed serious problems to go unsolved * * * Without
    coherent overall direction and basic management reforms, the
    organization has been unable to effectively address the changing
    enforcement responsibilities and longstanding service delivery
    problems.''
        We have not only been challenged by past neglect and management
    problems, but the agency has also experienced a continual wave of new
    challenges. INS has dealt with the devaluation of the peso in Mexico,
    which hit its lowest point in over a decade in 1993, just as we began
    to implement our efforts to enhance border control. We have been
    challenged by mass migration of both Cuban and Haitian migrants to
    South Florida, as well as mass smuggling of Chinese migrants. We have
    been challenged by an increase in immigration petitions and
    applications, including a threefold increase in citizenship
    applications. The INS is also facing the effects of implementing major
    changes to immigration law contained in three pieces of legislation,
    the Personal Responsibility and Work Opportunity Reconciliation Act,
    the Illegal Immigration Reform and Immigrant Responsibility Act
    (IIRIRA) and the Antiterrorism and Effective Death Penalty Act, all
    passed last year. These new laws have required us to rewrite many of
    our enforcement and service regulations, retrain our workforce, and
    educate the public. All of this has challenged our often outdated
    systems and procedures which we continue to reform and improve while we
    manage unprecedented growth.
        This Administration, you, and the other Members of the
    Subcommittee, have provided continued support and increased resources
    to strengthen and enforce our Nation's immigration laws. I realize the
    Subcommittee has several concerns about recent problems at INS. We have
    taken corrective measures, implemented improvements in planning and
    operations, and provided enhanced training to our officers. We have
    come a long way as an agency. In the face of numerous challenges, we
    have made monumental improvements in the way INS works. However, I
    recognize that there is still much work to be done.
        Mr. Chairman, the fiscal year 1998 budget I present to you today
    builds on our four-year effort to strengthen our borders, increase our
    enforcement efforts in the American workplace, remove criminal and
    other deportable illegal aliens from our streets and prisons, process
    applications for citizenship and legal entry into our country
    efficiently and effectively, and enhance the professionalism of our
    workforce.
                                  achievements
        Before I begin discussing the 1998 budget request, I would like to
    take a moment to tell you about the notable progress we have made. Our
    accomplishments clearly illustrate that we are not an agency standing
    still. We continue to meet the challenges we face. We have made some
    mistakes along the way, but we are seeing real change.
                          border control achievements
        First, I want to thank the Members of the Subcommittee for working
    with the Attorney General and me to develop a plan for hiring the
    additional personnel needed to support the President's Immigration
    Strategy.
        In 1994, the Attorney General and I announced a multi-year border
    enforcement plan committing this Nation to a comprehensive border
    enforcement strategy. Under the Administration's strategic plan, by the
    end of fiscal year 1997, Border Patrol staffing will have increased by
    73 percent since fiscal year 1993, for a total of 6,859 agents on-
    board. Border Patrol agent growth along the Southwest border will have
    increased by 85 percent over the same time period. We will also
    increase the number of inspectors at ports-of-entry by over 50 percent
    since 1993, which will facilitate traffic movement and commerce at
    ports-of-entry and provide major improvements in meeting the time
    requirements at our international airports. In fiscal year 1996, over
    500 new Inspectors were deployed along the Southwest border, and 150
    more will be deployed in fiscal year 1997. The combined increase in
    Border Patrol agents and Inspectors will result in a balanced,
    effective border enforcement strategy. To manage this growth, we have
    put into place a comprehensive growth management plan, in which new
    agents are being hired on an ongoing basis to meet the fiscal year 1997
    target.
        We surpassed our fiscal year 1996 goal of 5,778 Border Patrol
    agents on-board. In fact, we exceeded our target by 100 agents. As of
    March 1, we had 6,141 Border Patrol agents on-board. This includes 481
    trainees at the Charleston and Glynco training facilities. Additional
    classes are scheduled throughout the year to meet the fiscal year 1997
    goal. As part of the comprehensive plan, we have also strengthened
    recruitment efforts through more focused recruitment activities. A
    competency-based assessment battery for Border Patrol agents seeking
    supervisory promotions was designed and validated. These measures will
    help ensure that we have qualified agents on-board and the best
    qualified are promoted to supervisory positions.
        The new satellite training facility in Charleston, South Carolina,
    opened in April 1996, continues to provide the additional capacity
    needed to train the large number of Border Patrol agents being hired.
        This is the first Administration to outfit agents with the
    equipment and technology to perform their jobs more efficiently and
    safely. With the new vehicles, bullet proof vests, night scopes, ground
    sensors, lighting along the border, encrypted radios and computer-
    assisted dispatching and case processing systems, our front line agents
    are better supported than at any point before.
        Focusing additional resources on new Border Patrol staffing and
    equipment has yielded significant results. Hours dedicated specifically
    to linewatching, by agents working directly along the border, increased
    by 17 percent in fiscal year 1996. The Border Patrol made over 1.5
    million apprehensions for the year. In San Diego, El Paso, Nogales, and
    the areas between them we are deterring illegal traffic and disrupting
    smuggling operations. Operation Hold the Line has significantly
    diminished illegal immigration between Ciudad Juarez, Mexico and El
    Paso. In a similar fashion, Operation Safeguard has allowed INS to
    regain control of downtown Nogales. Through Operation Gatekeeper, begun
    in 1994, INS has gained substantial control of the Nation's busiest and
    most vulnerable border near San Diego, from Imperial Beach to Chula
    Vista to Brownfield. The San Diego Union-Tribune heralded the success
    of Operation Gatekeeper in a July 15, 1996 article by stating that the
    operation ``is transforming the region around the San Ysidro and Otay
    Mesa border crossing from lawless, chaotic places into the picture of
    order.'' Similar support from the community is continuously echoed. San
    Diego Sheriff William Hollander was quoted last year as follows: ``I
    worked the border in the 1960's and I've never seen the Federal
    government make this kind of effort.''
                           removal of illegal aliens
        The removal of criminal and other deportable aliens is one of the
    key components of INS' comprehensive strategy to prevent and deter
    illegal migration. In fiscal year 1996, INS removed a record 68,294
    deportable aliens from the country, of which 54 percent were criminal
    aliens. Of the 36,754 criminal aliens removed from the United States,
    10,323 completed the Institutional Hearing Program process. This
    represents an overall increase in removals of 37 percent over fiscal
    year 1995. As of the end of February of this fiscal year, there have
    been 34,421 overall removals, of which 19,045 have been criminal alien
    removals, putting INS on target to remove at least 93,000 aliens in
    fiscal year 1997.
        INS bed space increased dramatically over the year. INS' ability to
    detain aliens is directly linked to our ability to remove them from the
    United States. In fiscal year 1995, INS maintained an average of 6,000
    detention beds. In fiscal year 1996, the average increased to 8,200 and
    the Service closed the year with an all-time high of 9,500 beds. As of
    March 17, INS had over 11,500 beds in use. By the end of fiscal year
    1997, INS is expected to have 12,050 detention beds in use. The
    increased bed space is critical to meeting the requirements of the new
    immigration legislation's mandatory detention provision.
                              worksite enforcement
        To more effectively control the border, we must also strongly
    enforce employer sanctions and labor standard laws in the workplace.
    With the emphasis this Administration has placed on Worksite
    Enforcement over the past four years, we are now seeing effects. Over
    13,800 unauthorized workers were apprehended at the workplace in fiscal
    year 1996, and these jobs were made available to authorized workers. In
    fiscal year 1996, INS completed over 5,200 employer sanctions cases and
    identified 1,555 employers who knowingly hired illegal aliens or
    violated the laws pertaining to employer sanctions. Over $4.8 million
    in fines was collected from employers who violated immigration laws.
        We significantly increased interagency efforts in fiscal year 1996,
    aimed at stopping major violators in industries with a history of
    employing unauthorized workers. With the Department of Labor's
    assistance, INS addressed illegal employment and the exploitation of
    labor, resulting in 542 investigations, of which 329 were joint
    investigations last year. The joint investigations focused on abusive
    employers, particularly in the garment industry.
        The INS expanded the award-winning Operation Jobs and continues to
    work with State and local authorities to place authorized workers into
    job vacancies created when unauthorized workers are removed from the
    workplace.
        The INS also made major advances in automation of the alien status
    verification process and continued the expansion of the Verification
    Information Systems (VIS) into new industry areas, reaching a total of
    1,000 employers participating in the pilot. The inclusion of the meat
    packing industry into VIS marked a major accomplishment in addressing
    illegal employment in the Midwest.
        Work was completed on the revised Employment Authorization Document
    (EAD), which documents work eligibility for a wide range of immigrants
    and non-immigrants. The Service began issuing the new card in February
    1997.
                            technology improvements
        I am also pleased to report to you today that IDENT, our prototype
    fingerprint identification system, has become an effective tool which
    has enhanced our border control efforts. We have now installed systems
    at 80 locations along the Southwest border and expect to have 112 sites
    deployed by the end of fiscal year 1997.
        IDENT allows agents to identify rapidly and accurately criminal
    aliens and repeat crossers who were apprehended previously. In fiscal
    year 1996, IDENT matched over 10,500 individuals from the criminal
    alien lookout database and helped confirm the eastward shift in traffic
    as a result of Operation Gatekeeper. IDENT also helped agents identify
    1,234 suspected smuggler ``guides'' along the Southwest border. The INS
    has established an illegal entry recidivism database of 585,632 records
    and a criminal alien lookout database of 56,006 records on the IDENT
    system. With its implementation along the entire Southwest border,
    IDENT provides our agents with a significant tool to support efforts to
    secure our Nation's borders.
        The INS also expanded the Datashare initiative with the Department
    of State. The increase in the exchange of data between DOS and INS has
    streamlined the Inspections and Immigration Adjudication process. A
    pilot program for Immigrant Visa (IV) automation and sharing of
    information is now in place in Frankfurt, Germany; Georgetown, Guyana;
    and Juarez, Mexico.
        In fiscal year 1996, INS also completed 14 new installations and 13
    upgrades of existing sites of the Inter-Agency Border Inspection System
    (IBIS)--for a total installed base of 161 major air and land border
    ports-of-entry. IBIS is the core lookout system used by INS inspectors
    and U.S. Customs at airports and land border ports-of-entry to identify
    persons of interest.
        The Dedicated Commuter Lane (DCL) project was opened in Otay Mesa,
    California. We enrolled a total of 2,600 people and conduct an average
    of 800 inspections per day, enabling us to concentrate our inspection
    efforts on a smaller population of entrants.
        The INS Passenger Accelerated Service System (INSPASS) was
    recognized as the ``Best of the Best'' in Federal technology leadership
    in an awards ceremony on February 11, presented by Government Executive
    Magazine and the Association for Communications, Electronics,
    Intelligence and Information Systems Professionals. The judges stated
    that INSPASS, designed to streamline the Inspections process, goes
    ``above and beyond in providing enhanced service to the citizen.''
    INSPASS also received a Federal Technology Leadership Award in November
    1996.
        In fiscal year 1996, INS worked to improve standard office
    automation infrastructure and educate the user about the new
    automation. The INS completed deployment of office automation
    infrastructure at 143 sites in fiscal year 1996. A total of 235 sites
    in 34 major INS locales are now infrastructure equipped. In fiscal year
    1996, INS trained 10,210 users to bring the user population trained to
    date to 19,190. We also provided over 7,500 additional users with e-
    mail, for a total of 16,917 users, allowing for more efficient
    communications agency-wide.
                              immigration services
        In addition to our enforcement role, we also realize the importance
    of being a service provider. In the past four years, we have made a
    concerted effort to improve services and benefits to our customers.
    During fiscal year 1996, initiatives such as the Telephone Service
    Operation pilot initiated in June, the El Paso INSFORM kiosk, and the
    Forms Center reinvention, have provided easier access to INS
    information and simplified processing times for some of INS' high
    demand services. Applications for immigration benefits were up by six
    percent and actions taken on benefit applications also increased in
    fiscal year 1996 compared to fiscal year 1995. Last year, INS reached
    its goal to ensure that eligible persons will have their applications
    adjudicated within 6 months of filing a citizenship application.
        Customer satisfaction surveys were completed at land, air and sea
    ports-of-entry and the results have been compiled and analyzed for use
    in making further improvements to the inspections process. During last
    fiscal year, we also began integrating customer service training with
    other training activities to improve customer satisfaction.
                              assistance to states
        We started the Law Enforcement Support Center (LESC), which is
    located in Burlington, Vermont, in fiscal year 1995. Since the LESC's
    inception, it has received and processed 40,763 status inquiries from
    law enforcement agencies in three states. LESC pilots have been
    implemented in Arizona, Iowa, and Florida.
        INS participation in the Violent Gang Task Force resulted in
    notable accomplishments for fiscal year 1996. Through Violent Gang Task
    Force activity, 1,915 aliens were arrested, 388 of which were
    aggravated felons. The Task Force seized $46,629,072 worth of
    contraband, including narcotics valued in excess of $42 million.
        In fiscal year 1997, INS has designated enhanced cooperation and
    participation with State and local law enforcement agencies as a new
    priority. So far this year, INS has begun to test the applicability of
    community policing. Pilot projects will be developed and implemented in
    communities across the United States. In New York, we created a formal
    Citizens Advisory Panel for the New York District Office and conduct
    conferences involving a variety of community organizations. We also
    provide training for the vast array of intermediary agencies that
    provide assistance to immigrants applying for INS benefits.
        In Chicago, we developed a joint program with the Illinois
    Secretary of State and the Chicago Public Library system to provide
    naturalization information through the library system. We conduct
    problem resolution activities in response to allegations of unfair
    treatment by INS agents during worksite operations. In Chicago, we have
    also become involved in diversity training, by creating educational
    programs with city schools that have high concentrations of immigrants
    and by conducting cross-cultural training for District staff and
    Mexican consulate staff.
        In San Antonio we keep local law enforcement agencies informed
    about INS activities by conducting information seminars. In February
    1997, we met with State and local law enforcement agencies at the Omaha
    District Office to discuss mutual assistance initiatives to deal with
    drug and alien smuggling on Interstate 80.
                             other accomplishments
        In addition to our many successful activities we also provided
    extraordinary support to the 1996 Olympics in Atlanta. We had the
    largest presence in Atlanta of any Federal agency. The National Olympic
    Planning Group, of which INS was a key player, received a National
    Performance Review Hammer Award for outstanding, coordinated efforts
    aimed at expediting processing for international visitors to the
    Olympics.
        Our achievements included creating a new Olympic Identity Card.
    This card was hailed as one of the most secure, counterfeit-proof
    documents ever created. We established programs and processing to
    handle foreign nationals who were excluded from entering the United
    States because they posed a threat to national security. In support of
    the Summer Olympic Games, INS provided advanced automated lookout
    capabilities, including the Portable Automated Lookout System (PALS),
    the Interagency Border Inspection System (IBIS), and the National
    Automated Information Lookout System (NAILS). We installed an automated
    officer dispatch capability based on the system used on the Southwest
    border for sensor tracking and officer dispatch (CAD) at the Atlanta
    District office and the Atlanta airport. The INS also helped staff a
    24-hour Response Team to address international entry matters.
                              concerns and issues
        Although we have made significant progress during the past few
    years, there have also been some problems about which we share your
    concern. I realize you and this Subcommittee are keenly interested in
    several problem areas. Mr. Chairman, I would now like to take the
    opportunity to directly address some of your concerns.
    Miami
        The Inspector General's report regarding the June 1995 visit of the
    Congressional Task Force on Immigration Reform to Miami substantiated
    serious allegations made by employees of our Miami District. The
    Inspector General found that managers in the Miami District took
    actions that gave Congress a false impression of the actual work
    conditions in the District. I deeply regret the damage this has done to
    our relationship with Congress and this Committee.
        As you know, the Department of Justice has concluded the
    disciplinary process, and taken the necessary actions. The severity of
    the discipline imposed--including a removal from Federal service,
    several demotions, and a number of suspensions without pay--was
    consistent with the seriousness of the offenses.
        We have also worked hard to prevent any such incident from ever
    occurring in the future. We have reinforced the message throughout the
    agency, that honesty and integrity must be the core of all our work.
    Numerous instructions and directives have been issued as a result of
    the Inspector General's report, and we are working closely with our
    managers to ensure full compliance. In response to management concerns
    at the Miami District, I have filled the Miami District Director and
    Deputy positions with seasoned INS managers. We have also implemented a
    management review program, INSpect, which will give us regular and
    systemic oversight over field operations. One of the very first INSpect
    assignments examined the Krome Service Processing Center in Miami.
        These management decisions and the disciplinary actions that have
    been taken will mark the close of a sad and painful chapter for all of
    us at INS, one from which I hope, we at INS have learned a valuable
    lesson.
    Citizenship USA
        In the ten years before 1992, INS received fewer than 300,000
    naturalization applications per year. By contrast, in fiscal year 1995,
    we received more than one million applications, more than tripling our
    workload in this important area. Applications increased another 15
    percent in fiscal year 1996. Backlogs were at unacceptable levels.
    Waiting times in some cities were approaching three years. Therefore,
    in the Summer of 1995, we developed and launched Citizenship USA as a
    way of meeting demands and making necessary improvements to the
    naturalization process. We received bi-partisan congressional support
    for our plans through the approval of the reprogramming notifications
    by our Appropriations Committees in fiscal year 1995 and 1996.
        The goal of Citizenship USA is to achieve timely adjudication of
    naturalization applications, and reduce an unconscionable backlog
    created by the surge in applications.
        In hindsight, we recognize that we were using outdated policies and
    procedures. Our increased demand for fingerprint checks also increased
    pressure on the FBI and slowed the time period for obtaining responses.
    We relied on a 15-year-old assumptive policy regarding the receipt of
    FBI fingerprint checks, acting on cases where ``idents'' were not
    received within 60 days on a presumption that it was an indication of
    no FBI record.
        We now have a fuller understanding of our most serious
    vulnerabilities regarding the naturalization process and have
    implemented policies to resolve those problems. We are in the process
    of conducting a review--overseen by KPMG Peat Marwick at our Service
    Center in Lincoln, Nebraska--of the rap sheets for the individuals
    identified as having FBI records. We will make additional improvements
    and initiate the necessary naturalization revocations once the Lincoln
    review is completed.
        Working with the FBI, as of November 1996, we have implemented
    specific procedures that preclude naturalizing any person for whom we
    do not have a response from the FBI, either positive or negative. In
    hindsight, this should have been done previously. It is being done now.
        We implemented quality control procedures to provide a documented
    record of each case as it is processed. In addition to our own
    oversight of these procedures, we have asked KPMG Peat Marwick to
    review quality control procedures to give us an independent look at
    their implementation. We have also tightened naturalization test
    procedures and hired a contractor to monitor the testing entities.
    Coopers and Lybrand has been selected to conduct a comprehensive re-
    engineering of all aspects of our naturalization program.
        I hope that Congress and the American people understand the
    sincerity of our efforts. We have learned from past mistakes and are
    correcting those mistakes. We remain committed to a naturalization
    service that is worthy of the stewardship of the greatest benefit
    bestowed by our nation.
    Operation Gatekeeper
        Concerning the allegations that apprehension statistics had been
    fabricated to enhance the apparent effectiveness of Operation
    Gatekeeper, the Office of the Inspector General's review of the
    Operation is still ongoing. We have not been provided a status report
    or any other information related to the investigation that can be
    shared with you today. However, I would like to refer to the Inspector
    General's testimony before the House Appropriations Subcommittee on
    February 26, 1997 in which he said that so far, he is ``not finding the
    pervasive falsification of data or the distortion of procedures that
    have been alleged.'' When we receive more information in the form of a
    report, actions will be taken where applicable and appropriate. We will
    keep you informed.
                            fiscal year 1998 budget
        Now, I will turn to the fiscal year 1998 budget and initiatives
    included in our request. For fiscal year 1998, we are seeking a total
    budget of $3.6 billion and 28,230 positions for INS to further
    strengthen the Administration's comprehensive immigration strategy.
    With this budget, the Administration will have increased INS funding by
    142 percent over fiscal year 1993. The fiscal year 1998 budget
    represents a $419 million increase in funding over the anticipated
    fiscal year 1997 spending level, including $360 million in new
    initiatives, and adds a total of 1,570 positions.
        The goal of the Administration and the focus of the INS fiscal year
    1998 budget is to continue concerted efforts to control the Nation's
    borders and facilitate commerce while deterring and denying the illegal
    movement of people and drugs into the country. The fiscal year 1998
    budget request includes resources to firmly and fairly enforce
    immigration laws and to implement the broad legislative changes enacted
    in 1996. Specifically, the fiscal year 1998 budget includes continued
    funding for strengthening border control, port-of-entry facilitation,
    enforcement initiatives targeting U.S. worksites, increased removal of
    deportable, criminal and other illegal aliens, improved processing of
    naturalization and benefits applications, and resources to renovate and
    update the basic INS physical and technological infrastructure.
                           professionalism initiative
        Improving professionalism is my top priority for the Immigration
    and Naturalization Service. INS' fiscal year 1998 request includes a
    total of 83 positions and $23 million to address the deficiencies in
    the infrastructure base and mission support. In recent years, the
    Service has expanded and intensified program activities in the areas of
    enforcement, deterrence and benefits. Program expansion, though, has
    placed a strain on the basic infrastructure of INS and the ability of
    the Service to assimilate thousands of new employees.
        Under this initiative, INS will address those infrastructure areas
    that historically have been under-funded. This initiative encompasses a
    wide range of activities, including training for INS journeyman
    employees, resources to meet new Freedom of Information Act/Privacy Act
    requirements and support for the Statistical Analysis Program.
        Nine positions and $6.1 million are requested to provide training
    in field locations through the use of emerging technology keyed to a
    distributed learning environment. This effort will allow INS to provide
    continuous training for employees at or near their duty stations to
    reduce travel costs. These resources will allow for increased
    supervisory and managerial training within INS, a category of training
    which has been neglected in the past. This funding will also provide
    for individual career/professional development and for training
    requirements generated by legislation and regulatory and policy
    mandates.
        Twenty-one positions and $1.5 million are requested to support
    nationwide automation programs by augmenting the depth of support
    devoted to the various information technology and mission-critical
    programs of INS. The current industry standard is to have a ratio of 1
    ADP specialist for 50 field personnel. The current INS ratio is 1 to
    100. By the end of fiscal year 1998, INS hopes to improve this ratio to
    1 ADP specialist for every 75 field employees.
        An additional 37 positions and $3.1 million are requested to allow
    the Service to comply with the provisions of the Electronic Freedom of
    Information Act Amendment of 1996 (EFOIA). These provisions include the
    Electronic Reading Room, mandated FOIA responses within 20 days, and
    elimination of all backlogged inquiries, which are currently at more
    than 15,000 cases.
        The Service is committed to establishing a program of routine
    repair and maintenance of its buildings and structures, allowing for a
    healthy and safe work environment for all employees. One position and
    $5.3 million are requested to establish this program.
        Finally, the budget requests 15 positions and $7 million to improve
    the INS Statistical Analysis Program. These resources will allow INS to
    keep pace with its increasing workload and expand the quality of
    professional analytical services provided to other program areas within
    INS, along with external audiences. The Statistical Analysis Program
    includes data on immigrants, refugees, non-immigrants, naturalizations,
    apprehensions and removals of illegal aliens, as well as productivity
    and resource management statistics regarding INS and its mission.
    Increasing requests for information from the Congress, GAO and the
    general public have created greater demand for this data. These
    resources will help make improvements in the timeliness, precision,
    usefulness and reporting frequency of our data.
                   border facilitation and control initiative
        The fiscal year 1998 budget includes $152.1 million and 845 new
    positions to sustain facilitation of entry and control at ports-of-
    entry and expand control between the ports-of-entry along the Southwest
    border. These funds will maintain the aggressive hiring and training
    efforts begun in fiscal year 1996 to enable the INS to surpass the
    President's goal of 7,000 Border Patrol agents by the end of fiscal
    year 1998. The budget request of $62 million for 500 Border Patrol
    Agents and 50 support personnel, complemented by a corresponding
    increase in force-multiplying technological and other infrastructure
    enhancements, will enable INS to consolidate and expand on the progress
    achieved in recent years along the Southwest border.
        The 500 additional Border Patrol agents will join those already
    patrolling the Southwest border in California, Arizona, New Mexico and
    Texas. The Border Patrol has achieved dramatic results in areas like
    San Diego County in California, and the urban El Paso area in Texas.
    Recent expansion of efforts into Tucson, Arizona, and the remainder of
    the Texas sectors, will continue and grow.
        The fiscal year 1998 budget requests $16.2 million in funding and
    one position for further development and deployment of the highly
    effective biometric identification systems (IDENT/ENFORCE) at most
    Southwest Border Patrol locations, and expansion to the northern and
    maritime borders, as well.
        Also included in the request is $34.3 million to provide critically
    needed maintenance, renovation and replacement of older Border Patrol
    facilities along the Southwest border, funds for planning and designing
    future construction projects, and resources for 11 military engineering
    projects supporting the Border Patrol through construction of border
    lighting, fencing, vehicle barriers and roads.
        The fiscal year 1998 budget includes $19.4 million for 277
    Immigration Inspectors and 12 support personnel for air ports-of-entry.
    These positions will improve facilitation by continuing the processing
    of passengers through primary inspection within the 45-minute standard,
    and to staff two new airports in Palm Springs, California, and Medford,
    Oregon; and preinspection operations in Halifax, Nova Scotia. In
    addition, four positions and $2.5 million are requested to expand the
    departure management initiative at air ports-of-entry, which will allow
    INS to deploy automated Form I-94 equipment to 300 inspections booths,
    and expand the joint INS-Department of State DataShare project to 10
    new sites.
        One position and $17.7 million are requested for automation and
    reinvention of the inspections process at land, air, and sea ports-of-
    entry. At the land border, INS will implement a joint project with the
    U.S. Customs Service (USCS) to deploy license plate readers, new
    Treasury Enforcement Communications System (TECS) primary terminals,
    and other port permit technology. At air and sea ports-of-entry, INS
    seeks to install Interagency Border Inspection System (IBIS) imaging
    workstations at five sites and deploy 100 notebook computers to remote
    locations to allow for queries on INS' lookout database. The budget
    includes one permanent position and 11 contract positions to oversee
    the deployment of automated equipment at ports and increased funding
    for the IDENT and ENFORCE systems. We are also requesting resources to
    expand INSPASS, a system which speeds the entry of low-risk, frequent
    travelers at high-volume U.S. ports-of-entry, to 10 additional
    airports, and to deploy 100 carbon dioxide detectors at sea ports-of-
    entry to allow inspectors to more quickly and adeptly identify
    stowaways hidden in compartments on vessels entering the United States.
             remove criminal and other deportable aliens initiative
        The President's fiscal year 1998 budget includes $109.7 million to
    support 422 new positions to detain and remove criminal and other
    deportable aliens. We estimate that we will remove a significantly
    higher number of criminal and other deportable aliens in fiscal year
    1998 as compared to the fiscal year 1997 target of 93,000. At this
    time, however, it is not possible to provide an exact estimate. Much
    will depend on how great an increase in operational efficiency the INS
    will gain from the new enforcement provisions of IIRIRA and the extent
    to which legal challenges alter or delay full implementation of the new
    law. The resources requested for fiscal year 1998 will increase INS
    detention and removal capabilities and allow the agency to better
    respond to the detention requirements of IIRIRA and sustain INS'
    current efforts toward removing non-criminal deportable aliens. The INS
    will increase the amount of detention space and removal resources by
    3,000 beds, bringing total INS detention space to over 15,000 beds.
        Included in the request are 181 positions and $48.3 million to
    increase detention capacity as follows: (1) 119 positions for an
    expansion of 300 additional beds for the Buffalo Service Processing
    Center; (2) 300 beds for the Krome Lockdown Facility, which is part of
    the Krome Service Processing Center; and (3) 30 positions to staff an
    increase of 400 detention beds in the San Diego area. For non-INS state
    and local bedspace capacity, the request includes $6.9 million for 95
    beds and alien removal costs and 14 beds for juvenile detention. In
    addition, receipts from the Immigration Detention Account are projected
    to support 1,136 additional state and local bedspaces in fiscal year
    1998. Of the amount requested, 24 positions and $2.6 million will
    provide legal support generated by the additional workload and an
    additional eight positions to provide administrative support.
        The fiscal year 1998 budget request includes 36 positions and $12.1
    million for detention and deportation personnel to locate and remove
    deportable aliens who have completed the appeals process. These
    resources will also fund an additional 230 beds. Four positions will
    provide the necessary attorney and legal support to try cases, prepare
    briefs and ensure all legal requirements are met throughout the
    process. In addition, two support personnel will provide management and
    administrative functions for hiring, training, and procurement of the
    additional equipment and staff.
        A total of 90 positions and $20.6 million is requested to expand
    the Local Jail Program. Of these, 34 investigative positions will
    manage the interview process and identify deportable aliens who are
    incarcerated in local and county jails. This expansion requires support
    by 46 detention and deportation personnel. Four attorneys and two legal
    support personnel will review Orders to Show Cause, prepare cases
    before Immigration Judges, and perform other functions related to
    immigration hearings. Four support personnel will provide management
    and administrative support for this initiative. In addition, resources
    are included to acquire an additional 375 bed spaces for this
    initiative.
        The budget requests 43 positions and $5 million to respond to the
    increased number of queries at the Law Enforcement Support Center
    (LESC) and provide a permanent source of funding for the LESC. In
    addition, resources requested will fund a total of 36 temporary
    positions to perform status verification in response to queries from
    other law enforcement agencies.
        A total of 66 positions and $9.5 million will expand criminal alien
    record holdings in the FBI's National Crime Information Center (NCIC).
    The INS will install NCIC terminals in 45 additional locations
    nationwide and increase the number of records, including records in the
    Deported Felon File. New personnel will code, validate, audit and
    conduct quality control of the data being entered. Resources will also
    provide an additional 150 bed spaces and three attorneys and one legal
    assistant to assist with the deportations resulting from the expansion
    of the NCIC. Three support personnel will perform the management and
    administrative functions related to this initiative.
        Finally, the request includes $14.2 million in funding for new
    construction and renovation of the Krome and Port Isabel Service
    Processing Centers as well as planning and site design resources for
    the El Centro, Florence, Varick Street and additional Port Isabel
    renovation projects.
                         interior deterrence initiative
        The fiscal year 1998 budget includes $21 million to support 156 new
    positions for worksite enforcement, employer compliance and
    verification services. This initiative will expand efforts to deter
    illegal employment and increase investigation and prosecution of
    employers who intentionally violate immigration and labor laws. These
    funds also will promote compliance by providing information support to
    employers and employment verification services. The budget request also
    will fund expansion of employment verification pilot programs required
    by statute to allow employers to quickly verify the employment
    eligibility of newly hired employees.
        The budget request includes 73 positions and $7.8 million to
    increase targeting of major violators by pursuing those employers who:
    (1) employ unauthorized aliens and violate criminal statutes such as
    document fraud, smuggling, harboring, inducement and slavery; (2)
    violate other regulatory requirements such as labor laws; or (3)
    continually depend upon unauthorized labor. In addition, these
    enforcement resources will be used to develop capabilities to better
    target sweatshops and other abusive employment situations. Thirteen
    detention and deportation positions, 12 attorneys and four support
    staff, are included to aid in the removal of aliens when the initiative
    is fully implemented.
        The budget includes 14 positions and $1.2 million to establish a
    national telephone bank to respond to questions on the employment
    eligibility process, employing permanent and temporary foreign workers,
    changes in employment-related immigration law, hiring foreign students,
    independent contractors, asylum-based work authorization, hiring under
    NAFTA, hiring nannies and domestic workers, and the retention of
    documents. In addition, an employer Internet service will be
    established for employers that will provide an easy-to-use, cross-
    referenced information source for employers.
        Employment verification allows employers to quickly verify the
    employment eligibility of a newly hired non-citizen. Twelve million
    dollars are requested to fund 69 technical and clerical positions and
    expand the verification pilot programs to include additional
    participants and a variety of verification approaches. The enhancement
    will also provide resources to continue to improve immigration records
    supporting verification, to design and deploy improved verification
    business practices, and to reengineer existing business practices that
    support welfare reform legislation enacted in 1996.
                   improving services and benefits initiative
        We will also improve customer services for legal immigrants by
    continuing and improving the Citizenship USA naturalization initiative
    and increase staffing and automation for other benefit applications.
    The INS is requesting a total of 64 positions and $54.3 million to
    improve INS services and support components to better serve customers.
    These resources also will allow INS to keep pace with the expected
    fiscal year 1998 workload of approximately five million applications,
    including more than 1.6 million for naturalization, and to meet the
    challenges posed by new legislation and the increased demand for a
    broad range of immigration information.
        The Service's customer base has been growing rapidly; however, the
    records and information infrastructure has not kept pace with this
    growth. The Service requests four positions and $15.6 million to
    implement an information network for records restructuring and
    centralizing existing files in preparation for the transition to
    electronic filing and electronic immigrant files (A-Files). The records
    centralization proposal incorporates a national and comprehensive data
    improvement strategy to improve data integrity for the Service. This
    initiative also includes resources to provide a catastrophic backup
    capability for the IDENT system.
        The Service is requesting $13.8 million in resources to enhance its
    centralized computer-based information repository, the Central Index
    System; enhance the fingerprint collection and clearance process to
    have the capability to electronically capture, store and eventually
    transmit fingerprint data between the INS and the FBI; and expand the
    current telephone improvements efforts and establish a sole 1-800 line
    that will act as a front-end to all non-enforcement related inquiries.
        We are also requesting 50 positions and $3.4 million to create a
    corps of representatives in district offices to strengthen customer and
    community relations and provide customer relations training to INS
    service-related employees. The budget also includes $1.7 million in
    funding to expand the Direct Mail Program to the San Francisco, Newark
    and Baltimore Districts. These modifications will allow INS to more
    effectively process naturalization applications and gain control of the
    massive records workload in those districts. The resources associated
    with this transfer of naturalization cases will provide for additional
    records contract support in the Service Centers, and for mail, file,
    and data entry operations. In addition, $1 million is requested to fund
    a contractor study of the demographic aspects of the INS customer base
    to determine if the current location and configuration of INS offices
    meets customer needs.
        The budget request includes $2.6 million to support ongoing direct
    mail initiatives and fund the increased volume of FBI fingerprint
    clearances and naturalization ceremonies. In addition, a total of 10
    positions and $4.4 million is requested to improve Service
    responsiveness to the customer's needs for forms and information.
        A total of $1.8 million is requested to provide comprehensive
    reception and settlement services that could not be accommodated
    through base funding for the 15,000 Cuban nationals anticipated to
    arrive in the United States in fiscal year 1998 through the Cuban legal
    migration program.
        The budget requests $4.2 million to provide for the deployment of a
    naturalization module to Service Centers through the modification of
    the CLAIMS system. In addition, $1 million is requested to expand the
    case scheduling functions now available in CLAIMS at the Service
    Centers.
        The budget request also includes $4.8 million to continue the local
    office record contract concept to maintain pilots in seven district
    offices. Finally, the adjustment of status provision of the Immigration
    and Nationality Act expires on September 30, 1997. By requiring a
    substantial fine for adjustment of status, Section 245(I) penalizes
    individuals who may not have had legal immigration status but who are
    now legalizing their status. We project that revenue from 245(I)
    receipts will enable us to fund 1,136 detention beds in fiscal year
    1998. Our budget request includes language to repeal the sunset date so
    that we can continue to receive this revenue.
                                   conclusion
        These new fiscal year 1998 resources will give INS the personnel
    and tools needed to carry out the effective immigration strategy begun
    four years ago. I look forward to continuing to work with the
    Subcommittee, and with your support of this budget request, we can
    carry forward the momentum of the last few years to make our
    immigration system the best it can be. As I mentioned earlier, I want
    to work with you to alleviate your concerns and build your trust so
    that the many accomplishments over the past four years are not
    overshadowed by the few mishaps we have encountered along the way.
        This concludes my formal statement on the 1998 budget request for
    INS. I would be happy to answer any questions which you, Mr. Chairman,
    and Members of the Subcommittee may have.

        Senator Gregg. Thank you, Commissioner.
        I think we will limit questions on the first round to 10
    minutes. I know that Senator Hollings has an amendment on the
    floor, so why don't I yield to you, Senator?
        Senator Hollings. That is all right. You go ahead.

                        cooperation between FBI and DEA

        Senator Gregg. All right. Why don't I start with you,
    Director Freeh, on a couple of questions? First, since we have
    you and the folks from DEA here and even INS, I would be
    interested to know what sort of structural efforts have been
    made to cooperate? I know that you and the Administrator work
    very hard to cooperate. This was a big problem for many years,
    the lack of cooperation and the turf fights that had occurred
    between the different agencies. I am wondering what sort of
    structural, systematic programs have been put in place to
    survive personalities so that we have long-term cooperation.
        Specifically, if you could comment on this, Administrator:
    as we build the new building for you in Quantico, which is a
    separate building for DEA, one of the advantages, I think, has
    been that DEA and FBI agents have been trained together at
    Quantico. They have gotten a personal relationship there that,
    hopefully, they can build on throughout their career, and,
    therefore, it cuts down on turf fights. Is there going to be a
    formal effort made to continue to interface and mesh the early
    relationships that can evolve over time?
        Mr. Freeh. Senator, just let me answer part of it, and I am
    sure the Administrator can supplement this. The relationships
    between the agencies are really outstanding, and I do not say
    that without a lot of sincerity. When I came to this job, I
    found out that the former Director and Administrator used to
    make appointments to speak to each other, which is not a good
    way to communicate anywhere, but particularly in Washington for
    two law enforcement agencies.
        We have by our own very close personal and professional
    relationship, set a very important tone and message for our
    field divisions. Every SAC in the FBI and the DEA know that the
    Administrator and I do not want to hear about people in the
    field or headquarters fighting or not getting along about
    things which have to do with our simple unified mission. People
    know that there is a great expectation that that will not
    occur, and for the most part, it does not occur.
        Structurally speaking, we have done a number of things to
    ensure that this relationship, which is better now than it has
    ever been, is perpetuated. We have exchanged, for instance,
    very high level SES members. For instance, the former head of
    the intelligence unit at the DEA, who just retired, was an FBI
    agent. The individual who was the principal FBI official
    responsible for drug and organized crime programs, until he
    retired, was Doug Wankel, a senior DEA agent. These are people
    who had line authority in both agencies.
        We have several field offices where FBI supervisors or DEA
    supervisors are in charge of particular projects where both FBI
    and DEA agents work together. We have a very successful
    operational program, which I think the committee is aware of,
    where we fund together and work together and have collocated
    together to give us the intelligence, particularly along the
    southern tier, to put into effect strong operations and good
    cases.
        We have joint training. We have joint SAC conferences. We
    interchange and work directly on legislative matters, and on
    budget matters. There have been times when I have asked
    committees to give support and resources to the Drug
    Enforcement Administration, even though those would be taken
    away from the FBI. So the relationships, I think, are very
    good. I think they are being institutionalized.
        Perhaps Mr. Constantine can talk about the training
    academy. We have structured this new building at Quantico in a
    way that we will fully utilize it for both agencies, and it is
    not going to, in my view, put any separation between us.

                        DEA and FBI training at Quantico

        Mr. Constantine. Well, it is tough for me to say what the
    relationships were like before I came to Washington and to the
    Federal Government. Before coming to Washington, I had heard
    things. I come from an experience in law enforcement where it
    is essential for agencies to get along with one another merely
    for their own physical survival. In many instances, since I
    have been here, I have not had a conflict with anybody in the
    law enforcement community, and I think we have worked out a
    number of issues that may have existed before, especially
    involving maybe the DEA and the FBI at the level that they do
    not presently exist.
        Insofar as the academy is concerned, we recognized--and the
    Attorney General has also recognized the need for more space.
    We will still share many of the joint facilities. The firearms
    range, the practical training area, and the emergency vehicle
    operating course, will be shared.
        We have formed committees to ensure that we share the
    faculty of both DEA and FBI training staff and so that we can
    exchange them where each has an area of expertise. We will be
    establishing joint evening training sessions for FBI and DEA
    agents so they carry with them the same types of experiences. I
    think the fact that they now have space, each of them, to be
    trained and now have an ability to keep the major buildings at
    Quantico in good shape, the library and the gymnasium, I think
    will be to the benefit of both agencies.
        I have also seen from young managers in the DEA that I deal
    with directly, a sense of cooperation with the FBI, and all of
    the other agencies. They recognize that the people of this
    country are very concerned about crime and drugs, but they are
    also concerned about their tax dollar. The last thing that they
    want to hear is that a bunch of bureaucrats in agencies are
    fighting with each other over whose name is in the paper or who
    gets credit for something. And that is a message we send
    continually, and I think it is working.

                            Interagency cooperation

        Senator Gregg. Thank you.
        Do you have any comments you want to make on this effort of
    interagency cooperation?
        Ms. Meissner. I would simply add that the Immigration
    Service participates very directly in the same spirit that has
    been outlined here, most importantly in joint task force
    efforts among the Federal law enforcement agencies. Our added
    value is the authority that we have. Obviously, where
    noncitizens or illegal aliens in the country are concerned, our
    efforts often converge with crime initiatives that the FBI and
    the DEA are in the lead on. At the Southwest border, we are the
    first line of defense where drug trafficking and other criminal
    endeavors might be concerned. That relationship has worked
    very, very effectively.

                                 Border control

        Senator Gregg. What percentage of the people that are
    coming into the country illegally do you feel you are actually
    apprehending?
        Ms. Meissner. Well, that is difficult to say. The really
    critical thing about what has been going on in the last several
    years and what is being demonstrated on the Southwest border is
    that we are beginning to achieve control and deterrence. The
    best enforcement, where illegal immigration is concerned, is
    preventing it from occurring in the first place. And what you
    have now in California, in an area that had accounted for one-
    half of the illegal crossings into the country historically, is
    basically, we estimate, about 85 to 90 percent control.
        Senator Gregg. If you had that estimate in California, what
    is your estimate for, say, New Mexico, Arizona, and Texas?
        Ms. Meissner. Arizona is coming along very, very well. I
    would not want to give you an estimate right now without
    checking some numbers. It is clearly not 85 to 90 percent, but
    it is getting close. The investments in Arizona have been
    outstanding. We have work yet to do in Douglas, AZ, where we
    are just about to build a fence which will give us the missing
    piece that we need to support the personnel we have put there.
    Our major efforts now are to shore up Texas and to counter the
    movement of traffic that has occurred because of the efforts we
    have already made in Texas, particularly in El Paso, where we
    are seeing spillover into New Mexico.
        We are adding resources there as quickly as we can,
    consistent with providing the infrastructure, equipment, and
    technology that is required to put a comprehensive effort
    together. We think that in the next 2 to 3 years, as we
    continue to build the budget and build the effectiveness of the
    strategy, that we will have stable border control along that
    Southwest border.
        Senator Gregg. So you think within 2 or 3 years we will
    have stable border control along the entire border of Mexico?
        Ms. Meissner. That is what we foresee at the present time.
        Senator Hollings. You think that is going to happen?
        Senator Gregg. She is from Maryland. Those of us from the
    Northeast, we do not know.
        Ms. Meissner. You really need to see California. I really
    hope you will be able to come.
        Senator Hollings. I have been to California. Have you cut
    out the checkpoints 50 miles inland? Are you still doing that?
        Ms. Meissner. No; checkpoints are extremely important.
    Checkpoints, particularly in----
        Senator Hollings. They do so good that you put them 50
    miles inland and try to catch them a second time?
        Ms. Meissner. No, no. You need checkpoints because of the
    organized movement of aliens, which is increasingly the problem
    as we become more effective with border control. You simply
    have areas, particularly in more remote locations, where it
    will never be cost effective to have the concentration of
    Border Patrol that we have in the heavily trafficked areas.
    Therefore, we have to close off the transportation routes into
    the interior of the country.

                        coordination between INS and FBI

        Senator Hollings. Well, with respect to the coordination
    being so superb, what about the coordination between
    Immigration and FBI? As I understand it, a lot of the so-called
    immigrants came in at election time without the proper
    background checks, and you sent over fingerprints to the FBI
    asking that they be given checks within 60 days, and when INS
    did not get a response from the FBI in 60 days and the aliens
    were naturalized. Turns out many had criminal records. Where is
    the coordination there?
        Ms. Meissner. Well, I think that we have all recognized
    that the workload faced as an agency in the citizenship arena
    in the last 2 to 3 years was absolutely unprecedented. We have
    seen doubling and tripling of the caseload of people applying
    for naturalization, and that meteoric rise is continuing.
        We have simply not had the infrastructure, either in the
    FBI or in the Immigration Service, to effectively handle the
    fingerprint checking pressures that the caseload requires. We
    recognized several months ago, in the fall, that although there
    had been a great deal of contact and communication at the
    working level on these issues, they had not received the level
    of senior management attention that they deserved. The FBI and
    the INS, certainly since September, and very intensively since
    then, have been engaged in this effort, and we are finding
    solutions.
        Senator Domenici. Would the Senator yield?
        Senator Hollings. Yes.

                             Naturalization efforts

        Senator Domenici. Let me just ask you about this subject,
    and let's be specific. How many felons did you go ahead and let
    become American citizens in that extraordinary let's hurry up
    and create a bunch of citizens so they can vote episode? How
    many felons did you let in, and what are you doing about that?
        Ms. Meissner. Well, let me first say that this was not a
    let's hurry up and let them vote effort. This was an effort to
    be timely with an unprecedented caseload, a doubling and
    tripling of the caseload that we had been given to handle.
        Senator Domenici. Call it what you may. How many felons did
    you let in?
        Ms. Meissner. We have undertaken an audit of the entire
    caseload of decisions that we made last year. That audit is
    taking place under the guidance of an outside accounting firm.
    At the present time, we have identified 168 cases of
    individuals that were improperly naturalized because of
    criminal backgrounds. There will probably be a slightly larger
    number than 168 cases when the audit is complete. The audit
    will be completed within the next 2 months. Those cases that
    were improperly naturalized will all be subject to revocation.
    The cases are out of 1.1 million people that were naturalized.
        Senator Domenici. Thank you for yielding, Senator.

                           construction of Facilities

        Senator Hollings. Yes; I wanted to get those same figures.
    The FBI is building a new $130 million FBI laboratory at
    Quantico, and yet the DEA is asking separately for $25 million,
    Mr. Director, to reconstruct their own aging labs, and Treasury
    has got in another appropriations bill a $55 million request
    for another lab for the Bureau of Alcohol, Tobacco and
    Firearms.
        Senator Mikulski. The ATF.
        Senator Hollings. Yes; what about that coordination? The
    Vice President set up the so-called DIAP, the Department of
    Justice coordinating position or Director for Investigative
    Agency Policy, but I do not know what they are coordinating.
        Mr. Freeh. With respect to the laboratories, this issue
    came up, actually, well over 1\1/2\ years ago. As the Director
    of the Office of Investigative Agency Policies, I specifically
    tasked the agencies to sit down and talk about the existing
    laboratories and the ones which were proposed to make sure that
    there was coordination. And the question I asked is: Should we
    have one laboratory where we have the FBI, DEA, and INS
    together? The experts went out and studied that. They came back
    and unanimously recommended to myself and the Attorney General
    that it would not be cost effective to combine FBI, DEA, and
    INS laboratories. So based on that study, we did not put a
    consolidated lab together. We certainly did study it and very
    carefully looked at that possibility.
        Senator Hollings. Well, Ms. Meissner, with respect to the
    Charleston Border Patrol facility, we are turning out some
    1,600 Border Patrol agents per year down there. I happen to
    know that they are really enthused about it. It is working
    extremely well. But, again, for the coordination financially,
    they got a request up at Treasury for another $14 million for
    duplicative facilities down at Glynco when the existing school
    is working well.
        Now, I asked from the Government standpoint why waste the
    $14 million per year when the Charleston Border Patrol Academy
    is working extremely well. I can use it for taxpaying entities
    to go in there, so it is not a parochial interest in a sense,
    and yet it is in the Government's interest. Do you know about
    that? Do you know any reason why we ought to start building
    another school when you have one working extremely well in
    already established Government facilities?
        Ms. Meissner. I am sorry. I cannot speak to that request.
    That is, I believe, a Treasury Department request, because that
    is where the Federal Law Enforcement Training Center funds come
    from.
        Senator Hollings. But you pay the bill. We appropriated $20
    million for a firing range for the FBI, another $30 million for
    training facilities at Quantico for DEA, and here we have got a
    bigger Border Patrol school for the cost of only $8 million.
    And yet they are coming from Glynco and asking for another $14
    million per year to build another school down at Glynco.
        Ms. Meissner. I cannot help you with that. What I can tell
    you is that the Charleston facility has, as you said, been an
    extremely positive effort. It has been and continues to be a
    vital resource for us in meeting the requirements that we have
    for bringing very large numbers of Border Patrol agents into
    the Service, and we are very pleased with the outcome of that
    effort.

                                 FBI laboratory

        Senator Hollings. Director Freeh, what about this statement
    in the Washington Post to the effect that McVeigh and the
    Oklahoma bombing has gotten its biggest break when the Justice
    Department investigation showed shoddy practices at the FBI
    crime lab, and another Post story that the FBI learned of
    serious inadequacies in the lab nearly a decade before the
    Justice Department inquiry documented the failings there?
        Mr. Freeh. Senator, it is hard to comment on the McVeigh
    case because the judge, as you know, has an order against that
    and it is a pending matter. I read what has been in the
    newspapers. I have certainly heard what the defendants'
    attorneys have said. I am confident, having spoken to the
    prosecutors, that the case and the interests of the U.S.
    Government have not been compromised by anything and that the
    court will fairly determine any claims that anybody has.
        As to the second part of your question, the inspector
    general's report, which will be out next week. It will comment
    and very carefully track the history of prior problems or
    allegations in the laboratory going back, I think at least to
    1989.
        Senator Hollings. Well, what do you know, though, Judge?
    The Justice Department has identified at least 50 criminal
    cases where evidentiary problems created by questionable
    forensic analysis by the FBI laboratory may have resulted in
    improper prosecutions. That is Deputy Attorney General
    Gorelick's quote.
        Mr. Freeh. Yes; I think she later said in some detail that
    they identified 50 cases where issues had been raised and
    matters have now been raised which, in due diligence and
    because of our Brady obligations, should go to prosecutors and
    ultimately to defense lawyers to make any motions. I do not
    know of any FBI case that has been compromised by any of the
    matters which are addressed in that report. I think what she
    said very clearly is that this was not only a required but a
    prudent move by the Department of Justice to make sure that if
    there is any evidence relating to a prosecution or a
    conviction, that defense lawyers with a view to making a motion
    have it. But that does not mean, in my view, that 50 cases have
    been compromised. It means in 50 cases there is a possibility
    that some information in the prosecutor's view and ultimately
    the judge's view might be relevant to a motion, and I do not
    think it--I certainly know it does not mean that there are
    problems with 50 cases.

                            certification of Mexico

        Senator Hollings. In my limited time, one more question,
    please, Mr. Chairman. Over on the House side, Mr. Constantine
    you testified, and I quote:

        I think it is also important to say that despite the fact
    the Government of Colombia was decertified, the United States
    Government, and particularly the Drug Enforcement
    Administration, recognize the enormity of the challenge faced
    by the Colombian National Police as they work hard to defeat
    the Cali mafia. I have expressed deep admiration to the head of
    the Colombian National Police, General Serrano, and have
    commended him and the chief prosecutor, Alfonso Vallievaesio,
    for their exemplary commitment in the face of grave obstacles.
    Both are true heroes in the joint struggle in which we are
    engaged.

        Now, if you have heroes in Colombia and ne'er-do-wells down
    in Mexico--I believe you said you could not trust anybody in
    the police operations down in Mexico--why is the United States
    Government certifying Mexico and decertifying the ones that are
    making heroic efforts. How do we explain that?
        Mr. Constantine. Well, I think as I have mentioned in much
    of my testimony, I do not certify or decertify, nor do I make a
    recommendation of certification or decertification.
        Senator Hollings. So you are not responsible?
        Mr. Constantine. Well, I would not say that. I give people
    my analysis of the facts on law enforcement cooperation.
        Senator Hollings. Who is responsible? If you do not do it,
    who does?
        Mr. Constantine. Well, those decisions are mostly made by
    the State Department and other people who look at a whole host
    of policies. But those statements that you read were my
    admiration of the police officials and prosecutors in Colombia.
        Senator Hollings. Well, if Colombia's national police are
    doing an outstanding job, we ought to make a public record of
    it and let them know rather than decertify them. If they are
    taking their lives in their hands trying to help the United
    States, whereas we are not getting the help down in Mexico,
    something isn't right here. I think we have got it backward. We
    ought to be certifying Colombia and decertifying Mexico.
        Thank you, Mr. Chairman.
        Senator Gregg. Do you want to comment? Or was it not a
    question?
        Senator Hollings. That is all right.
        Senator Gregg. Senator Campbell.
        Senator Campbell. Thank you, Mr. Chairman.
        There is one thing I think these agencies all have in
    common, and that is that as they apply pressure in one area,
    the problem seems to move along the line of least resistance.
    And I am not sure where we are going to resolve it, whether it
    is drugs or immigration, until we deal more with demand rather
    than supply. It seems to me if you cut down the demand, then
    you begin to cut down supply. But I thank them for appearing.
        I have no questions of Director Freeh except to thank him
    for the effort he has gone to to make sure that our G-7
    conference in Denver is going to be done safely. There is some
    concern, obviously, in our State with the heads of seven
    countries in conference there and the McVeigh trial going on at
    the same time. The security has become kind of a major question
    for many of our folks in Colorado, so I thank you for that.

                                 HIDTA funding

        I do have a couple of questions, one for Administrator
    Constantine, though, and that deals with the high intensity
    drug trafficking areas [HIDTA] program. Congress established a
    HIDTA program in Colorado last year, and I think it has been
    pretty successful. I mentioned it in my opening statement, the
    number of arrests that were recently made, and I think HIDTA
    was active in that, even though they just really got off the
    ground in the last year. But originally we funded that to the
    tune of $3 million. When we originally did that, we did not
    know that there was also going to be a branch in Laramie, WY,
    and a branch in Salt Lake City.
        I met with the chiefs of police of the six metro areas
    around Denver a couple of weeks ago, and I asked them their
    feeling of the HIDTA program, and they were very, very
    supportive and very happy that it had been established there.
    But they did think, since it was now divided into three areas,
    that the funding level was not enough to be able to do what
    they wanted. And I would ask if you could respond to that.
        Mr. Constantine. As the HIDTA program has developed, there
    seems to be an enhancement of the money in the out-years. In
    the original authorization and appropriation of money, it is
    really difficult to project how successful it is going to be,
    how receptive the local chiefs and sheriffs are going to be to
    a HIDTA program, what are their needs in technology, what are
    their needs in buy money for investigations or informant money,
    which is how most of the funds are used in the HIDTA program.
        It is my experience, for example, in talking to Dave
    Michaud, the chief in Denver, and the various people from the
    Colorado Bureau of Investigation and the chiefs of police in
    Colorado Springs that people are very receptive to the HIDTA
    program. There have been some major joint investigations, and
    they recognize the need for money because we are dealing,
    again, in Denver, with some powerful international organized
    crime syndicates who have come to Denver. And the same problem
    exists in Salt Lake.
        My suspicion was that as we look at the budget this year
    and, I believe the budget authority for the HIDTA programs is
    in the Treasury-General Government Subcommittee, that there may
    very well be an enhancement. I would be glad to recommend the
    needs and issues that are developing in that tristate HIDTA,
    because they are often connected. The events that happen in
    Denver seem to have an effect especially in Wyoming and to a
    degree in Utah. And my suspicion is there will probably be
    enhancement in the out-years.

                            Methamphetamine strategy

        Senator Campbell. You also mentioned the dramatic increase
    of methamphetamines, and you include some new funding in your
    request for expanding the work to target, investigate, and
    prosecute those folks that are in the labs. Is there anything
    you can tell us publicly about what you intend to do to expand
    that--I know there are some things you probably should not
    discuss publicly.
        Mr. Constantine. Fifty-four of the agents that are in that
    program will actually go into enforcement groups which go after
    criminal organizations who are directing this activity, most
    often in the west coast States, the Rocky Mountain States, and
    in the Southwest. An additional number of agents will go into
    what is called the clandestine laboratory training program
    where we will train and, to a degree, try to equip deputies,
    patrol officers, and detectives in police agencies throughout
    the country, because often the investigation of methamphetamine
    trafficking results in a raid on a manufacturing site. The
    entry into the lab is very dangerous because of the chemicals
    that are being utilized and the lack of safety precautions for
    the people who are involved in the manufacture. In addition, a
    lot of the airborne pathogens in all of the material that is in
    these laboratories are very volatile and could blow up, and
    have, in fact, blown up on the manufacturers. So we will use a
    substantial amount of that money to train local law enforcement
    for those issues.
        The third part will be in laboratory personnel. There will
    be an additional number--I believe the number is 12--laboratory
    technicians who will be available to assist in not only the
    investigation but the analysis of the evidence. When we seize
    heroin or cocaine, it has already been manufactured. The test
    is fairly easy. You can do a field test. You would have
    probable cause and get an indictment.
        With methamphetamine or amphetamine, when we interrupt the
    process, it may be three-quarters of the way to becoming the
    actual drug. We then have to take that product to a laboratory,
    do a quick-turnaround laboratory test to be able to say in
    court that there is a level of probable cause or beyond a
    reasonable doubt that these chemicals are being used to make
    methamphetamine. We have had a 146-percent increase in our labs
    seizures alone in the last calendar year, and police agencies
    in your State and in the Western States have had at least that,
    and maybe more. Much of that laboratory work tends to create an
    additional load on a laboratory. So that is where we will be
    spending that money.

                        illegal immigration in Colorado

        Senator Campbell. OK. Thank you. One last question, Mr.
    Chairman, of Commissioner Meissner. I think, as you mentioned
    in your testimony, the INS is probably moving along and kind of
    come a long way, but I live kind of on the border of the
    Southwest, in western Colorado, and if our area is included in
    the Southwest border strategy, I would have to say it has not
    been a resounding success. The number of illegal immigrants in
    Colorado, and particularly western Colorado, has gone up by 100
    percent in just 2 years. I am told by law enforcement people on
    the western slope of Colorado that when they stop vans,
    sometimes dangerous vans, unlicensed drivers and so on and they
    find illegal immigrants in it, they notify the INS as to the
    procedure they are supposed to use, and they are being told to
    let them go because there is no place to hold them. Is that
    correct?
        Ms. Meissner. Certainly that is not entirely correct, but
    let me just start with the terms. We would consider Colorado
    and the problems that you are experiencing part of our interior
    enforcement responsibilities. In other words, obviously the
    border is the first line of response, and that is where we have
    put our highest priority effort. But what we are now seeing
    more and more of--Colorado has been a real hot spot in this
    regard--is changing transportation patterns and much larger
    groups of illegal migrants traveling together because of the
    success we have had at the border. In other words, there is far
    more smuggling now and far more desperate measures being taken
    by the smugglers to move loads of illegal immigrants.
        The good news is that we are beginning to understand and
    focus on intelligence to the point that we are seeing the
    linkages. We are beginning to be able to trace back to where
    those people have crossed the border, and who they rented vans
    from for transportation. We have begun to put special
    operations into place. Operation Mountain Pass was a good
    example in Colorado where we did a major blitz to interrupt
    this kind of traffic. But we do not have the resources in the
    interior of the country yet to sufficiently interrupt that
    traffic, and that----
        Senator Campbell. That gets back to my original question.
    Are local police being told to let them go?
        Ms. Meissner. Sometimes that occurs. We try very hard to
    prevent that. We are building up our detention capacity by
    leaps and bounds. We added 3,000 additional beds last year.
    This year, we are adding 3,000 more beds. We basically have
    doubled our detention capacity in the last 2 years in a
    combination of contract jail space, rented space, et cetera.
    But there are instances where we are unable to respond. We are
    reducing that as quickly as we can, and we hope to be able to
    get better and better intelligence in order to interrupt those
    smuggling patterns.

                        funds for local Law enforcement

        Senator Campbell. I am supportive of your budget request,
    which I understand goes up by about 100 percent in the last 3
    years, and you have added about 5,000 employees. What I am
    trying to do is connect it to our local law enforcement, and I
    wanted to know if any of those funds are dedicated to local law
    enforcement or county sheriffs to help them with the problem?
        Ms. Meissner. We do have new authorities under the
    immigration law that was passed in September to engage local
    law enforcement more directly, and we are working at the
    present time on what the respective roles and responsibilities
    between the Federal authorities and local authorities ought to
    be. We are in very close communication with local law
    enforcement, and we want to find the best arrangements so that
    we can respond to their needs.

                           policy on Illegal workers

        Senator Campbell. Can you just, in my last minute or so,
    explain the catch-and-release policy for illegal workers? Is
    the term used in INS for that, catch and release?
        Ms. Meissner. I am not familiar with that term.
        Senator Campbell. Well, it seems to be what is happening.
    We are catching them, and you are releasing them. But there is
    no official term for that?
        Ms. Meissner. Well, I should hope not. If we have run out
    of time, I will be happy to talk with you or your staff further
    about how some of these things work.
        Senator Campbell. OK. Thank you, Mr. Chairman.
        Senator Gregg. Senator Domenici.
        Senator Domenici. Thank you very much.
        Senator Mikulski. Hello. I have to go to a hearing.
        Senator Domenici. Senator, you go ahead.
        Senator Mikulski. Well, no. I will go by the rules. I have
    to leave, so I would like to ask unanimous consent to place
    my----
        Senator Domenici. Senator, you go ahead. I----
        Senator Mikulski. No, no, Senator, that is fine. I will be
    happy to go. I just was not aware that is the way we were doing
    it. I really do need to talk to these two men about Baltimore
    and Washington. If I could just maybe ask one question about
    Prince Georges and----
        Senator Domenici. Of course.

                             FBI agents in Maryland

        Senator Mikulski. I thank the Senator from New Mexico for
    his courtesy. You have just put 50 agents in Prince Georges
    County?
        Mr. Freeh. Yes, Senator.
        Senator Mikulski. And I want to thank you for it. Do you
    want to describe what your intention is to follow up? Because
    we have different kinds of border problems.
        Mr. Freeh. There are currently five task forces in
    Maryland. What we found in speaking to Chief Farrell, as well
    as other local enforcement officers, is that the Washington,
    DC-Prince Georges border was particularly problematic in that a
    Federal infusion of resources with some permanent followup was
    necessary to deal with the very unique geographical problem.
        We assigned 50 special agents beginning on March 10 for a
    60-day phase 1 period. Now, they are working directly and
    closely with John's people, and I think very successfully, from
    what I have heard. We are going to follow up that initiative
    either by continuing the presence of those agents or, in any
    event, it will be followed up by the formation of a permanent
    safe streets task force with Prince Georges County. We think
    that will give us an impact there that we have not previously
    had.
        Senator Mikulski. What will the task force do?
        Mr. Freeh. The task forces will focus on violent crimes,
    particularly directed to the people who are transiting in and
    out of the District committing crimes and transporting guns.

                            Heroin use in Baltimore

        Senator Mikulski. Well, we want to thank you for that
    because we have a problem in the Northeast corridor, just as
    our colleagues have problems with borders. We have I-95, which
    instead of being a corridor of opportunity, has become a
    corridor of death with trafficking in guns and drugs, which
    takes me then, if I could, to one question for Mr. Constantine.
    What is the heroin issue in Baltimore?
        Mr. Constantine. Well, heroin in the United States has
    always----
        Senator Mikulski. No, no; in Baltimore. Is it distribution,
    is it----
        Mr. Constantine. There is a distribution and a usage
    problem in the city of Baltimore for some unique reasons. It
    has become one of the largest per capita groups of people
    addicted to heroin. I have heard figures of 50,000 people in
    the city of Baltimore addicted to heroin, which is virtually 1
    in every 10, I think, close to the population base of the city.
        It has always been a drug that has been focused in cities
    since the early 1920's. Heroin has been an addiction problem
    for poor people. Now you have this tremendously powerful
    infusion of heroin from South America and Colombia. So the
    purity rate is about 90, 95 percent.
        Senator Mikulski. Mr. Constantine, I would imagine that
    this is the kind of conversation we should have privately about
    the Baltimore situation. I find that a shocking, a truly
    shocking and chilling statistic, because we are a port and
    major transportation. I did not know if we had become kind of
    the premier warehouse, distribution center, which would be a
    sad description in and of itself. I need to discuss with you
    the accuracy--I do not dispute the accuracy, but these very
    chilling numbers, and then what we see as a plan of action.
        I know everyone talks about this as a public health
    problem, and I would agree with that. But it is also an
    enormous public safety problem.
        To my colleagues, really, from the West and from the South,
    Baltimore was making it. I think so many of our cities were
    making it until we were just being overrun by drugs. We were
    just being overrun. And I do not place this all on immigrants,
    legal or illegal. They come for two reasons. They either bring
    dreams, or they bring drugs. And I am on the dream side. So
    let's talk privately.
        Mr. Freeh, thank you for everything and let's talk about
    that.
        Thank you, Senator.
        Senator Domenici. You are welcome.
        Senator Mikulski. Thank you very much.
        Senator Gregg. Senator Domenici.

                          naturalization of Immigrants

        Senator Domenici. Mr. Chairman, I am not sure which
    committee is going to have a hearing with reference to the huge
    legalization of immigrants that occurred in the year starting
    September 1995 and ending in 1996. I do not have enough time to
    go into it, but it is an extraordinary year in terms of how
    many people were made American citizens. I am not making any
    accusations as to why, but I think it is pretty obvious, from
    the little bit of records that I have, that when you try to do
    that, you make big mistakes and you end up with an immigration
    system that does not have credibility.
        I would just add, of the cases that were reviewed by the--
    what is the name of the company that did it?
        Ms. Meissner. Peat Marwick is the accounting firm that we
    are working with.
        Senator Domenici. Peat Marwick Mitchell. Actually, the 2
    percent or 168 immigrants which were found to be ineligible
    because they had felony records, that is not the whole story.
    There is 29 percent, or 2,800, that they have been unable to
    decide whether they qualify or not, and that is out of just a
    small total of 9,500 cases. So I hope everybody learned a
    lesson of not taking on more than they can handle, which
    seriously harmed the credibility and the reliability that the
    American people deserve from an agency that is supposed to
    determine whether somebody is of good enough character to
    become a citizen. I am going to let that go, unless you want to
    comment.
        Senator Gregg. Senator, if I can tell you the status
    relative to this committee, we have sent to the INS an
    interrogatory, which we just received a response to last night.
    It is a very extensive response. It was an extensive
    interrogatory.
        We may ask for further hearings on this issue. The
    Commissioner has gone through an extensive hearing process on
    the House side. We do not want to have to repeat what the House
    went through because we have got their information. We have
    that background. But the Senator's point on felons is an
    appropriate one. In fact, our number comes close to 10,000
    felons being admitted. What their level of crime is is an issue
    as versus violent crime as versus some sort of other felony. So
    this is a major concern. It may be, after reviewing this
    documentation, we will ask for another hearing with the
    Commissioner on this. We have not decided. If the Senator from
    New Mexico sought such a hearing, we would certainly pursue it.
        Senator Domenici. Thank you. Mr. Chairman, I have two sets
    of questions I am going to submit to Commissioner Meissner
    regarding the backlog the INS has and how they are handling it,
    and 10 questions with reference to the staffing on the entire
    border. Rather than use my few minutes to go through each one,
    I am just going to submit them and ask that, whatever your
    timing is, they be answered. Are you asking for a couple weeks?
        Senator Gregg. Whatever you desire and whatever the
    Commissioner feels----
        Senator Domenici. Could you do those in 2 weeks?
        Ms. Meissner. Absolutely.
        Senator Domenici. OK. You are going to have the record open
    at least that long, aren't you?
        Senator Gregg. Yes.

                          sponsorships of legal Aliens

        Senator Domenici. Now, I want to talk a little bit about
    another subject. When we were engaged up here in this
    monumental job of reforming welfare, one of the side issues
    that we found had to do with legal aliens who came to our
    country under the sponsorship of American citizens who were
    supposed to be their sponsors. In the early days of that law,
    it was literally thought that the legal alien that was coming
    in would be a ward, not of the Federal Government, but a ward
    of the sponsor. When we finally, after decades of doing
    nothing, inquired, we found something startling: that over an
    entire decade, only 13 out of literally millions of such
    sponsor relationships had ever been adjudicated as improperly
    followed through by the sponsors. Out of millions, only 13
    cases--which meant we had closed our eyes as to whether the
    sponsors were meeting their responsibility or had put them all
    on our welfare programs from Medicaid to food stamps, and a
    variety of things.
        We think we have changed that for the future, and so I
    would like to ask just a very preliminary question regarding
    this. In our new law, affidavits of support are required for
    sponsored immigrants, which are legally binding on the sponsor
    so that their ward does not become a public charge. We put that
    in the law, and we said that to meet the responsibility, there
    could be public charge bonds. Those are the words, public
    charge bonds.
        So I bring in some relatives from Italy who are old, and
    under our wonderful policy of family unification, we bring them
    in. I am supposed to be responsible for them, not our SSI
    program. Courts would never help us in our previous law, so
    Congress said I can meet my responsibility by putting up a
    bond.
        I will ask you: How many people have been admitted under
    sponsorship arrangements since we enacted the new law? What is
    happening with reference to trying to get an enforceable
    relationship of sponsorship versus the legal alien? Are there
    any court challenges to our new statute? Could you give us some
    answers to those questions?
        Ms. Meissner. I will give you what I know at this point,
    and I will provide some additional information.
        The implementation of the provisions you have just cited is
    part of a whole range of regulatory requirements that we have
    in implementing the law. We have developed the new affidavit of
    support, the actual form, and it is, I believe, in the final
    clearance processes at OMB. Forms have to be approved.
        We are writing the regulations. The regulations are not yet
    complete. They will then obviously go through a circulation and
    a comment period as well. Until the new form and the actual
    regulations are published, we are not yet implementing the
    provisions. But that is on a very fast track, and we have a
    very aggressive effort underway on the entire regulation-
    writing front. We will be happy to keep you apprised how that
    is developing as we move along.
        Senator Domenici. Mr. Chairman, I believe, as the
    appropriating committee for the ongoing operational budget for
    the INS, it is imperative that we see to it that this law is
    complied with, or we will be right back in the muddle. Somebody
    will--in 6 or 8 years--find that we have legal aliens here and
    sponsors will not be taking care of them, and then they will
    say nobody can enforce the law. We ought to be able to follow
    this policy pretty rigorously, and I urge that you do that
    however you can in the appropriations process.
        Senator Gregg. I would be happy to get any suggestions the
    Senator has, and if the Senator has language he wishes to put
    in this bill to this effect, we would be happy to put it into
    the bill.

                             effect of Welfare Act

        Senator Domenici. One last issue on which I would like you
    to get us some numbers. Currently there are naturalization
    waiting lists of over 2 years in some jurisdictions. After the
    welfare reform bill of last year, noncitizens had a grace
    period of 1 year to complete the naturalization process before
    being terminated from the welfare rolls. That is what I
    understand the law was.
        Can you tell us or could you dig up the information as to
    how much of the influx in applications is due to noncitizens
    affected by the welfare reform bill?
        Ms. Meissner. We will try to provide that information. It
    is not a question that we have asked on the naturalization form
    or that we ask in the interview. People apply for
    naturalization. They pay a fee in order for their
    naturalization application to be adjudicated.
        There is no question that the incredible increase in
    naturalization applications that we are receiving this year and
    over the last 2 years has something to do with changes in
    Federal policy not only where welfare is concerned, but with
    the overall tightening of enforcement of the immigration law.
    But as to the extent to which we could disaggregate that within
    the application pool, I have some doubts. We will try.

                          requirements for Citizenship

        Senator Domenici. I think we ought to know for the record
    that INS has already, Mr. Chairman, by regulation waived as
    part of expediting citizenship, the English requirement, and
    they are easing other barriers so they can take care of this
    backlog.
        Ms. Meissner. Well, let me be clear. We do not waive
    anything unless there is a statutory basis. There is not an
    English requirement for the elderly, for people that are 55
    years old and 15 years in the country or 50 years old and 20
    years in the country. But we are certainly not waiving
    requirements without a statutory basis.
        Senator Domenici. I did not think you were doing anything
    illegal. If you promulgated rules to do it, you probably found
    the justification in the statute.
        Ms. Meissner. Right, absolutely.

                             Naturalization backlog

        Senator Domenici. I am raising this because in an effort to
    get these applications through, we are doing extraordinary
    things. Much of the blame is being placed for this big backlog
    on welfare recipients who want to become citizens. I think it
    would be helpful if we could find out how much of that is true.
        Ms. Meissner. Well, we do know that we have very large
    numbers in our application pool of naturalization applicants
    who have been in the country 15, 20 years, a very long time of
    permanent residency. One could only ask the question why are we
    naturalizing them now. It has to do with changes in policy of
    which welfare policy changes are among the principal ones.
        But I want to be very clear here, as I tried to be in my
    statement, that the effort that we have been making to handle
    naturalization applications is a response to historic levels of
    applications. These are applicants who pay for the service of
    having their applications adjudicated, and we have a
    responsibility to handle those applications in a timely
    fashion.
        We also have a responsibility to do it with integrity and
    according to a process that is correct, and there is no
    question that we have had a systemic weakness that we did not
    foresee sufficiently. We have taken strong measures to address
    it. We now do a 100-percent fingerprint check. We are working
    daily with the FBI, and have implemented a whole series of
    measures to make that work more effectively. So we are
    committed to the proper balance between timeliness and
    integrity.

                    Drugs entering through the port of entry

        Senator Domenici. My last question has to do with all three
    of you, but in particular to the two law enforcement gentlemen
    who are here. I thank both of you for your wonderful work and
    great coordination. Things are much better in terms of DEA
    working with the FBI.
        What we are hearing on the border is that most of the drugs
    coming into the United States are not coming through some
    newfangled airline system that is bringing them in. They are
    coming in right through our ports of entry; that is, they are
    coming in under the hoods of automobiles and trucks. Recently
    they found one vehicle where they had literally built a new
    metallic impoundment in the block of an engine so that they
    displaced some of the engine block and they stuffed that with
    heroin. Are we putting in modern equipment? Are we engaged in
    an operation to modernize these ports and their techniques and
    capability? This is the biggest way illegal drugs are coming
    in. Could you just give us a quick observation?
        Mr. Constantine. If you are talking about people in
    interdiction, you are really talking about Customs enforcement
    and port inspectors.
        Senator Domenici. Yes.
        Mr. Constantine. About 80 percent of the successful hits
    are intelligence-driven. That means usually there is an
    investigation, in the United States, or a DEA or FBI agent
    overseas who has an informant or a major investigation
    involving a wiretap who is able to predict the plane, the ship,
    the car.
        One of the things that we know is that a substantial amount
    of the cocaine on the Southwest border is coming through in
    either personal vehicles or large transportation vehicles. And
    it varies from building what we call traps in the trunks of
    vehicles that would be not easily found on a cursory
    inspection, or something as elaborate as taking the tanks and
    refinishing the inside of those and filling them with cocaine.
        I have talked with Mr. Weise, the Commissioner of Customs,
    and the head of the Coast Guard, and they are spending a
    substantial amount of money in research and development to come
    up with some types of scanning devices that are able to pick up
    the chemical or radioactive specific properties of specific
    drugs. You have probably been there, too, Senator, at many of
    these border crossings, where there are hundreds of thousands
    of vehicles or trucks coming across every day.
        Picking which vehicles to search is approximately 80
    percent intelligence-driven. But you still frequently need
    these types of technologically advanced searching devices.
    Probably the Customs officials would be the best to answer
    that, but I know they are working on it.
        Senator Domenici. I think so, Mr. Chairman. Maybe I could
    ask Customs.
        Senator Gregg. What is your chance of developing that
    system?
        Mr. Constantine. I am not an expert. I have listened to
    people in Customs as they have discussed the things that they
    are working on. They seem to be hopeful that they will be able
    to find some types of devices, especially along the border, for
    the most part in commercial cargo. They hope to be able to scan
    the whole box on a tractor trailer and then pick out a correct
    hot spot for secondary inspection. But I have not seen a
    demonstration of it, and to tell you the truth, it is just a
    skill that is beyond my present capacity.
        Senator Domenici. Thank you very much.
        Senator Gregg. Thank you.
        Senator Hutchison.

               Illegal immigration and drug enforcement in Texas

        Senator Hutchison. Thank you, Mr. Chairman.
        I have heard a lot of frustration here. Count me in as
    frustrated. I am almost hopeless about our situation in Texas.
    We have an estimated 500,000 illegal immigrants in our State.
    We are now becoming the center for the entrance of drugs. When
    I talk to ranchers in our border areas, they tell me stories
    about not being able to go out on their lawns without a gun
    because they will meet someone with an AK-47 in their front
    yard. Customs agents on our side tell me that they are told to
    look the other way as someone brings in cocaine and heroin, and
    if they do not, their relatives in Mexico will come to harm or
    death.
        Now, my concern is great because I do not think we are
    doing enough to solve the problem. I appreciate, Mr.
    Constantine, that you came to my office, and you are trying to
    address my concerns. I do appreciate that. But the facts are
    California has 140 miles of border; Texas has 1,200 miles of
    border. And yet there are 265 DEA agents in all of Texas in one
    Houston office; in San Diego, CA, they have 147; and in Los
    Angeles, they have 261. We have the same number of DEA agents
    for 1,200 miles of border that they have in just the Los
    Angeles office, for 140 miles of border.
        Now, I am not against California having help because it too
    is a transit area for drugs and illegal aliens, there is no
    question. But it is time to start with a fresh slate. It is
    time now that we had some accommodation on 1,200 miles of
    border, Border Patrol agents.
        Ms. Meissner, we have authorized 1,000 new Border Patrol
    agents. Last year most of the newly developed agents went to
    California, even though McAllen and El Paso have more drug--$2
    billion went through McAllen last year. McAllen is now the
    second highest sector in the number of illegal aliens
    apprehended and in marijuana coming across the border. We
    deserve and need more Border Patrol agents.
        So forgive me if I am harsh, but it is not complying with
    the law to come in with a budget for only 500 agents,
    especially at a time when we have been shortchanged in Texas.
    And I am not saying take anything from California. I am just
    saying go the full 1,000 and give Texas its fair share. In some
    places, we have fewer Border Patrol agents today than we did 5
    years ago.
        My question to each of you is: What are you going to do
    about this huge inequity at a time when we are being overrun
    with illegal aliens and with drugs that are not only coming
    into the country through our sectors--which Senator Domenici
    correctly pointed out is the main source, but people who live
    in the remote areas of Texas fear for their lives. When I go to
    Alpine, when I go to Marathon, small communities that do not
    have the resources in their county budgets to deal with a drug
    dealer, that is where these people are defenseless. It is
    almost a lawlessness on our border. It is like the old frontier
    days. We do not need Judge Roy Bean, but we do need help from
    the Federal Government.
        So I am going to ask each of you to address these concerns.
    Tell me what your plans are that will make me at least be able
    to go home with a straight face and tell my constituents that
    we are doing all we can.
        Mr. Constantine. I will go first. I share your frustration
    and your concerns. I have testified up here again and again as
    to the scope and power of these criminal organizations. I do
    not think anybody should underestimate their ability to corrupt
    and intimidate law enforcement on both sides of the border.
        We have seen a demonstration of what their impact is in
    Mexico. I think we should be very careful to recognize the fact
    that, given the amount of money and power that they have and
    the ruthless attitude that they have toward life, I see no
    indication that they would respect our borders.
        I have been to McAllen. I have been to Rio Grande City. I
    have been to Laredo. I have been to Alpine. And I have sat with
    the ranchers in Eagle Pass where, in effect, the border
    probably has the potential to disappear because people who own
    ranches along the Rio Grande River are afraid to go down to
    their boat dock for fear that they will see a murder or see a
    body and become a witness, and by becoming a witness that they
    will become vulnerable and will be exterminated.
        What has happened is they have put their property up for
    sale, and we find that there are shell corporations from the
    traffickers purchasing the property. Once that happens, there
    in essence is no border as far as drug trafficking is
    concerned.
        I can only speak for DEA. Virtually every available major
    enhancement that I have been able to get--really, I have not
    gotten it; you have given it to me, both the House and the
    Senate--has gone to fight these major trafficking
    organizations. I have done that and filled those agent
    vacancies before I have filled them in New York or Chicago or
    Philadelphia.
        We recognize that there are powerful organizations that
    infiltrate the United States in Texas and in California, and
    they are equally as powerful and equally as dangerous. And to
    move the resources out of one place and to put them over in
    another place will only, as somebody mentioned, open the
    opportunity for the damage to continue, the damage to continue
    unaddressed.
        So the last two budgets that we have put in have requested
    major enhancements in Texas and in California and New Mexico
    and Arizona, and virtually every operational dollar that I can
    find for translation costs, for wiretap investigations in the
    United States has been directed against these entities. If you
    look at the actual budget, probably 20 to 25 percent--and that
    is a lot of money nationwide or worldwide for operations--has
    been addressed in those four States, including Texas.
        So I share your concern. I have testified again and again
    that these criminal organizations is not a border issue. It is
    a criminal organization issue, Senator. They have to be
    addressed and they have to be addressed very vigorously. And
    that is what we have tried to do.
        Senator Hutchison. Mr. Constantine, before I go to Ms.
    Meissner, two of the three largest drug cartels are operating
    in Juarez and Matamoros, across from McAllen and El Paso. You
    have your agents in Houston. Is there any hope that we are
    going to be able to see some movement toward those areas where
    we are looking at two of the largest three. Clearly the
    resources--I understand what you are saying about the
    resources, but the resources have been allocated in a very
    inequitable way. And I am not saying move them, but I am asking
    what you are going to do to have some equity here for the key
    areas. You talk about moving them causing problems, but the
    lack of help in these areas is also causing that to become a
    bigger problem.
        Mr. Constantine. Maybe I can help, and maybe I have not
    been clear. The enhancements in Texas and California for the
    last 3 years have been similar in numbers and percentages. We
    have offices in Houston, a major division in Dallas, and we
    have 70 people in El Paso. We also have offices in McAllen,
    Brownsville, and Alpine.
        This budget that we have includes 96 people for the
    Southwest border. A substantial amount of that will be going to
    those four States. There is a major increase of 54 agents for
    the methamphetamine program. A lot of that involves the border
    issue.
        So what we have been trying to do is address it. We also
    are looking, as I mentioned in the office the other day,
    because of the nature of the trafficking, to make El Paso a
    separate division. Currently, New Mexico and Las Cruces are
    covered out of our Denver office. Really, the relationship on
    drug trafficking is much closer between El Paso, TX, Las
    Cruces, and the rest of New Mexico. And if we did that, that
    would be the third division in the State of Texas, and there is
    only one other State in the Union that has three divisions,
    California. So our largest commitment has been to California
    and to Texas.
        Senator Hutchison. Well, I am really looking forward to
    that El Paso component because I think you can see from the
    statistics that it is warranted.

                        request for Border Patrol agents

        I have only got about 1\1/2\ minutes left, and I would like
    to talk to you Commissioner Meissner, if you would tell me what
    you are going to do on the Border Patrol issue. Tell me you are
    going to increase your 500 Border Patrol agents to 1,000.
        Ms. Meissner. Well, let me say first that we are extremely
    concerned about Texas, particularly south Texas. We recognize
    that the investments that we have made in California and in
    Arizona are creating problems in Texas simply because we have
    tightened up and the pressure is now in Texas.
        We have put very large numbers of resources into Texas in
    the last 2 or 3 years, but we will be putting much more in in
    the next 2 to 3 years. The difficulty is that we can build up
    our resources only so quickly and still do it in a way that is
    effective.
        Let me just give you McAllen, which is the major source of
    concern at the present time. This year, we are putting into
    McAllen almost a 50-percent increase, about a 47-percent
    increase in personnel resources. That is straining our
    capability. That is as far as we think, responsibly, you can
    increase the number of agents and still have those agents be
    properly supervised, have the equipment get to them and be used
    effectively. You cannot double and triple these sectors all in
    1 year. It has to be a multiyear effort. But that multiyear
    effort is underway. There are large numbers of sensors, large
    numbers of scopes that have come into Texas and that will
    continue. Our experience is that it takes 3 years, maybe more,
    to get the whole package put together so that the fences are
    built, the roads are built, the training is completed, the
    supervision is intact, and the intelligence is working in a way
    that has us focusing where we need to focus.
        In terms of the 500 Border Patrol agents this year, we had
    to make the very difficult choice between infrastructure
    investment and additional personnel. We have been growing so
    quickly in this agency, particularly in the Border Patrol. The
    Border Patrol will have increased by 85 percent on the
    Southwest border in the last 3 years. That is a huge, huge
    increase, but the infrastructure to support it has not kept up.
    We have equipped the agents, but some of the deeper needs that
    we have, to replace our vehicles on a timely basis, bring
    enough buses into the system to sustain the detention that has
    to support the border efforts, improve our detention at Port
    Isabel, for instance, are a major aspect of our budget proposal
    for this year.
        There are lots of infrastructure improvements that support
    the Border Patrol's effectiveness in this budget. We simply
    felt that we had to have balance in the growth at this point.
        Senator Hutchison. Thank you, Mr. Chairman. I know my time
    is up. Ms. Meissner, this is the same thing that Ms. Reno has
    said. But I have to tell you that Congress has passed a law to
    deploy 1,000 Border Patrol agents every year for the next 5
    years. That is the will of Congress. I understand what you are
    saying, but I do not think that not deploying the full 1,000 is
    the right way to go when we have the problems that we have. And
    I hope we will be able to discuss it more in the future. And I
    apologize, Mr. Chairman.
        Senator Hollings. Mr. Chairman, the Senator from Texas
    wants more agents, and the Senator from New Mexico wants more
    equipment. And I have been attending hearings and have been
    hearing about wonderful hearings of coordination now for 25
    years; yet the drug situation gets worse each year and we get
    more frustrated.
        Senator Domenici, when you and I were chairmen just 10
    years ago, this Justice Department was $4 billion. It is now up
    to $19 billion. Of course, we are going to get up on the floor
    in a little while and say let's cut spending, cut spending, cut
    spending--and taxes, by the way, the wherewithal to pay for any
    of this, which is a wonderful exercise. But in my opinion,
    Pete, you and I have got to get some money in education. When I
    went around--and I have been in 36 of the 46 counties. These
    cops on the beat are working. And the majority of my cops on
    the beat have found themselves not on the beat just in the
    streets in the afternoon, but in the schools--and in the
    schools lecturing on drugs.
        Senator Domenici. No doubt.
        Senator Hollings. You know, nobody here has been smoking--
    if we had had this hearing when John Pastore was the chairman,
    ashtrays would be out and you would have to ask the staff to
    please open the window here because you could not breathe,
    literally. But we have learned. And as long as 5 percent of the
    population is going to snort 50 percent of the drugs in this
    world, the Senator from Texas, the Senator from New Mexico, and
    the Senator from South Carolina are going to come here
    continually frustrated and nothing happens. It just gets worse.
        We had General Chapman 20 years ago who wanted to take
    these porous metal strips that you put for a temporary landing
    strip during World War II, to erect them in a perpendicular
    fence, a Maginot Line, all along the Rio Grande for 2,000
    miles. We have had every idea in the Lord's world. Senator
    Hutchison, you are right. They are coming over in the
    thousands, but all you have to do is go down to Tijuana. How
    many people cross into the United States from Tijuana in a day,
    cars and people?

                           number of Border crossings

        Ms. Meissner. You mean cross through the port of entry?
        Senator Hollings. Yes; cross the port of entry.
        Ms. Meissner. It is the busiest crossing port in the world.
        Senator Hollings. Yes; but how many? Thousands and
    thousands. You cannot expect everyone with----
        Ms. Meissner. Tens of thousands.
        Senator Hollings [continuing]. The right equipment to look
    at how they inspect all those trunks and autos. As long as
    America is going to snort it, as long as we have got the
    demand, I can tell you they are smarter than we are. They will
    get it in here. We, you know, chase the flowers from Colombia.
    I burned the poppy fields in Turkey. I have been up in the
    Golden Triangle in Burma, destroyed the factories in Marseille.
    We are just wasting time. We just all act like we are
    responsible, and it is the most irresponsible activity I know
    of to continue and not get on with the education part of it. We
    have got to do it. It is in the little schools in your State
    and mine.
        Senator Hutchison. I just want to say that I think that the
    points you are making are right on target. But there is one
    difference between police on the streets and Border Patrol
    agents and DEA agents, and that is, we cannot fund every police
    department in America. That is not a Federal responsibility.
    But there is no alternative to the Federal responsibility of
    patrolling our borders. That is why, if I have to choose
    between those two, I am going to choose for the Federal
    Government to do the job that only it can do and do well. Our
    borders are under siege, and it is a Federal responsibility to
    prevent that.
        Senator Hollings. Well, I agree with you on the Federal
    responsibility. That is a good political science course answer.
    But the reality of the world in which we live is that the best
    way to patrol that border is to cut back on the need of the
    patrolling because it is physically and financially impossible
    for the Federal----
        Senator Hutchison. Absolutely. You are right.
        Senator Hollings [continuing]. To answer up to their
    responsibility. We can build fences. We can do it, and then
    they will come back around. Like we have run them out of some
    of the ports on the east coast, not Baltimore and not
    Charleston. We have the problem there. But it is going to come
    in, Pete. You know that. We have got to do something else.
        Senator Domenici. Could I respond?
        Senator Hollings. Yes.
        Senator Domenici. I noticed that you asked me to stay a
    while.
        Senator Hollings. Yes.
        Senator Domenici. I appreciate the thoughts. We have worked
    on a lot of things together, including this committee, for a
    long time. I am not as pessimistic as you because in the not
    too distant past we had much less drug use in America than we
    do today. I am not suggesting that was all attributable to us
    having less drugs coming into America by law enforcement, but
    we had less drug use. It is now on the upswing. It is moving up
    dramatically again.
        I would agree to the extent that we ought to be doing both.
    We ought to clearly be working on the American people and our
    young people with reference to educating them on not using
    illegal drugs. I think at the same time, however, a country
    like ours should not do the minimum on the border; we have got
    to do the maximum. Clearly, these people are burdened with drug
    cartels that have a lot of money and a lot of resources.
        We are engaging in a pretty good war on drugs on the
    border. It is much better than it was 3 years ago, and the
    plans we have got will make it even better in the future. I
    want to stick right with it, and give them the resources they
    need. I also want to parochially indicate that while I agree
    with the Senator from Texas on everything she said, I would
    want you to know that in the written questions that I
    submitted, I asked you about New Mexico before she asked you
    about Texas. [Laughter.]
        Senator Hutchison. Mr. Chairman, may I also submit another
    question for the record that I did not have a chance to ask?
        Senator Gregg. Yes.
        We have a vote on. Did you have another question you wanted
    to ask?

                          INS coordination with Police

        Senator Hollings. Well, yes. Ms. Meissner, look here it is
    headlines in my local newspaper: ``Police arrest illegal
    aliens, INS will not get involved.'' It is the same thing that
    Senator Campbell was getting into. We not only have it at the
    border. At least you have an office in Texas. I do not even
    have an office in South Carolina. I have to call North
    Carolina. And when we call North Carolina, Immigration, they
    say, oh, do not worry about them, let them go.
        Ms. Meissner. But you are getting an office now.
        Senator Hollings. Ma'am?
        Ms. Meissner. You are getting an office this year.
        Senator Hollings. We are going to get one?
        Ms. Meissner. Yes.
        Senator Hollings. Good enough. I hope we can move
    Constantine down there.

                                 Border control

        Senator Gregg. I do not want to keep you here, so I have a
    series of questions that I am going to send to all of you.
    There are a lot of issues which we have questions about that go
    to the specifics of the budget.
        I expect some of us will be here 2 or 3 years from now,
    Commissioner, and your statement that the borders will be
    pretty much secure in 2 or 3 years is something we are going to
    hold you to.
        Ms. Meissner. I said stable.
        Senator Gregg. Well, stable is a much further term than
    where we are presently. We are going to give you the resources
    you need to do that, and, hopefully, you can accomplish it. It
    sounds to me to be a very ambitious goal, but something that we
    certainly need to accomplish. We will also give DEA and the FBI
    the resources needed to do their jobs.
        I think the problem has been identified, though, by all the
    members here, and we certainly understand it. There will be
    problems as long as the demand for drugs is $7 to $10 billion.
    We are a capitalist world. We have established that
    incontrovertibly, and there are going to be people out there
    who want to make the money. Whether education can reduce that
    demand, I do not know, but somehow we have to look at the
    demand side. We cannot blame it all on Mexico. If I were a
    Mexican, I would be upset that basically the demand from
    America has corrupted my entire government, or a large
    percentage of my government. The demand issue is a major part
    of the equation.

                         Additional committee questions

        But you folks are on the enforcement side. You are doing a
    good job. We appreciate it. There are people who put their
    lives at risk on a daily basis for us, and we very much
    appreciate that. Therefore, you need the support, and we will
    continue to give it to you. But we do have some specific
    questions we will submit.
        [The following questions were not asked at the hearing, but
    were submitted to the agencies for response subsequent to the
    hearing:]
                   Questions Submitted by Senator Judd Gregg
                        Federal Bureau of Investigation
                       national crime information center
        Question. What capabilities will NCIC 2000 not have that were
    planned for when we first appropriated funds for this effort? Do you
    anticipate additional costs over and above the estimated cost?
        Answer. NCIC 2000 will have the same capabilities that were planned
    when Congress first appropriated funds for the system. The FBI has made
    some technical changes in two areas. After contract award, the FBI
    removed the requirement for an on-line expert system based intrusion
    detection capability because no product existed that could satisfy the
    requirement and a prototype being requested in another application
    proved ineffective. Instead intrusion detection will be accomplished
    using an audit and analysis sub-system that will run in the background.
    Also, the original NCIC 2000 contract required the use of Government
    Open System Interconnection Profile (GOSIP) compliant communications
    protocols. When the GOSIP mandate was dropped, the FBI decided to use
    more modern communications that are in line with the protocols criminal
    justice agencies will use to access NCIC 2000.
        The FBI does not anticipate any additional costs over $183.2
    million.
         integrated automated fingerprint identification system [iafis]
        Question. What additional costs do you anticipate now that the
    IAFIS completion date has been revised to July 1999?
        Answer. The FBI has implemented a build to cost approach to the
    development of IAFIS. This will provide currently defined requirements
    to the user at the baseline budgetary cost of $640 million. The IAFIS
    budget is not expected to change unless Congress mandates additional
    requirements on the program, or there are major changes in operational
    user requirements. The FBI does not foresee this happening at this
    time; however, changes can and do occur in large, complex software
    development efforts such as IAFIS.
                          fbi laboratory investigation
        Question. Can you help me understand where we are with the FBI
    Laboratory? While we have provided funding for a new lab, modernization
    of equipment and the quality assurance unit, what additional
    requirements are anticipated as a result of the Inspector General's
    investigation?
        Answer. More than 3 years ago, the FBI began a large number of
    initiatives to improve the quality and timeliness of examinations
    performed by the FBI Laboratory. These initiatives include taking the
    initial steps needed in order to apply for independent accreditation of
    the Laboratory, obtaining funding for construction of a new state-of-
    the-art Laboratory facility, and bringing in more scientific expertise.
    In addition, in order to more efficiently and effectively support the
    needs of the law enforcement community, the FBI Laboratory is in the
    process of implementing a reorganization involving, among other things,
    a more prominent role for the Quality Assurance Unit and a
    restructuring of the Scientific Analysis Section. These efforts are
    just part of the FBI's constant work to re-evaluate and improve both
    the scientific processes and the equipment of the Laboratory. The
    findings and recommendations are being considered in concert with
    ongoing and new initiatives of the Laboratory; however, no additional
    requirements specifically attributed to the Inspector General's report
    have been identified.
        Question. Please help me understand whether any of the supervisors
    that were removed from the lab were accused of intentionally altering
    evidence? Were any of them promoted? Has any action been taken against
    them?
        Answer. When the FBI received a copy of the Inspector General's
    draft report, temporary personnel actions were taken with respect to
    four Laboratory employees, of which only two were supervisors,
    including Roger Martz, then Chief of the Chemistry-Toxicology Unit, and
    J. Thomas Thurman, then Chief of the Explosives Unit. Although not
    accused of ``intentionally altering'' evidence, Martz was accused of,
    among other things, fabricating evidence in the VANPAC matter. The
    Inspector General found no merit to that accusation.
        Thurman had been accused of, among other things, altering auxiliary
    examiner reports dictated by Frederic Whitehurst. The Inspector General
    found that when acting as principal examiner, Thurman (and certain
    other FBI Laboratory employees) had altered some of Whitehurst's
    auxiliary examiner reports. However, the Inspector General did not
    identify a single instance in which those alterations were made with
    the intent to bias an FBI Laboratory report. Moreover, of the 13 cases
    in which the Inspector General concluded that Thurman made substantive
    alterations to Whitehurst's dictation, none resulted in prosecution.
        Whitehurst first complained about Thurman's alteration of dictation
    in 1992, at which time Thurman was instructed to stop such alterations,
    and he apparently did so. Subsequently, in 1994, the FBI Laboratory
    undertook a review of Thurman's files to determine the impact of his
    alterations. That review was still ongoing in December 1994, when
    Thurman was promoted to Chief of the Explosives Unit. Because no final
    determination had been reached with respect to Thurman's alteration of
    dictation at that time, we do not believe that the Career Board, which
    considered Thurman's promotion, was aware of or considered the
    alteration of dictation issue.
        Since January 24, 1997, Martz has temporarily been assigned to the
    FBI's Washington Field Office and Thurman has temporarily been assigned
    to the Bomb Data Center, where he does not perform or supervise any
    scientific analysis. The FBI has requested the Department of Justice to
    determine what action, if any, is appropriate with respect to the
    Inspector General's findings against Martz and Thurman, as well as the
    other employees criticized in the report.
                          laboratories for fbi and dea
        Question. Director Freeh and Mr. Constantine, what differences do
    you see with the work that is done at the FBI, DEA, Secret Service, and
    Bureau of Alcohol, Tobacco, and Firearms (ATF) laboratories? With
    discretionary spending going down, have you considered consolidating
    some of these laboratories? By designing the new capability into the
    new FBI lab, is it possible to consolidate DEA's field labs in the lab
    at Quantico?
        Answer. In October 1995, at the request of the Deputy Attorney
    General, Director Freeh directed the Office of Investigative Agency
    Policies to examine the consolidation of the FBI, DEA and INS
    laboratories. A document known as Resolution 11 served as the guideline
    for this examination.
        Resolution 11 established the Interagency Laboratory Working Group
    (ILWG) to examine the feasibility of collocating or consolidating the
    laboratories of the INS and the DEA into the new FBI Laboratory
    facility.
        After a three-month study, the ILWG members reported the finding to
    the Director of Investigative Agency Policies (DIAP). In the
    recommendation of the ILWG to the DIAP, the report states ``All members
    of the ILWG are in agreement that the consolidation would provide
    minimal savings in the sharing of equipment. There would be no savings
    in terms of personnel costs through consolidation and that there would
    be minimal savings in terms of space considerations * * *.'' In
    addition, it was the position of the ILWG that ``* * * it is not
    possible under consolidation, to maintain the same important services
    to the DEA and INS by their respective laboratories, if such
    consolidation were to take place.''
        The mission of the DEA's laboratory system is to serve as a
    national and international leader in the field of forensic drug
    analysis; to provide scientific and technical assistance and service to
    the special agents of the DEA, FBI and other Federal and state law
    enforcement agencies. These services are also provided to the criminal
    justice system at large for the enforcement of controlled substances
    laws; the development and dissemination of scientific information, and
    the coordination of scientific activities with other Federal, state and
    local law enforcement agencies. Through DEA's Office of International
    Operations, these scientific services are provided at an international
    level. The FBI, Secret Service and ATF laboratories provide specified
    support based on their congressionally dictated charters and mission
    statements.
        The DEA laboratories do not duplicate services which are offered by
    any other Federal law enforcement laboratory. The DEA laboratories'
    primary function is to analyze evidence for the presence of controlled
    substances, and to provide fingerprint identification services related
    to the seizures of controlled substances. Interagency agreements have
    established the DEA laboratories as the exclusive providers of drug
    analysis support for the FBI, USCS, Border Patrol, and HUD. Analytical
    support is provided to the United States Park Police, the United States
    Capitol Police, the United States Secret Service, ATF, National
    Institutes of Health, and state and local law enforcement efforts when
    requested. In addition, specialized, highly developed forensic science
    services related specifically to drug law enforcement, are offered
    worldwide. No other laboratory system provides this uniquely focused
    capability.
        Consideration has been given to consolidating Federal laboratories.
    The assumption being that by combining services thought to be
    ``duplicated'' by these laboratories, operating costs would decrease,
    resulting in substantial savings to the government as well as increased
    efficiency of all services provided. With this idea in mind, an ILWG
    was established to determine the feasibility of consolidating the FBI
    Laboratory, the DEA Special Testing and Research Laboratory, and the
    DEA Mid-Atlantic Laboratory.\1\ This group consisted of two laboratory
    representatives each from the DEA, FBI, and the Immigration and
    Naturalization Service. Representatives from the Department of Justice
    and the United States Marshals Service were also participants in this
    process. The overall objective was to demonstrate a savings which would
    result from merging laboratories and/or sharing facilities,
    instrumentation, technical knowledge and expertise. This task was
    accomplished by reviewing the different laboratories operational costs,
    mission essential programs, and the needs of the individual
    laboratories' agencies. The consensus of the ILWG was that
    consolidation was not a viable option because such an effort would
    adversely affect the missions of those laboratories involved.
    ---------------------------------------------------------------------------
        \1\ Pursuant to Attorney General's order number 1814-93, Resolution
    11 concerning Department of Justice laboratories was issued.
    ---------------------------------------------------------------------------
        This conclusion was supported by the following facts:
      --Consolidation would provide minimal savings in the sharing of
            equipment among the laboratory scientists. Laboratory equipment
            is calibrated and configured mechanically for specific kinds of
            analyses such as: the analysis of drugs, the analysis of arson
            residues, or the analysis of trace evidence such as fiber or
            plastics. Mechanical modifications of spectrophotometers and
            chromatographs for use in other types of analyses involve major
            expenditures of time and money. These reconfigurations of
            equipment would offset any potential savings resulting from the
            sharing of instruments. Additionally, the numbers of each type
            of equipment are based on the staff size meaning that each
            piece of equipment is effectively in full-time use.
      --Consolidation would result in marginal savings in terms of space
            considerations. Forensic science laboratories must be
            configured to receive, analyze, store and process specific
            kinds of evidence. In the case of drug evidence, storage and
            destruction can involve amounts ranging from trace amounts to
            multi-ton quantities. Given the dollar value of the contraband,
            tightly controlled access and accountability procedures have
            been developed. The same process applies to safeguarding trace
            evidence and biological samples including serological
            specimens. Consolidating evidence handling facilities would
            present significant problems in the areas of accountability,
            specimen integrity, and biohazard dangers to staff members.
            Each type of evidence requires a specific kind of storage
            facility and specially trained people to handle the specimens
            submitted for examination.
      --Consolidation results in a centralized system of laboratory
            support. United States Government forensic science laboratories
            were established to provide front line, tactical support, and
            to address specific analytical requirements.
        All eight DEA laboratories provide analytical services in the
    examinations of controlled substances, and fingerprints in controlled
    substance enforcement investigations. Consolidating the DEA
    laboratories would mean removing them from the geographical areas where
    their impact over the past twenty-four years has been felt at all
    levels of law enforcement.
        The issue of consolidating DEA's field laboratories with the new
    FBI laboratory at Quantico, would be neither cost effective nor
    practical from an operational perspective to consolidate DEA's seven
    field laboratories and DEA's Special Testing and Research Laboratory
    with the new FBI Laboratory at Quantico. Along with direct analytical
    responsibilities in the laboratories, there are also accompanying
    responsibilities for all laboratory directors to provide training to
    state and local forensic science analysts and enforcement personnel
    working primarily to enforce state drug laws in all fifty states. The
    DEA Special Testing and Research Laboratory scientists provide
    specialized forensic drug analysis training at DEA international
    forensic chemists seminars at least once a year, and at state and local
    forensic chemists seminars at least five times a year. What sets the
    DEA laboratory system apart is the fact that scientific personnel are
    strategically located around the United States to provide enforcement
    assistance in controlled substance examinations, including clandestine
    laboratory seizures, within a a matter of hours.
        The General Services Administration (GSA) prospectus development
    study of 1992, the interagency laboratory working group study of 1995,
    the interagency budgetary adversary council review of 1995, and the
    Inspector General's (IG) report issued at about this same time have
    examined the feasibility of consolidating the DEA laboratories into one
    geographical area, or consolidating DEA's laboratories with other
    government laboratories. In each case, the conclusions were the same--
    the logistics, finances, and mission support impact would severely
    hamper United States drug enforcement efforts. The IG report reflected
    a 97 percent satisfaction rate for DEA laboratories' services in the
    enforcement and legal communities.
        There are currently more than 190 forensic chemists assigned to the
    eight DEA laboratories. The primary responsibility of these
    laboratories is to provide operational support to this country's drug
    enforcement efforts. This mission is achieved through the analysis and
    evaluation of suspected controlled substances. These analyses of
    controlled substances are accomplished with one goal in mind--to
    facilitate the enforcement of the drug laws passed by the United States
    Congress. At the same time, all DEA chemists are tasked with providing
    testimony in state and Federal courts in their laboratories' respective
    geographical areas of responsibility.
        From a building design perspective, the examinations of drugs
    requires an isolated laboratory designed to accommodate large
    quantities of chemical vapors, and hazardous chemical disposal
    capabilities. The existing DEA laboratories are in need of replacement
    because of age and new environmental laws. New DEA laboratories are in
    the design phase to comply with environmental and safety standards.
    These laboratories are being designed with specialized air handling
    systems and increased analytical capabilities. In the Administrator's
    Congressional Appropriations Testimony of March 19, 1997, before the
    House Appropriations Committee, Subcommittee on Commerce, Justice,
    State, Judiciary, and related agencies, regarding fiscal year 1998
    appropriations, Mr. Constantine requested funding for laboratory
    reconstruction. The Administrator reinforced his commitment to ``safe
    and efficient laboratory facilities.'' He voiced his support for
    providing ``chemists and support staff a safe working environment * * *
    that can handle the increased volume of drugs and evidence flowing from
    burgeoning investigations.''
        In summary, consolidation of DEA's field laboratories with the new
    FBI laboratory at Quantico is not practical. The price in dollars would
    be very high. More importantly, however, there would be an accompanying
    negative impact on the enforcement efforts of DEA in providing
    strategic, operational, and scientific support for drug law enforcement
    initiatives in this country and abroad. With the current laboratory
    system infrastructure, DEA has been successful in providing a service
    which works for Federal drug law enforcement.
                            fbi disciplinary office
        Question. Has the FBI created a new disciplinary office? Would you
    help me understand why such an office should not report directly to the
    Attorney General?
        Answer. Yes. The FBI recently consolidated under a new, independent
    Office of Professional Responsibility (OPR) disciplinary functions that
    were previously located in its Inspection and Personnel Divisions. The
    new FBI OPR reports directly to the Deputy Director. The FBI hired a
    career Federal prosecutor to lead the OPR and provided additional
    staffing to ensure the Office has the resources needed to conduct its
    investigations thoroughly and on a timely basis. The reprogramming
    request for the additional staffing was approved by the Congress on
    January 8, 1997.
        On November 8, 1994, the Attorney General issued a Departmental
    Order that gave the Director the responsibility for exercising
    authority in all FBI personnel matters. The Order also established
    reporting and oversight procedures to permit the Attorney General and
    her staff the ability to exercise supervision of an OPR matter when
    necessary.
        FBI disciplinary procedures are designed to address routine cases,
    which are the great majority of matters handled. Procedures also exist
    however, to address unique, sensitive situations which allow for FBI
    resources to be assigned directly to the Department of Justice to
    investigate and/or adjudicate these matters. As a practical matter,
    disciplinary authority is so intimately intertwined with the exercise
    of other personnel and managerial authority that it can only be
    exercised in coordination with and not independently of those other
    functions, as in those rare cases provided for by the Attorney
    General's November 1994 order.
                     telecommunications carrier compliance
        Question. Why is the FBI requiring simultaneous wiretapping
    capability in dozens of areas where no taps have ever been requested?
    Shouldn't the FBI place a higher priority on areas where there is a
    demonstrated need for simultaneous tapping capability?
        Answer. In its review of historical interception activity, law
    enforcement recognized that there were a number of geographic areas
    that did not exhibit interception activity during the time period
    studied (January 1, 1993, through March 1, 1995). This does not mean
    that these areas never experienced interception activity; rather, that
    interceptions did not occur in these areas during the 26-month study
    period. Experience has shown that criminal activity or exigent
    circumstances can occur anywhere and at any time. In view of this
    circumstance, it would not be prudent to establish capacity
    requirements of zero as it would not provide even minimal flexibility.
    In addition, the absence of capacity requirements in a particular
    geographic area would largely undermine the intent of CALEA, which is
    to preserve law enforcement's existing ability to conduct
    interceptions. Law enforcement must be capable of preserving some level
    of interception ability in all geographic areas.
        Consequently, in counties with little or no historical interception
    activity, a minimum actual capacity requirement of two and a maximum
    capacity requirement of three were established applicable to
    telecommunications carriers offering local exchange service. Likewise,
    in wireless market service areas with little or no historical
    interception activity, a minimum actual capacity requirement of two and
    a maximum capacity requirement of four were established applicable to
    telecommunications carriers offering cellular and Personnel
    Communications Systems services.
        The capacity requirements will serve to advise telecommunications
    carriers of their obligations for supporting future potential law
    enforcement interceptions. These obligations will exist regardless of
    whether a particular telecommunications carrier receives reimbursement
    for complying with the capacity requirements out of CALEA funds. Those
    carriers who have significantly upgraded, replaced or otherwise
    undergone a major modification must comply with the capacity
    requirements post carrier statement submission without the benefit of
    recovering costs through CALEA. What is important to note is that law
    enforcement will apply CALEA appropriated funds in a prioritized
    manner. CALEA expenditures will be made in such a way as to ensure that
    those geographic areas with the highest interception activity and
    existing technological impediments are addressed first.
        Question. Regarding CALEA who are you negotiating with? If the FBI
    has not started to negotiate cooperative agreements with carriers, how
    can Congress reasonably expect the FBI to meet the September 1 deadline
    for the implementation of these agreements? Why is the FBI insisting on
    standards that no one in the telephone industry believes are necessary
    and, if implemented, would be subject to legal challenges due to the
    invasion of privacy?
        Answer. The FBI is in the process of negotiating cooperative
    agreements with telecommunications carriers and the manufacturers with
    whom they will subcontract. Actual awarding of cooperative agreements
    will begin upon Congressional approval of the FBI's March 27, 1997,
    reprogramming notification to begin the obligation of appropriated
    funds. The September 1 deadline does not apply to the implementation of
    cooperative agreements. Since January 1997, the FBI has had several
    general meetings to explain to the telecommunications industry the
    purpose and process for the cooperative agreements. Additionally, the
    FBI has had several one-on-one meetings with carrier/manufacturer pairs
    for the purpose of negotiating terms and conditions and resolving
    technical issues associated with each individual contract. To date, the
    process is moving forward in a positive manner, and it is anticipated
    that the first cooperative agreement will be executed in the near
    future.
        In order to aid the telecommunications industry in meeting the
    assistance capability requirements and as part of the consultative
    process mandated by CALEA, law enforcement has submitted comments and
    made recommendations to the industry's standards setting process. These
    comments and recommendations have been aimed at educating the industry
    on what is necessary to comply with the requirements of electronic
    surveillance statutes, the rules of evidence, and in court. Failure to
    meet these requirements could jeopardize the ability of the United
    States Government to use electronic surveillance evidence in a criminal
    proceeding. Although the standard presently proposed by industry does
    not include a few of the recommendations suggested by law enforcement,
    the parties participating in the cooperative agreements are willing to
    table the disagreements regarding particular requirements in order to
    allow for a systems engineering and cost analysis to be conducted on
    all of the requirements. It is hoped that the results produced by the
    first set of cooperative agreements will assist both industry and law
    enforcement in assessing the complexity and reasonability of the
    requirements. It will also go a long way toward moving the
    implementation process forward.
        With regard to the standard, the FBI recognizes that the
    telecommunications industry has advocated the adoption of a
    ``minimalist'' standard. Such a standard could potentially create new
    electronic surveillance problems and shortfalls, which CALEA was
    intended to avert. Therefore, the FBI and other Federal, state, and
    local law enforcement have recommended that the industry adopt a
    standard which is consistent with the requirements of CALEA, electronic
    surveillance statutes and the rules of evidence. There is nothing among
    law enforcement's recommendations for inclusion into the standard that
    is inconsistent with existing electronic surveillance law and would
    represent an unlawful invasion of privacy.
                     Immigration and Naturalization Service
                                citizenship usa
        Question. Can you provide me with the status of denaturalization
    and deportation proceedings against the 168 or more naturalized aliens
    determined to be ``presumptively ineligible''?
        Answer. The Naturalization Review Team is currently reviewing the
    FBI rap sheets and immigration records of the 71,112 individuals
    naturalized from August 31, 1995, to September 30, 1996, identified as
    having potentially disqualifying arrest records. This first phase of
    the review consists of sorting these individuals into the categories of
    properly naturalized, presumptively ineligible, and requires further
    inquiry. This phase of the review is ongoing and no final number of
    presumptively ineligible individuals has yet been determined. The
    second phase of the review will not begin until the first phase is
    completed.
        During the next phase, the records of all individuals identified as
    presumptively ineligible will be reviewed to verify that no further
    action is necessary. INS will then initiate revocation proceedings in
    all appropriate cases. During the second phase of the review, priority
    will be given to those presumptively ineligible individuals who are
    nearing the end of the 2-year period to initiate administrative
    revocation proceedings.
        Question. Can you provide me with the status of background checks
    for the 180,000 naturalized aliens for whom no background check was
    conducted? Am I correct that INS cannot compel fingerprints from the
    individuals in question? If so, lacking fingerprints, how will INS
    conduct the necessary background checks?
        Answer. The INS is currently investigating procedures for checking
    the criminal records of citizens who may have been naturalized without
    an FBI fingerprint clearance. One option is to request the 179,524
    citizens to voluntarily resubmit fingerprint cards to the INS for
    clearance by the FBI. However, the INS does not have authority to
    compel submission of fingerprints from naturalized citizens. Therefore,
    the INS would have to rely on name checks run against the FBI's full
    Criminal Justice Information System (CJIS) database for those
    individuals who do not voluntarily resubmit fingerprint cards. CJIS
    name checks were completed for 113,126 of these individuals before
    naturalization. Another option would be to rely solely on CJIS name
    checks for the entire population of 179,524 individuals.
        Regardless of which option is pursued, any criminal records
    identified by the background checks would be reviewed against the
    individual's naturalization record in accordance with procedures
    established by the Naturalization Review Team, which is currently
    reviewing decisions for individuals naturalized between August 31,
    1995, and September 30, 1996, who have felony arrest records.
        Question. Recognizing the paramount importance of restoring and
    maintaining the integrity of the naturalization process, how many
    naturalization applicants do you estimate that the INS can properly
    handle in fiscal year 1998? Help me understand why we should not limit
    the number of naturalization applications processed? What do you
    suggest to bring INS' workload in line with its capabilities?
        Answer. The INS anticipates receiving 1.8 million naturalization
    applications in fiscal year 1997. There is no current estimate of how
    many naturalization applications the INS will receive or be able to
    process during fiscal year 1998. Limiting the number of naturalization
    applications processed by INS each year would not be an appropriate
    measure to ensure the integrity of the naturalization process. It would
    be unfair to the vast majority of naturalization applicants who are
    eligible and anxious for the benefit of citizenship. Rather than
    limiting the number of naturalization applications processed each year,
    the INS must adhere to systematic and standardized naturalization
    procedures, and continue to strengthen its quality assurance measures.
        Question. There are concerns that Designated Fingerprint Services
    providers are even more susceptible to fraud than civics and language
    testing contractors. What objection, if any, would you have to limiting
    fingerprinting to INS and law enforcement agencies? Would it be less
    objectionable if INS and law enforcement agencies could charge a fee
    for service?
        Answer. The critical factor affecting the integrity of the
    fingerprinting process is to ensure that the fingerprint submitted to
    the FBI belongs to the applicant. A verification step in the
    fingerprint process would maximize the security of the process without
    regard for who collected the fingerprint, or who controlled the
    fingerprints after collection.
        If INS performs fingerprinting and receives the applications at INS
    offices, this security risk is minimized but not completely eliminated
    because we are using ``picture verification'' on identity documents to
    confirm identity and we are not verifying that the individual is the
    same at the time of interview. The impact of this alternative is
    diminished service levels to the customer due to an additional trip to
    INS offices and higher cost to the INS and customers because the INS
    will have to open new satellite offices to handle the volume. This
    option would also require long trips for many applicants to the nearest
    INS office. To add full security, INS would have to implement
    biometrics verification at interview time. This cost for this should be
    paid by the customer through an exam fee. The implementation of such an
    alternative can take between 6 to 12 months to set up new offices and
    will require a fee change.
        In INS's experience, many law enforcement agencies (LEA's) are
    unwilling to do fingerprinting for immigration benefit applicants,
    which has become even more onerous with the requirement that
    fingerprint cards must be sealed and signed in a specific manner. Many
    LEA's see fingerprinting of immigration benefit applicants as an
    unwelcome burden, which is inconsistent with their misprints taken by
    LEA's for immigration-related purposes is not consistently high. This
    is because LEA's often use lesser trained clerks and volunteers to take
    fingerprints for INS applicants, reserving better trained officers to
    take fingerprints for law enforcement purposes. In addition, monitoring
    and terminating LEA's for quality problems would be complicated with
    one LEA monitoring another. Finally, to prevent applicant fingerprint
    substitutions, LEA's would need to accept applications, which would
    require them to accept and provide receipts for payment. Given that
    LEA's already can charge a fee for fingerprint services, such a fee
    does not make this alternative less objectionable.
                                 consolidation
        Question. It is my understanding that the positions of Associate
    Commissioner for Finance and Associate Commissioner for Human Resources
    and Administration have not been filled in order to improve efficiency
    and accountability by ``flattening'' the INS hierarchy. I commend you
    for your efforts. What consideration have you given in doing the same
    for the Offices of Associate Commissioner for Enforcement, Associate
    Commissioner for Examinations, and Associate Commissioner for
    Information Resources Management?
        Answer. In 1994, we implemented a number of institutional reforms
    as a first step in long-range managerial efforts to overcome severe
    problems within the Service. A proposed 1997 reorganization takes a
    second step in this long-range institutional reform. After several
    years of experience with the 1994 changes, we identified the need for
    additional organizational change in several areas. In some cases, the
    need follows efforts to fulfill and extend the 1994 reorganization.
    Other areas result from dramatic changes in the Service's work during
    the last three years.
        The goals of the current reorganization proposal are to strengthen
    the integrity of Servicewide programs and operational activities, to
    build a professional workforce for the 21st Century, and to provide an
    organizational structure that facilitates effective and efficient
    implementation of the immigration laws. We are currently developing
    detailed plans to implement these goals, which will result in some
    changes to the current structures within the Office of Programs, Field
    Operations, and Management. I believe that these changes will improve
    efficiency and accountability within the INS.
                        Drug Enforcement Administration
                                  war on drugs
        Question. Would you comment on where you see where the United
    States is on the war on drugs? Would you agree that this war is not
    going to stop the way we are addressing it now?
        Answer. The Drug Enforcement Administration (DEA) has documented a
    number of trends suggesting that both international crime and the
    illicit drug trade have undergone a radical shift in recent years. The
    drug trade has expanded from a cottage industry into many sophisticated
    organized criminal enterprises of global proportions. Drug trafficking
    organizations within the United States are controlled by criminals
    sheltered beyond its borders. Drug syndicates--particularly ones in
    Colombia and Mexico--have become the most powerful criminal
    establishments, and the influence and power exerted by these drug
    traffickers threatens the governments of their nations, as well as the
    citizens of the United States.
        Yet despite their reach and power, these drug trafficking
    organizations remain vulnerable in certain respects. U.S. law
    enforcement has demonstrated that one of the best ways to dismantle
    organized crime syndicates is to attack their leadership and
    infrastructure; this disrupts their ability to continue their illicit
    operations and causes them to decline in disarray. This was the
    strategy used to diminish the significance of La Cosa Nostra in the
    United States to a shadow of what it was in the 1950's. In a similar
    way, the Colombian National Police (CNP), with the assistance of the
    United States, crippled the Cali Cartel, one of the most powerful
    criminal organizations in the world.
        In order to be successful, this strategy must be a collaborative
    effort relying upon the cooperation of various governmental entities.
    The federal law enforcement and intelligence communities, in
    partnership with state and local authorities, should target the
    communications, and command and control centers of the drug trafficking
    organizations and develop compelling criminal cases against their
    leaders and members. Once arrested, these criminals should be
    prosecuted fully and serve meaningful sentences commensurate with the
    gravity of the offenses committed. Prosecutions should be pursued
    vigorously in the country where the interests of justice are most
    likely to be served--if this is not likely to occur in the country of
    arrest, then the defendant should be expelled or extradited to the
    United States to stand trial here.
    Trends in Drug Trafficking
        DEA has identified and described six drug trafficking trends as
    follows:
        Threat to democracy.--Today's international drug syndicates have
    garnered such power and influence as to threaten the democracy of
    nations, compromise governments and institutions, and weaken economies.
        Sophistication and technology.--Drug trafficking organizations with
    their vast wealth command state-of-the-art equipment and expertise.
    They employ the top attorneys, accountants, bankers, financiers,
    chemists, linguists, technicians, computer designers, and
    transportation and communications experts. These drug syndicates are
    well-organized and have networks of counter-intelligence experts to
    protect their enterprises. Their resources rival those of many
    sophisticated international corporations--especially, with respect to
    wireless and secure communications, transportation networks, and
    computer systems.
        Syndicates are maturing faster.--Drug trafficking syndicates are
    developing at a faster rate than at any previous time. For instance, La
    Cosa Nostra, rose to power in the United States over a 75-year period;
    ethnic-Chinese gangs in United States matured over several decades;
    Colombia's Medellin Cartel developed in 15 years; the Cali Cartel
    evolved in 10 years; and the syndicates in Mexico, the most immediate
    threat, reached their power in less than a decade. This trend is
    significant because (1) law enforcement has greater difficulty staying
    ahead of the criminal organizations, if they develop so rapidly; and
    (2) the global nature of the drug trafficking industry and the
    advancements in communications, technology, air travel, and banking,
    enable drug traffickers to have a more direct and immediate impact upon
    citizens of other nations.
        The establishment of syndicates in Colombia and Mexico.--In the
    late 1980's, Colombian traffickers were the dominant drug trafficking
    organizations that controlled the supply of cocaine to the United
    States. However, in the early 1990's, the Colombian organizations began
    searching for new transportation routes and turned to criminal
    organizations in Mexico who controlled smuggling corridors into the
    United States.
        Early in their alliance, Mexican traffickers settled for a
    relatively small cash percentage derived from each cocaine shipment
    transported into the United States. Eventually, Mexican drug
    traffickers, looking to expand their own influence, re-negotiated their
    arrangements with the Colombian trafficking organizations; instead of
    receiving cash payments for their transportation services, the Mexican
    traffickers demanded a percentage of the cocaine transported--in some
    cases, up to half of each cocaine shipment. Over time, this arrangement
    enabled the Mexican drug traffickers to establish their own
    transportation and distribution networks in the United States. With
    this increasing power, Mexico-based trafficking syndicates solidified
    control over the markets of other drugs, such as black-tar and brown
    heroin, methamphetamine and precursor chemicals, and marijuana.
        Today, drug traffickers comfortably insulated in Colombia and
    Mexico control the U.S. cocaine market through their associates in the
    United States, working to expand their share of the U.S. market.
    Colombian traffickers largely control the East Coast drug markets,
    while Mexican traffickers dominate the West and Southwest markets; both
    groups are converging on the Midwest markets. Recently, however, there
    have been some indications that Mexico-based organizations have made
    some inroads into the cocaine markets on the East Coast, formerly
    controlled by traffickers from Colombia.
        Drug-related violence.--Colombia- and Mexico-based drug trafficking
    organizations are responsible for much of the drug-related violence in
    the United States. On several occasions, U.S. authorities have
    identified and arrested violent offenders that had been dispatched by
    the Colombian and Mexican drug traffickers to execute their violence in
    the United States. In the West and Southwest, the surrogates of Mexican
    drug trafficking organizations have forged strong alliances with street
    gangs, such as the Crips, Latin Kings, and Brown Assassins, to
    distribute drug shipments and carry out violent acts, including
    murders.
        Emerging organizations and alliances.--The drug trade has given
    rise to new trafficking syndicates and criminal alliances around the
    globe. U.S. authorities have identified several representatives of
    major Colombian traffickers meeting with criminal leaders in Italy and
    Russia in an apparent attempt to forge agreements for importing drugs
    into Eastern Europe and other nations in transition. Furthermore, there
    have been indications that criminals in Albania, Bosnia, Croatia,
    Herzegovina, Serbia, and Slovenia are beginning to enter the drug trade
    and stand to gain power from their position along the Balkan
    trafficking routes. In addition, Mexican traffickers have attempted to
    purchase coca directly from the suppliers in Bolivia--a move that, if
    successful, could impact the role of Colombian traffickers in the
    cocaine trade.
        Among the most striking trends is the rise of West African
    criminals in the world heroin trade. Nigerian criminals are well-
    organized and sophisticated and have formed close alliances with
    criminals in Thailand and other parts of Southeast Asia.
    Fighting Drug Trafficking Organizations
        DEA's National Investigative Survey is anchored in three major
    initiatives that focus resources where they will have the most impact--
    (1) on the sophisticated criminal syndicates from Colombia and Mexico
    that control the vast majority of the drug trade in the Western
    Hemisphere; (2) their U.S.-based distribution infrastructure; and (3)
    the surrogates used by the trafficking organizations (often violent
    drug gangs) to peddle their poison on the streets of our country.
        First, DEA directs its investigative assets against the
    communications systems of the command control functions of the major
    organized crime syndicates from Colombia and Mexico. Second, DEA
    attacks the U.S.-based infrastructure of these organizations that
    direct and control the flow of thousands of tons of cocaine, heroin,
    and methamphetamine into the United States. Third, DEA targets violent
    drug trafficking groups operating within the borders of the United
    States. In support of these three initiatives, DEA is actively involved
    in the following programs:
        Southwest Border Initiative.--The Southwest Border Initiative
    (SWBI) targets the major drug organizations on both sides of the U.S.-
    Mexico border. The strategy's objectives are to dismantle Mexican drug
    trafficking organizations, strip them of their illicit assets, and
    arrest, prosecute, and incarcerate their criminal leaders for terms of
    imprisonment commensurate with the offenses committed. The SWBI is a
    result of a close, collaborative effort involving the DEA, Federal
    Bureau of Investigation (FBI), U.S. Attorneys, U.S. Customs Service,
    the Department of Justice's Criminal Division, the High Intensity Drug
    Trafficking Area (HIDTA) program, and state and local law enforcement
    agencies.
        Mobile Enforcement Teams.--The initiative of the Mobile Enforcement
    Teams (MET's) is designed to assist local police agencies with DEA's
    expertise and necessary resources to target, arrest, and remove violent
    drug offenders from communities and reduce the threats posed by drug
    trafficking organizations within these communities. By early 1997,
    MET's had been deployed to more than 90 jurisdictions across the
    country, and they accounted for more than 3,000 arrests of violent drug
    offenders, and the seizure of large quantities of illicit drugs and
    millions of dollars in assets.
        Organized Crime Drug Enforcement Task Force Program.--The Organized
    Crime Drug Enforcement Task Force (OCDETF) Program, administered by the
    Department of Justice's Criminal Division, is an inter-agency law
    enforcement program which targets the highest-level drug traffickers in
    the country. DEA, and eight other federal agencies participating in the
    OCDETF program, act in concert with numerous state and local agencies
    and have, over the years, achieved unprecedented levels of cooperation
    and coordination.
        The United States is years away from an end to drug abuse and
    trafficking and the drug-related violence facing this country.
    Nevertheless, we must continue to work towards a solution--which is not
    a question of choosing among law enforcement, interdiction, education/
    prevention, or treatment. Instead, we must adopt an integrated,
    comprehensive approach to incorporate all perspectives and viewpoints.
    We must strive to protect future generations from the slow misery and
    decay caused by drug abuse, while trying to rescue the present
    generation from the immediate harm posed by drugs.
                                     mexico
        Question. What course do you believe we should take with respect to
    Mexico?
        Answer. Despite the achievements that the Government of Mexico has
    accomplished in combating drug trafficking, there is much more that
    needs to be done. We believe that the solution lies not in cordoning
    ourselves off from them, but, rather, in working with and supporting
    President Zedillo's counternarcotics efforts. Mexico is an
    indispensable partner in combating drug trafficking.
        The U.S. Government therefore should support the Government of
    Mexico in what will be a long-term effort to build an effective law
    enforcement capacity. In the meantime, we should offer assistance to
    the special law enforcement units developed by the Government of Mexico
    that will lead the attack against the traffickers, while continuing our
    own aggressive campaign against these criminal organizations
    domestically.
        To that end, DEA is providing assistance in the following ways to
    the Government of Mexico:
      --DEA is providing assistance to the Government of Mexico in
            selecting and screening candidates to become a member of
            Mexico's special counterdrug enforcement units. The U.S.
            Government has offered assistance and technical support
            throughout the ``vetting'' process, which includes: (1)
            security questionnaires and background interviews; (2) medical
            and psychological screening (records review and aptitude/
            profile testing); (3) initial and random urinalysis; and (4)
            polygraph examination.
          This ``vetting'' process, combined with enhanced training, a
            minimum time commitment [the U.S. agencies have suggested a
            three year minimum assignment]--and a premium pay to reflect
            the additional training--would increase our confidence in the
            special counterdrug enforcement units, indicating that they are
            substantially free of corruption and have competent personnel
            to combat the highly sophisticated and violent drug trafficking
            cartels. Although the ``vetting'' process is no panacea, it is
            a step in the right direction by the Government of Mexico.
      --DEA has provided and will continue to provide significant training
            programs to the new recruits of Mexico's special counterdrug
            enforcement units. In mid-August 1997, the first class of
            Mexican counterdrug agents completed a four-week intensive
            investigative analysis training seminar conducted by DEA, FBI,
            U.S. Customs Service (Customs), and Department of Justice
            personnel. A second session is now underway and others will
            follow as the U.S. agencies work to provide these Mexican
            enforcement units with up-to-date training.
      --DEA is providing assistance to the Government of Mexico in
            establishing an internal affairs unit which will conduct in-
            service integrity checks on Mexican law enforcement agents. It
            is essential to have an integrity assurance program in place.
            Unless these specialized enforcement units are trustworthy,
            informants who cooperate will not be safe, undercover
            investigations will be compromised, and the information-sharing
            process will not function smoothly.
        Border Task Forces.--DEA is devoting additional agents and
    resources to establish and develop strong and solid law enforcement
    investigative units in Mexico. On July 30, 1996, U.S. and Mexican law
    enforcement officials signed a Memorandum of Understanding establishing
    bilateral drug law enforcement units along the U.S.-Mexico border known
    as Border Task Forces (BTF's). The BTF's were poised to be the key
    units for U.S.-Mexico cooperative enforcement efforts targeting major
    drug trafficking organizations along the U.S./Mexican border. DEA, FBI,
    and Customs are working with the Mexican Attorney General's Office
    (PGR) and counternarcotics enforcement offices/agencies to create and
    establish three bilateral Border Task Forces in Juarez, Tijuana, and
    Monterrey.
        The U.S. Government and the Government of Mexico anticipate that
    complete staffing of the ``vetted'' BTF's will include 18 Mexican
    counterdrug agents, one Mexican prosecutor, and six U.S. ``commuter''
    agents [DEA, FBI, and Customs agents who reside in the U.S. and cross
    the border each day to join the BTF's], complemented by a 30- to 50-
    person response unit for each BTF location. This bilateral effort holds
    the greatest potential for success in developing compelling cases
    against the major trafficking groups--with the everyday exchange of
    important U.S. and Mexican law enforcement information, the joint
    analysis of that information, and the development of strong cases
    leading trafficker convictions.
        The success of the BTF's depends upon the participation of both the
    in-country agents assigned to the resident officers and the 22
    ``commuter'' agents. If one of these two entities is unable to
    participate in the BTF's, the effectiveness of the BTF's will be
    impeded. Because drug traffickers disregard international borders, the
    ability of BTF's to perform the envisioned function will be severely
    limited without the participation of the ``commuter'' agents.
        Regrettably, however, the BTF's have not realized their potential
    effectiveness and continue to be impeded by administrative and
    operational problems. To date, the BTF's have faltered and have not
    achieved their primary objective: the immobilization of the Juarez and
    Tijuana Cartels. Indeed, both the Amado Carrillo Fuentes Organization
    and the Arellano Felix Organization continue to operate.
      --Despite the documented threat to law enforcement (see below) along
            the U.S.-Mexico border, the Government of Mexico has not
            approved the U.S. request for U.S. law enforcement ``commuter''
            personnel to carry firearms for self-protection. Because we
            have not yet been able to resolve with the Government of Mexico
            our grave concern for the safety of our agents assigned to the
            BTF's in Mexico, we have been forced to curtail the
            participation of U.S. agents who would be crossing the border
            daily to carry out their duties. Without the direct
            participation and guidance of U.S. agents--the resident in-
            country agents and the ``commuter'' agents--the BTF agents are
            not likely to pursue and competently develop investigations
            against major trafficking organizations independently.
      --The BTF's have suffered from corruption within their leadership.
            For example, 17 Mexican law enforcement officials, including a
            federal prosecutor, military officers, and law enforcement
            officers, were arrested between June 3 and June 9, 1997, for
            the theft of 476 kilograms of cocaine from a PGR office in the
            state of Sonora. The cocaine had been seized by the Mexican
            Army and turned over to the PGR three weeks earlier, and the
            stolen cocaine has not been recovered. All BTF staff will now
            be fully ``vetted.''
      --Although the Government of Mexico has committed to provide full
            support to the BTF's once they are completely ``vetted,'' these
            resources have not yet been made available. The Government of
            Mexico initially pledged $2.2 million to the efforts of the
            BTF's; however, to date, the Government of Mexico has furnished
            approximately $600,000 in equipment, and small purchases. This
            figure falls far short of the nearly $6 million available from
            seized assets previously forfeited by the U.S. Government and
            shared with the Government of Mexico for bilateral law
            enforcement purposes.
        Despite the shortcomings of the BTF's, DEA will be adding more
    resident agents to the existing offices in Tijuana and Juarez. On July
    11, 1997, the Government of Mexico formally authorized an increase of
    six DEA Special Agents and six FBI ``Resolution Six'' Special Agents to
    be assigned to duty in Mexico. These resident agents will serve as an
    interim stop-gap support to the BTF's until the ``commuter'' agent
    concerns are satisfactorily resolved.
        Dissolution of the INCD and Establishment of the Special
    Prosecutor's Office for Crimes Against Health.--On April 30, 1997, the
    Narcotics Institute to Combat Drugs (INCD) was dissolved, and the
    Special Prosecutor's Office for Crimes Against Health (FEADS), headed
    by Mariano Herran Salvati, was named by Attorney General Jorge Madrazo
    as the Mexican federal agency responsible for counterdrug law
    enforcement efforts. The dissolution of the INCD and the reorganization
    of the principal Mexican drug law enforcement agency, although
    necessary, have further slowed any progress.
        The ``vetting'' process for the new PGR units, including the FEADS,
    is proceeding, but faces many difficulties. On July 29, 1997,
    Commissioner Herran stated that all personnel of FEADS will be subject
    to the full ``vetting'' process. The ``vetting'' process will be
    accomplished in two phases--the first will focus on administrative
    personnel at FEADS Headquarters in Mexico City, and the second phase
    involves the ``vetting'' of personnel assigned to the Bilateral Border
    Task Forces (BTF's). Thus far, 150 FEADS agents have been ``vetted.''
        Of the 39 FEADS agents who have completed their ``vetting'' and the
    above-described training program in the United States, 10 are now
    assigned to the Organized Crime Unit (OCU). Of the 29 remaining FEADS
    agents, two have been assigned to the BTF's and the other 27 will be
    assigned to the BTF's upon completion of the PGR Training Academy. On
    September 8, 1997, 40 additional FEADS agents began training in the
    United States; they will similarly be assigned to the BTF's and OCU.
        At this time, the transformation of counterdrug enforcement
    agencies in Mexico is still a ``work in progress.'' Many of the INCD
    officers remain in place as the ``vetting'' process is beginning for
    the FEADS replacements. Further, the PGR must contend with the fact
    that nearly 700 agents dismissed for corruption by former Attorney
    General Antonio Lozano from the pre-existing INCD have now been
    reinstated after successfully challenging certain procedural flaws in
    the dismissal process.
        Today, the FEADS, as an organization, lacks any real infrastructure
    support--their agents have typically not been issued credentials,
    badges, or weapons, and they only have limited resources with which to
    work. Until a sufficient number of personnel are fully ``vetted'' and
    the reinstated INCD personnel who do not survive the ``vetting''
    process are removed, the organization cannot move forward with
    effectiveness or confidence in security and integrity.
        Safety Along U.S.-Mexico Border.--The severity of violence along
    the U.S.-Mexico border continues to increase at an alarming rate. The
    trafficking organizations responsible for this violence continue to
    operate. The U.S. Government's repeated requests to the Government of
    Mexico to enable U.S. agents to carry firearms for self protection
    continue to be denied.
        Since March 1997, DEA has recorded 49 incidents of threats against
    both the U.S. and Mexican law enforcement personnel and their sources
    of information along the U.S.-Mexico border. The escalation of
    violence, as demonstrated by the increased number of kidnappings,
    shootings, and murders along the border, remains largely unchecked.
    Drug traffickers continue their brazen attacks against both U.S. and
    Mexican officials and their informants. This situation places U.S. law
    enforcement personnel operating along the border in an extremely
    dangerous and precarious environment.
        Organized Crime Law.--In November 1996, the Government of Mexico
    passed an Organized Crime Law, which included: (1) authorization to
    conduct electronic surveillance; (2) a witness protection program; (3)
    plea bargaining; (4) conspiracy laws; (5) undercover operations; (6)
    the use of informants by police; and (7) asset forfeiture. Having the
    law on the books is not sufficient; these authorities must be fully
    implemented. Guidelines and policies for these new procedures need to
    be promulgated by the PGR, and competent, trustworthy judges need to be
    identified for these sensitive cases. Until these are accomplished, the
    efforts of the BTF's and other Mexican special investigative units will
    continue to be hampered in conducting the necessary information
    gathering activities authorized by the Organized Crime Law.
        To conduct effective law enforcement investigations in Mexico,
    these specialized units must utilize state-of-the-art investigative
    techniques, including court-authorized electronic surveillance. In
    order to conduct electronic surveillance properly, the Government of
    Mexico must identify a cadre of competent and trustworthy prosecutors
    and judges to apply for and approve court-authorized electronic
    surveillance and other sophisticated investigative techniques, without
    the fear of compromise.
        The Organized Crime Law not only mandated that the Government of
    Mexico form an Organized Crime Unit (OCU) to conduct investigations
    pursuant to these authorities, but further stipulated that the laws
    could not be enforced until the OCU was formed and properly trained.
    The OCU is now, at least, partially in place and consists of 55
    officers to investigate crimes specified under the law. DEA and FBI
    have worked and will continue to work with the PGR to establish the
    OCU. It is anticipated that the OCU will pursue investigative leads
    provided by U.S. law enforcement agencies and will share information
    with their U.S. counterparts.
        Southwest Border Initiative.--In our continuing efforts to
    dismantle the Mexican drug trafficking organizations and disrupt its
    operations, the continuation of the Southwest Border Initiative is
    critical (as described previously). Since its inception, the SWBI has
    proven to be an important and effective coordinated effort focusing on
    drug trafficking across the U.S.-Mexico border. The SWBI is law
    enforcement's collaborative response to the substantial threat posed by
    Mexican groups operating along our Southwest Border.
        Question. Will the 96 agents you are adding this year help address
    the Mexican Cartels that have gone unchecked to this point in time?
    What can we do to help you?
        Answer. The enhancement of the 96 Special Agents in DEA's 1998
    budget request will augment and complement DEA's existing counterdrug
    force. DEA will use some of the positions assigned to Mexico to
    establish new offices in the key strategic border towns of Juarez and
    Tijuana, and personnel assigned to these offices will be used to
    support and strengthen the operations of the BTF's, as described above.
        DEA's counterdrug enforcement operations along the Southwest Border
    are geared toward attacking and dismantling the command and control
    structures of the major Mexican trafficking organizations. These
    organizations are responsible for smuggling vast quantities of cocaine,
    heroin, marijuana, and methamphetamine into the United States. The 96
    positions requested in the 1998 budget will be used primarily to
    enhance DEA's information gathering capabilities in Mexico and along
    the Southwest Border and will enable DEA to track and investigate the
    major Mexican trafficking organizations and their activities within the
    United States.
        DEA's enforcement operations are sophisticated and labor-intensive;
    therefore, the agency's staffing requirements are continually growing.
    DEA is grateful for the funding support provided by Congress for its
    operations along the border last year and appreciates any further
    assistance provided in 1998.
        Question. What can you share with the Committee about the
    distribution of narcotics between Mexico and the Northeast?
        Answer. The distribution of narcotics between Mexico and the
    Northeast United States can best be explained and described based upon
    the particular drugs and unique markets, as follows:
        Cocaine.--Typically, Mexican drug traffickers transported cocaine
    shipments from the Southwest Border only as far as the Midwest.
    However, recently, there have been instances where Mexico-based
    traffickers have emerged in the New York City cocaine market. For
    example, in March 1997, 1.6 metric tons of Colombian-owned cocaine were
    seized in the New York City area, where a Mexico-based organization had
    transported the cocaine shipment in carrot crates from Mexico to New
    York City.
        In addition, during 1996, a unique OCDETF operation, code-named
    ZORRO II, documented that Mexico-based organized crime drug groups had
    moved beyond the role of transporters and were involved in wholesale-
    level cocaine distribution in the United States. Once transported from
    Mexico to the United States, the cocaine was stored in the Los Angeles
    area for eventual distribution to buyers in such cities as Newark, New
    York City, and Philadelphia. Operation ZORRO II documented the
    increased and more diverse role played by major Mexico-based
    traffickers in the U.S. cocaine trade.
        The multi-district, multi-agency investigations known collectively
    as Operation Reciprocity further revealed Mexican drug traffickers'
    eastward expansion across the United States and into New York City.
    These coordinated OCDETF investigations targeted several drug
    trafficking cells of the Amado Carrillo-Fuentes Organization. Seizures
    of drugs and money as well as other evidence clearly demonstrate that
    Mexican traffickers are displacing at least some of the Colombian
    cocaine organizations which have traditionally dominated drug
    trafficking along the East Coast of the United States. Operation
    Reciprocity resulted in the seizure of 7.4 tons of cocaine, 2,800
    pounds of marijuana, and over $11 million in U.S. currency. Indictments
    and complaints charging 48 people with drug and money laundering
    offenses are pending in four districts. Thirty-five defendants have
    been arrested.
        Marijuana.--Mexico-based drug trafficking organizations, through
    extensive networks in both Mexico and in the United States have
    supplied the U.S. drug market with marijuana and heroin for more than
    20 years. From distribution hubs along the Southwest Border, wholesale
    distributors ship marijuana to cities along the Eastern seaboard using
    a wide and ever-changing array of motor vehicles, as well as couriers
    aboard commercial aircraft.
        In addition to overland smuggling, traffickers have resumed routing
    large quantities of marijuana from Mexican suppliers and other sources
    through the Caribbean region, to destinations along the East Coast.
    Package delivery services also have been identified as a significant
    means of transporting marijuana from Southwest Border areas to
    destination cities throughout the Eastern United States.
        Methamphetamine.--Although methamphetamine use has historically
    been concentrated in the western and southwestern parts of the United
    States, it is now spreading to the Midwest and to the East. Organized
    crime drug groups operating from Mexico are responsible for producing a
    significant amount of the methamphetamine distributed throughout the
    United States. Methamphetamine distributors in other areas of the
    country, including the Northeast, obtain much of their methamphetamine
    from these organizations operating along the Southwest Border. One
    recent investigation revealed that distributors in Buffalo, New York,
    were acquiring pound quantities of methamphetamine from sources in the
    San Diego, California area and shipping the drugs via express mail
    services back to the Buffalo area.
        Heroin.--The heroin market in the northeastern United States is
    largely dominated by high-purity, white powder heroin from South
    America, Southeast Asia, and Southwest Asia. Mexican black-tar and
    brown heroin is usually of lower purity and therefore, is generally not
    competitive in this market. As a result, Mexican heroin is encountered
    in the Northeast in only isolated instances.
                              methamphetamine labs
        Question. Would you help the Committee understand how you are
    addressing the growing problem of methamphetamines?
        Answer. Halting the trafficking of methamphetamine is one of DEA's
    leading enforcement priorities. In May of 1995, while attending the
    annual meeting of the International Association of Chiefs of Police
    (IACP), Narcotics and Dangerous Drug Committee in San Diego,
    Administrator Constantine was approached by California Narcotics
    Officers Association (CNOA) members as well as personnel from the
    California Bureau of Narcotics Enforcement (CBNE). These groups
    dramatically brought to the Administrator's attention the magnitude of
    the methamphetamine problem in California and also shed light on
    additional evidence of what their fellow state and local law
    enforcement officers across the country were confronting.
        At the same time, DEA was developing information on some very
    disturbing national trends. Our agents and intelligence analysts became
    aware of increasing incidents of abuse and trafficking of
    methamphetamine all across the country, an alarming change to what had
    once been largely perceived as a West Coast problem.
        For example, drug abuse warning network statistics revealed that
    methamphetamine-related hospital episodes were skyrocketing. From 1990
    to 1995, they more than tripled. In fact, the dramatic increase of
    methamphetamine-related deaths in cities such as Los Angeles, San Diego
    and Phoenix strongly supported the concerns of the CBNE and CNOA. Also
    startling was the fact that similar statistics were being compiled in
    America's heartland (and across the rest of the United States).
        Based on these findings, it was clear that methamphetamine was fast
    becoming a national problem, and a national approach was needed. As a
    result, in February 1996, DEA sponsored a National Methamphetamine
    Conference in the Washington, DC area, the first of its kind. The
    Conference included the participation of 240 attendees from across the
    nation, including representatives from Federal agencies, state police
    and investigative agencies, police departments in large and small
    cities, and sheriff's offices in both rural and urban counties. In
    addition, professional law enforcement organizations also sent
    representatives, including the IACP, the National Sheriffs'
    Association, the National Association of District Attorneys, the
    Clandestine Laboratory Investigators Association, the National
    Narcotics Officers Association and the National Drug Enforcement
    Officers Association. Invitations were also sent to numerous prevention
    and treatment professionals.
        In the past, the methamphetamine trade was dominated by members of
    loosely structured outlaw motorcycle gangs. Today, all of this has
    changed. It has become increasingly clear that we are now dealing with
    an entirely different element. Methamphetamine production is now
    controlled by international organized criminal groups from Mexico who
    are responsible for the wholesale distribution of methamphetamine
    across the United States.
        Clandestine laboratories, operating in the United States (mostly in
    California) and in Mexico are the primary source of the methamphetamine
    available in our country today. Mexican organized crime groups
    frequently establish large laboratories capable of producing from 150
    to 200 pounds of methamphetamine during a 48-hour manufacturing cycle.
    There are hundreds of other labs across the United States--in the
    Midwest, the Southeast, as well as in the Southwest and California--
    which are operated on a smaller scale, but are no less a threat to the
    well being of Americans. In many of these smaller labs, methamphetamine
    manufacturers rely on ephedrine and pseudoephedrine products to make
    methamphetamine.
        Some of the big names in methamphetamine trafficking are already
    known as major traffickers of heroin and cocaine: the Amezecua-
    Contreras Organization, the Amado-Carillo Fuentes Organization, and the
    Arellano-Felix Organization. These new, international organized crime
    groups are far more wealthy, powerful and connected than the outlaw
    motorcycle gangs could have ever imagined.
        We know, for example, that the Amezecua-Contreras Organization has
    developed international connections in Europe, Asia and the Far East,
    to provide ton-quantity shipments of the chemicals they need to make
    methamphetamine. DEA has documented the international diversion of 170
    metric tons of ephedrine to Mexico from mid-1993 to early 1995. This
    quantity of ephedrine could have produced 120 tons of methamphetamine.
        In a 1994 case, two ephedrine shipments totaling 5.7 metric tons,
    were seized at the Dallas-Fort Worth Airport bound for Mexico. This
    ephedrine could have produced almost four tons of methamphetamine. The
    ephedrine had been produced in China and was smuggled from Hong Kong
    through Long Beach, California, into Mexico.
        With their ability to obtain wholesale multi-ton quantities of
    precursor chemicals on the international market, their access to
    already-established smuggling and distribution networks, and their
    control over laboratories capable of large-scale production and
    distribution of methamphetamine, these criminal groups from Mexico now
    dominate wholesale methamphetamine trafficking in the United States.
        Since February 1996, when DEA co-sponsored the first National
    Methamphetamine Conference, our nation has made significant progress in
    working together on the methamphetamine problem. Following the
    President's announcement of the National Methamphetamine Strategy in
    April 1996, DEA has refocused its attention and adjusted its resources
    accordingly.
        The National Methamphetamine Strategy incorporates the
    recommendations from a broad spectrum of the law enforcement community.
    It recognized that in order to tackle the mathamphetamine and precursor
    chemicals problem, the government must adopt a multi-disciplinary
    approach, including legislation, law enforcement, training, chemical
    regulation, international cooperation, environmental protection,
    education, and treatment. Therefore, the Strategy called upon the
    collective wealth of experience and expertise of the Departments of
    Defense, Education, Health and Human Services, Justice, State, and
    Treasury, the Environmental Protection Agency, the Office of National
    Drug Control Policy, and other noted experts and scholars.
        First, we had to recognize that methamphetamine trafficking was an
    organized crime problem. American law enforcement agencies have
    successfully attacked organized crime in this country and abroad by
    aggressively targeting its leadership and persistently attacking its
    membership at all levels. It is a model that has a proven track record,
    and we are now successfully applying it to the methamphetamine problem
    and the organized criminal groups controlling the drug's trade. This
    strategy includes the following elements.
      --Department components are attacking organized crime groups through
            the Southwest border initiative [SWBI]. The SWBI is an
            integrated, coordinated strategy that involves law enforcement
            at the Federal, state and local levels in a focused effort to
            dismantle the sophisticated trafficking organizations operating
            on both sides of the United States-Mexico border.
          Since 1996, DEA has contributed over $17 million, supporting over
            100 organized crime investigations in over 30 cities. Over
            1,000 wire taps, including almost 400 this year alone, have
            been employed to identify and incarcerate the members of these
            criminal groups. Much of the focus of this effort has been
            directed at those groups trafficking in methamphetamine. Since
            January of 1996, methamphetamine investigations under the SWBI
            umbrella have accounted for the seizure of 682 pounds of
            methamphetamine and the arrest of over 150 members of organized
            crime groups.
      --DEA refocused its investigative resources to address the
            methamphetamine problem in other parts of the country. In 1996,
            DEA conducted over 2,500 methamphetamine investigations, up
            from approximately 1,700 actions in 1995. In the 1998 budget,
            we have requested over $11 million and 74 positions to further
            enhance our ability to combat the methamphetamine threat.
      --One of the major concerns expressed by state and local law
            enforcement officers at last year's Conference was the need for
            specialized training to conduct clandestine laboratory
            investigations. In response, DEA increased clandestine
            laboratory training schools from 7 in 1996, to 13 in 1997. By
            the end of this year, 540 state and local officers will have
            been trained, with another 800 projected for next year.
      --DEA has expanded its clandestine laboratory certification program
            in Quantico, Virginia, by adding training facilities in Kansas
            City, Missouri and San Diego, California. This regionalized
            approach will allow training to be provided to more officers
            and to be tailored to the particular needs of the affected
            area.
      --We are developing a National Clandestine Laboratory Data Base
            located in the El Paso Intelligence Center [EPIC], in
            partnership with the California Bureau of Narcotics Enforcement
            [CBNE] and the Western State Intelligence Network, to assist
            law enforcement across the nation in methamphetamine
            investigations.
      --This year, DEA has earmarked $850,000 to initiate Special
            Enforcement Programs directed at the methamphetamine problem.
            We have already seen some tremendous successes in
            investigations developed in one of these programs, Operation
            Backtrack. This program targets ``rogue'' companies which
            provide three specific precursor chemicals to illegal
            methamphetamine laboratories in the United States; ephedrine,
            pseudoephedrine and phenylpropanolamine. Started in February,
            this program has already resulted in seizures of over 10.5
            million pseudoephedrine tablets destined for distribution by
            ``rogue'' convenience and liquor stores. The DEA Domestic
            Operations Section instituted a Special Enforcement Program
            entitled Operation Velocity, which targets major
            methamphetamine organizations as well as independent
            traffickers in the United States.
      --Our San Francisco Methamphetamine Conference emphasized the need
            for government and industry to work more closely together. To
            help accomplish this, DEA invited 98 senior executives to
            attend a meeting in Arlington, Virginia, on June 16. The
            invitees represented industry associations, major wholesale
            distributors, manufacturers, and retail distributors. The
            meeting provided a forum for DEA and the affected industry to
            further develop cooperative efforts to identify and prevent the
            diversion of legal drug products containing key precursor
            chemicals. Working groups were formed to address the following
            areas: (1) identify points of diversion; (2) technological
            issues; and (3) training and education programs. DEA and
            industry officials are acting as co-facilitators for each of
            the working groups which are expected to meet again within the
            next 30 days.
          As an example of how effective cooperation between government and
            the business community can be, DEA formed a partnership with
            Wal-Mart in April to control large-scale purchases of two key
            over-the-counter products: pseudoephedrine and
            phenylpropanolamine. This means Wal-Mart will now restrict
            sales of allergy/cold/diet preparations which have increasingly
            been diverted from legitimate use and seized in clandestine
            laboratories throughout the West, Southwest and Midwest.
          In other examples, Price Costco in California and Schuck's
            Markets in St. Louis have both initiated voluntary programs to
            control diversion of over-the-counter products.
      --Finally, in order to reduce methamphetamine abuse, the Partnership
            for a Drug-Free America will run a media campaign to educate
            young people on the dangers of methamphetamine. The Partnership
            will feature prime-time television commercials, magazine
            advertisements, and other educational material aimed at our
            nation's teens. DEA will produce and distribute posters,
            awareness brochures, and a video on methamphetamine abuse.
        In addition to these major initiatives, DEA will participate in an
    interagency prevention group formed by the Attorney General to work
    with local agencies and private organizations in developing public
    awareness programs about methamphetamine addiction and abuse.
        In conclusion, methamphetamine presents a serious threat that will
    impact heavily on both our law enforcement community, as well as our
    prevention and treatment specialists. There was a time when many
    thought the heartland would never suffer the ravages of drugs, crime
    and violence. In addition to aggressive law enforcement actions, it
    will take an all-out effort in our schools, communities, and workplaces
    to educate all Americans, especially our young people, about the
    dangers of methamphetamine.
        Over the past year and a half, we have seen many positive
    developments in the national fight against methamphetamine trafficking,
    use and abuse. As a nation, we have worked to develop a national
    strategy and have implemented many new programs to attack both
    methamphetamine production and use. We must, however, continue to move
    forward to ensure that we prevent the onslaught of another drug
    epidemic, one which could be even more serious than the crack epidemic
    experienced in our recent past.
                                    colombia
        Question. What is the United States' position on Colombia? A
    reasonable person might suggest we take quite a bit stronger action
    toward Colombia based on the performance of its president and what is
    being sent to the United States from Colombia. What does it take to
    tell us that this government is an adversary? Based on Samper's
    statements, what opportunities do we have at this time?
        Answer. The Administration's position with respect to Colombia
    remains under constant review by the National Security Council and
    other relevant government agencies.
        While the U.S. Government is convinced that the Samper
    Administration has been tainted by the traffickers, DEA has continued
    to expand its work and contacts with the Colombian National Police
    (CNP). DEA's position on Colombia continues to focus on a cooperative
    bilateral law enforcement effort to combat the threat of drug
    trafficking affecting both countries. The Department of Justice has
    continued to work with the Colombian Chief Prosecutor's Office and many
    agencies joined to urge the Government of Colombia to enact the
    legislative reforms in money laundering, asset forfeiture, and enhanced
    narcotics penalties now in place. The U.S. Government continues to
    press Colombia for the extradition of its nationals--especially, the
    narcotics kingpins.
        The demise of the Cali Cartel can be largely attributed to the
    dedicated efforts of the CNP under the direction of General Serrano,
    working in conjunction with DEA and other U.S. agencies. Nevertheless,
    we now see the emergence of other powerful trafficking organizations
    from other parts of the country, including the Norte Del Valle group
    headed by the Henao-Montoya brothers. As soon as the Cali Cartel
    crumbled, such groups forged ahead to position themselves smartly in
    the drug trafficking markets and developed close alliances with Mexican
    and other trafficking groups to achieve the common goal of distributing
    illicit narcotics--namely, cocaine and heroin--on the streets of the
    United States.
        In 1995, Colombian-processed heroin represented 62 percent of the
    heroin seized in the United States. In cooperation with the CNP and
    other Colombian law enforcement authorities, DEA has implemented
    several new programs and enhanced other initiatives targeting the
    production and transportation infrastructures of the major trafficking
    organizations.
        Question. How will decertification affect Colombia?
        Answer. DEA will defer to the State Department with regard to the
    effect that decertification will have on Colombia.
        On a law enforcement level, the initial decertification of Colombia
    in early 1996 forced the Government of Colombia to focus its efforts
    more acutely in cooperating with the United States in the fight against
    the spread of illicit drugs. These efforts resulted in operational
    successes and in meaningful legislative reforms. The effects of the
    subsequent decertification in 1997, however, remains to be seen.
        In recent years, the Colombian National Police and DEA have forged
    a strong bond with common objectives and mutual goals. Our law
    enforcement officers have continued to work uninterrupted and
    effectively, despite the Administration's decision to de-certify
    Colombia. To illustrate this point, on June 26, 1997, the CNP, with the
    assistance of the DEA, seized more than 2,500 kilograms of cocaine in
    Puerto Rey, Department of Cordoba, Colombia. Also, on March 11, 1997,
    the CNP seized more than $4 million in assets (including sophisticated
    communications equipment) owned by the Cali Cartel. These seizures are
    a direct result of continued outstanding bilateral cooperation between
    the CNP and DEA.
        Question. It appears that the heroin market is expanding because of
    the ease with which it is manufactured and supplied. What is your plan
    to stop the expansion of this market?
        Answer. The expansion of the heroin market in the United States is
    the result of several factors. While drug abuse was on the rise across
    the board in the 1970's, the use of heroin was stigmatized and its
    popularity was held in check. Due to the low purity of heroin available
    at the retail level, the only effective method of administration at the
    time was through injection, a method that most drug users found
    unpalatable and not the least glamorous.
        Today, heroin is readily available and is much purer than in years
    past. In the 1970's and early 1980's, the purity of heroin at the
    retail level averaged between 2 and 7 percent. Now, it is not uncommon
    to find heroin as high as 80 percent pure being sold on our streets.
    According to results of DEA's Domestic Monitor Program, the nationwide
    average purity for retail heroin from all sources was 39.7 percent in
    1995, over five times higher than a decade ago. At this purity level,
    heroin can be administered effectively through several methods, all far
    more alluring than injection and safer than using dirty needles.
    Snorting, and to a limited extent, smoking, also called ``Chasing the
    Dragon,'' are the preferred methods of ingestion by first-time and
    casual users. However, as the user gains tolerance, more heroin is
    needed for the high and snorters and smokers soon turn to injection.
        The second and probably the single greatest reason for the
    emergence of heroin is its portrayal as what is being called ``heroin
    chic'' by members of the entertainment and fashion industry. A recent
    article in Newsweek magazine reported that the fashion industry is seen
    as glamorizing the junkie look in fashion photos and shows. In the last
    several years, many people in the film and music industry have been
    associated with heroin.
        The annual number of heroin-related emergency room mentions
    increased from 34,000 in 1990 to 76,000 in 1994. The Cornell University
    Hospital reports the number of middle class people requesting treatment
    for heroin addiction has increased tenfold in the past two years.
    According to the Office of National Drug Control Policy, about 50
    percent of users seeking treatment in 1995 used needles. During 1996,
    according to a sampling of large treatment programs in selected cities,
    that figure was up to 75 percent. As the addict population grows older,
    that figure can be expected to increase. Those users injecting heroin
    now have the highest rate of new HIV infection. Further exacerbating
    the problem is the fact that when novices accustomed to other methods
    of administration switch to needles, the high quality of heroin that is
    often available on the street greatly increases the risk of overdose.
    Between 3,000 and 4,000 heroin abusers die of overdoses annually.
        According to the DEA's Heroin Signature Program results in 1995,
    South America was the predominant source area for heroin seized in the
    United States for the first time, accounting for 62 percent of the
    total heroin analyzed, an increase over the 1994 total of 32 percent.
    High grade Colombian heroin is smuggled into the United States by
    couriers who use ingestion or body carries to get the drug into the
    country, mostly in one-to-three kilo quantities. Aggressive
    interdiction programs at Miami International Airport and New York's JFK
    Airport have accounted for nearly half of all samples analyzed.
        There is no question that heroin produced in and controlled by
    groups in Colombia is being aggressively marketed throughout the
    Northeast, and more recently, the Midwest. These two areas have, by
    far, the largest portion of the heroin addict population in the United
    States. Colombian traffickers have been attempting to make inroads into
    the United States heroin market for several years. Reports of
    substantial opium poppy cultivation in Colombia began in 1990. By 1992,
    couriers from Colombia with one to two kilograms of heroin were being
    arrested on a regular basis at Miami International Airport and JFK.
        Within the United States, the same groups who are distributing
    cocaine are now also trafficking in heroin. To compensate for their
    late entry into the heroin trade, and to establish themselves in the
    marketplace, Colombian traffickers provided high-quality heroin, 80 to
    99 percent pure, to a fiercely competitive market where high purity is
    essential to establishing a clientele and maintaining user loyalty. To
    further entice customers, they offered their product at cut-rate
    prices. Heroin prices have been relatively stable for years. High-
    quality Southeast Asian heroin costs $150,000 to $200,000 per kilogram,
    and Southwest Asian heroin, not consistently as pure as that from the
    Golden Triangle, sells for approximately $120,000 to $150,000 per
    kilogram. Lesser quality Mexican heroin is often priced under $100,000
    per kilogram, but because of its inconsistent quality and black tarry
    appearance, it has never gained popularity outside the West and
    Southwest regions of the United States.
        Colombian traffickers began offering their highly pure product at
    $90,000 per kilogram and gave perspective customers free samples to get
    a foothold. Other methods used to establish market share were to allow
    customers to take multiple kilograms on consignment, and forcing
    cocaine customers to accept quantities of heroin along with their
    cocaine shipment as a condition of doing business. The other dilemma
    faced by these traffickers was a lack of connections to the mid-level
    wholesalers in the urban heroin trade, which they quickly solved by
    enlisting Dominican gangs to bridge the gap. This was a natural choice
    due to the Dominican nationals having already established ties in this
    area through their position as mid-level cocaine wholesalers. We have
    seen these independent groups using similar tactics in other major
    cities such as Boston and Detroit, where they are pushing high-grade
    heroin on to the streets, at extremely low prices to wrest the heroin
    trade from Middle Eastern and Mexican traffickers.
        Because the heroin industry is more decentralized and diversified
    than the cocaine trade, a different approach is necessary to blunt the
    impact of growing heroin problems. DEA's primary enforcement strategy
    is to identify those individuals and organizations within the United
    States responsible for heroin trafficking, and to target these
    individuals and organizations, with the ultimate goal of arresting
    them. DEA also seeks to ensure that these drug traffickers serve long
    sentences and to provide follow-up effort in source countries to
    identify and incarcerate the sources of supply.
        Domestically we are targeting our investigative resources at the
    organized Chinese and Nigerian gangs who control the Southeast Asian
    heroin. In 1995, the Chicago Field Division identified a Nigerian Cell
    operating in Chicago that was receiving 20 kilograms of heroin monthly
    from Bangkok and redistributing it to street gangs in Chicago. All of
    this heroin was smuggled into the country in five-kilogram quantities
    concealed in suitcases; most couriers were female of either British or
    American nationality and under the age of 25. Through an interagency
    effort including DEA, USCS, and other agencies, we were able to arrest
    21 individuals belonging to this relatively small cell of violators. In
    conjunction with the USCS, we are also intensifying our interdiction
    efforts at key international airports, and through our cooperation with
    state and local officials around the United States, supporting
    Operation Pipeline, an interdiction effort targeted at cocaine and
    heroin being moved cross country via passenger vehicles.
        The response to the expanding heroin market must be a comprehensive
    effort, addressing prevention and treatment in addition to interdiction
    and enforcement. In recent months, several significant enforcement
    operations have been initiated to address the expanding heroin problem,
    particularly in the northeastern and southeastern United States where
    heroin from South America has had the greatest impact. For example, in
    New York City, the nation's largest heroin market, DEA's New York Field
    Division has been monitoring the distribution of heroin in the
    metropolitan New York area and the proclivity of many organizations to
    identify their particular brand of heroin by stamping brand names on
    the glassine envelopes containing the heroin. The use of brand names
    allows the organization to package its product in a manner clearly
    designed to facilitate market loyalty and discourage competitors from
    infringing on there customers. Examples of common brand names found on
    the streets of New York City are being found in upstate communities as
    well, highlighting the scope of the current heroin problem affecting
    New York and the rest of the country. In addition, because South
    American heroin is transported to Puerto Rico directly from Colombia as
    well as through other nations in the Caribbean Basin, the San Juan
    Field Division has initiated a five-year plan--designated as a priority
    within the Caribbean Strategy--to coordinate major heroin trafficking
    investigations in its area of responsibility.
        The DEA hosted a National Heroin Conference in Reston, VA, February
    3-6, 1997. This conference served to heighten the awareness of law
    enforcement personnel, from around the country, to the increasing
    heroin threat. DEA is in the process of developing Special Enforcement
    Operations aimed at heroin traffickers. DEA realizes that enforcement
    initiatives are not the only way to address this problem. We also need
    to reduce the demand for heroin. DEA's Demand Reduction Program seeks
    to alert the public to the real dangers of heroin. DEA's Demand
    Reduction Program is trying to reach the youth of America through
    programs in schools and national youth groups such as Boys and Girls
    Clubs and the Boy Scouts of America. The Demand Reduction Program shows
    gritty, real-life films depicting the dangers of heroin abuse. It will
    take a combination of strong law enforcement pressure and the education
    of our youth to the dangers of heroin to curb the expansion of the
    heroin market.
        The heroin problem facing the United States at the current time is
    serious and must be addressed quickly to ensure that we do not have
    another epidemic, as we had with crack in the 1980's. The recent
    overdose deaths and coverage of the heroin issue in the press have
    focused attention on heroin, and I believe that is the first step if we
    are committed to addressing this issue seriously. DEA continues to work
    diligently at home and overseas to dismantle the world's most
    significant drug trafficking organizations. We appreciate the support
    we have been given from the Congress, and we look forward to working
    with Congress in the coming years to ensure that our nation's citizens
    are safe and free from the drug scourge which has taken far too many
    lives.
                                  puerto rico
        Question. What can the Committee do to help you with the challenges
    you have in Puerto Rico?
        Answer. DEA has determined that drug trafficking organizations are
    responding to the increased enforcement along the Southwest Border by
    increasing their use of the Caribbean and South Florida points of entry
    to move their product to United States markets. DEA estimates that the
    Eastern Caribbean is now the second most active drug trafficking route
    into the Western Hemisphere. Another reason for the Caribbean's re-
    emergence as a significant trafficking area may be in part a result of
    the United States's recent success against the Cali leaders.
        Current manpower and resources in the Caribbean do not compare with
    those in the Southwest Border, and the task at hand is no less daunting
    than that of the Southwest Border. The congressional committee would be
    able to assist the Caribbean Field Division of DEA by: strengthening
    its manpower, both agents and support staff; providing greater air
    support to the region; providing additional technical equipment and
    vehicles necessary to improve intelligence gathering and surveillance;
    and increasing the training for state, local and foreign law
    enforcement agencies. Many of these items are being considered at the
    Department of Justice as part of the 1999 budget request.
                                     ______

                Questions Submitted by Senator Pete V. Domenici
                     Immigration and Naturalization Service
      naturalization application increase--interaction with welfare reform
        Question. Currently, there are naturalization waiting lists of over
    2 years in some jurisdictions. After the Welfare Reform Bill of last
    year, non-citizens had a grace period of a year to complete the
    naturalization process before being terminated from the welfare rolls.
        How much of the influx in applications is due to non-citizen
    affected by the Welfare Bill?
        Answer. The Immigration and Naturalization Service (INS) does not
    have information available about why people naturalize. The current
    surge in citizenship applications appears to be the result of several
    factors, including the passage of the Welfare Reform Law, changes in
    INS procedures, as well as a significant increase in the number of
    eligible persons. In fiscal year 1997, INS anticipates as many as 1.8
    million naturalization applications, up from 1.2 million in fiscal year
    1996. During the next 3 years, the INS expects applications to increase
    by approximately 300,000 to 400,000 per year, for a total of more than
    one million additional applications.
        Question. How many of those who will be affected by the Welfare
    Bill and eligible for citizenship, will be able to be naturalized
    within the next two years if we accept the President's recommended
    levels?
        Answer. The INS does not have data regarding the number of non-
    citizen who may be affected by the Welfare Reform Law and who are
    eligible for citizenship. Some of this information may be available
    from the Social Security Administration or the Food Stamp Program.
                 affidavits of support and public charge bonds
        Question. Last year's immigration bill made the affidavit of
    support for sponsored immigrants legally binding and emphasized the use
    of ``public charge'' bonds.
        How many people have been admitted into the country under a
    sponsorship arrangement since enactment and how many public charge
    bonds were collected?
        Answer. Most family immigrants admitted since enactment of
    legislation have had nonlegally binding affidavits of support filed on
    their behalf. The new legally binding affidavit of support and the
    implementing regulation are currently being reviewed within the
    Administration and will be promulgated in the near future, with
    implementation beginning, as provided in statute, 60 days later. During
    this period, the INS will print the new form and with the State
    Department, disseminate it to INS offices and consular posts worldwide.
    Sponsors must obtain, complete, and file the new legally binding
    affidavits of support on behalf of prospective immigrants who file
    applications for immigrant visas or adjustment of status beginning on
    the effective date.
        The public charge bond pilot described in Section 564 of the
    Illegal Immigration Reform and Immigrant Responsibility Act of 1996, is
    currently being designed for implementation in five INS Districts.
    Under this pilot program, certain family-based immigrants in the
    selected five districts will be required to post public charge bonds in
    addition to having affidavits of support filed on their behalf.
    Beginning 9 months after implementation of the pilot, as required by
    statute, the Attorney General will report on the effectiveness of the
    pilot program.
        Question. Have there been any court challenges to making the
    affidavit of support legally binding?
        Answer. We are not aware of any legal challenges to this new
    requirement. The Service, however, has not yet promulgated the new
    affidavit of support form; nor have the related regulations entered
    into force. The need for extensive and in-depth consultation with other
    agencies has prevented the Service from meeting the implementation date
    specified by the statute. The new requirement will not enter into force
    until the form and regulations are promulgated. Consequently, no one
    has been affected by the new requirement in a way that would give them
    standing to challenge the requirement.
                 special immigrant status for certain juveniles
        Question. At a recent Subcommittee hearing at which the Attorney
    General testified, I asked her to examine a provision adopted in the
    1990 Immigration Act entitled ``Special Immigrant Status for Certain
    Juveniles.'' At that time it was my belief that this provision was
    being severely abused by certain students who come to the United States
    from foreign countries on student visas. During the hearing with the
    Attorney General, she informed the Subcommittee that she would look
    into the matter and report back to us.
        Madam Commissioner, as your staff has been looking into the issue
    of Special Immigrant Status for Certain Juveniles in support of the
    Attorney General's commitment to this Subcommittee, do you have
    anything to report back to us about it at this time?
        Answer. Yes. Balancing the issues related to the best interests of
    a juvenile alien and the deference owed to state juvenile courts who
    are experienced in dealing with juvenile issues with the immigration
    enforcement mandate of the INS has been a difficult task. Although we
    believe that the intent of the provision was to assist abandoned,
    neglected, or abused children with no lawful immigration status, the
    language of the provision contains no such limitation and is open to
    the interpretation that it is available to other juveniles.
                            naturalization backlogs
        Question. In New Mexico, I have one constituent, a Holocaust
    survivor, who married a GI and immigrated to the United States 50 years
    ago. She has since been widowed. Having married a United States
    serviceman, this woman has long been under the mistaken impression that
    she was a United States Citizen. Recently, however, she received a
    letter from the Social Security Administration indicating that she is
    not in the agency's records as being a citizen. She is now anxious to
    naturalize.
        I must thank the distinguished Subcommittee Chairman and his staff
    for assisting me in monitoring this ongoing situation. I also thank you
    for the detailed responses you gave to my several questions on this
    issue last year.
        I know that the Department is currently undergoing the deployment
    of additional Border Patrol agents and other law enforcement and
    support personnel along the border. The interim plan now being
    implemented also redeploys some 200 Border Patrol agents to the
    Southwest border. I understand that this deployment plan will be
    finalized this month under the original schedule.
        Commissioner Meissner, could you give the Subcommittee a brief
    review of the interim deployment plan for Border Patrol agents and
    support personnel?
        Answer. The INS is in the process of deploying 714 Border Patrol
    agents and 100 support staff of the new personnel received in fiscal
    year 1997. Chart A lists these positions by state. The deployment plan
    for the remaining 286 Border Patrol agents has recently been approved
    as submitted in the original deployment schedule.

     CHART A.--DEPLOYMENT OF FISCAL YEAR 1997 BORDER PATROL AGENT (714) AND
                             SUPPORT (100) POSITIONS
    ------------------------------------------------------------------------
                                          Border
           Sector/State/Station           patrol      Support       Total
                                          agents
    ------------------------------------------------------------------------
    Del Rio, TX:
        Bracketteville...............            5  ...........            5
        Carrizo Springs..............            5  ...........            5
        Eagle Pass...................           27            1           28
        Sector HQ....................  ...........            5            5
                                      --------------------------------------
          Total......................           37            6           43
                                      ======================================
    El Centro, CA:
        Calexico.....................           24  ...........           24
        El Centro....................           12  ...........           12
        Sector Headquarters..........  ...........            3            3
                                      --------------------------------------
          Total......................           36            3           39
                                      ======================================
    El Paso, NM:
        Deming.......................           13  ...........           13
        Las Cruces...................           13            2           15
        Santa Theresa................           26  ...........           26
    El Paso, TX:
        El Paso......................           21  ...........           21
        Sector Headquarters..........  ...........            5            5
                                      --------------------------------------
          Total......................           73            7           80
                                      ======================================
    Laredo, TX:
        Laredo North.................           18  ...........           18
        Laredo South.................           16  ...........           16
        Sector Headquarters..........  ...........            6            6
                                      --------------------------------------
          Total......................           34            6           40
                                      ======================================
    McAllen, TX:
        Brownsville..................           81            1           82
        Harlingen....................           30  ...........           30
        McAllen......................           28  ...........           28
        Mercedes.....................           20  ...........           20
        Harlingen....................  ...........            2            2
        Kingsville...................  ...........            1            1
        Sector Headquarters..........  ...........           12           12
                                      --------------------------------------
          Total......................          159           16          175
                                      ======================================
    Miami, FL: Miami Station.........  ...........            1            1
    Detroit, MI: Sector Headquarters.  ...........            2            2
    New Orleans, LA: Sector
     Headquarters....................  ...........            1            1
    Ramey, PR: Ramey.................            8            1            9
    San Diego, CA:
        Brownfield...................            7  ...........            7
        Campo........................            6            1            7
        Jacumba......................  ...........            1            1
        Chula Vista..................            7  ...........            7
        El Cajon.....................            6            1            7
        Sector Headquarters \1\......          175           26          201
                                      --------------------------------------
          Total......................          201           29          230
                                      ======================================
    Tucson, AZ:
        Douglas......................           90            3           93
        Nogales......................           76            2           78
        Naco.........................  ...........            1            1
        Wilcox.......................  ...........            1            1
        Sector Headquarters..........  ...........            9            9
                                      --------------------------------------
          Total......................          166           16          182
                                      ======================================
    HQ, SC: Charleston Training
     Facility........................  ...........            5            5
    HQ, PA: National Firearms Unit...  ...........            1            1
    HQ, TX: El Paso Flight Operations  ...........            2            2
    Blaine, WA: Blaine Sector
     Headquarters....................  ...........            2            2
    Yuma, CA: Yuma Sector
     Headquarters....................  ...........            1            1
    WOR, CA: Regional Office.........  ...........            1            1
                                      --------------------------------------
          Servicewide total..........          714          100          814
    ------------------------------------------------------------------------
    \1\ All trainees will EOD at San Diego Sector HQ and further be assigned
      primarily to the mainline stations.

        Question. Of the 1,000 new agents approved for fiscal year 1997,
    how many have actually been deployed?
        Answer. Of the 1,000 new Border Patrol agents, Congress has
    approved the deployment of a total of 714 positions.
        Question. How many of these agents are being sent to the El Paso
    sector for New Mexico?
        Answer. The El Paso Sector received 73 of the 714 Border Patrol
    agents, 52 of the 73 were deployed to New Mexico stations.
        Question. How many Border Patrol agents (BPA), investigators, and
    support personnel are currently deployed in New Mexico? Would you
    please provide this information by station?
        Answer.

    ----------------------------------------------------------------------------------------------------------------
                                                                            BPA        Investigators      Support
    ----------------------------------------------------------------------------------------------------------------
    Lordsburg.......................................................              26  ..............               1
    Truth or Consequences...........................................              12  ..............               1
    Las Cruces......................................................              80               2               6
    Alamogordo......................................................              55  ..............               2
    Carlsbad........................................................               3               5               1
    Deming..........................................................              85               1               2
    Silver City.....................................................               2  ..............  ..............
    Albuquerque.....................................................               2              12  ..............
    Santa Teresa....................................................             100  ..............               1
                                                                     -----------------------------------------------
          Total.....................................................             365              20              14
    ----------------------------------------------------------------------------------------------------------------

        Question. Of the remaining agents to be deployed (286), how many do
    you anticipate will be deployed to New Mexico?
        Answer. In June 1997, the INS reevaluated each sector's operational
    needs and made final recommendations to the Appropriations Committees.
    The recommendations were approved as submitted, which means that New
    Mexico stations will receive another 24 Border Patrol agent positions.
        Question. The Border Patrol deployment plan is scheduled to be
    finalized in April. Is the Department on schedule to complete that in
    April?
        Answer. The INS submitted a proposed deployment plan for the
    remaining 286 Border Patrol agents to the Appropriations Committees in
    June. That plan was approved as submitted.
        Question. Could you please provide the Subcommittee with the final
    distribution of the 200 redeployed Border Patrol agents including where
    they were transferred from and where they were actually redeployed?
        Answer. The INS has moved 73 Border Patrol positions to the
    Southwest border with an additional 127 workyears of redirected border
    control activities. This will improve the overall border control
    capability of the Border Patrol by 200 agents. Chart B provides the
    locations of redeployment.

                  CHART B.--REDEPLOYMENT OF BORDER PATROL AGENTS--NEW AGENTS AND REDIRECTED WORK-YEARS
    ----------------------------------------------------------------------------------------------------------------
                                                                                         Positions
                          Border Patrol Sector                          Redirected      Deployed to        Total
                                                                        Work-years        Border
    ----------------------------------------------------------------------------------------------------------------
    Buffalo, NY.....................................................             0.4  ..............             0.4
    Detroit, MI.....................................................             1.5  ..............             1.5
    El Paso, TX.....................................................            21.6             4.0            25.6
    Marfa, TX.......................................................            12.4  ..............            12.4
    McAllen, TX.....................................................             4.2            29.0            33.2
    Havre, MT.......................................................             3.3  ..............             3.3
    Miami, FL.......................................................             3.8  ..............             3.8
    New Orleans, LA.................................................             1.0  ..............             1.0
    Tucson, AZ......................................................             6.8             9.0            15.8
    Yuma, AZ........................................................             9.6  ..............             9.6
    Houlton, ME.....................................................              .8  ..............              .8
    Swanton, VT.....................................................  ..............  ..............  ..............
    Del Rio, TX.....................................................            10.9  ..............            10.9
    Laredo, TX......................................................             7.1  ..............             7.1
    El Centro, CA...................................................             6.6  ..............             6.6
    San Diego, CA...................................................             4.6            31.0            35.6
    Livermore, CA...................................................            20.0  ..............            20.0
    Mayaguez, PR....................................................              .3  ..............              .3
    Spokane, WA.....................................................             7.0  ..............             7.0
    Blaine, WA......................................................             4.2  ..............             4.2
    Grand Forks, ND.................................................              .9  ..............              .9
                                                                     -----------------------------------------------
          Total.....................................................           127.0            73.0           200.0
    ----------------------------------------------------------------------------------------------------------------

        Question. Has the Department backfilled the positions as it
    committed to do when the Border Patrol agents were transferred to the
    front lines of the border? What is the status of this initiative?
        Answer. The INS assigned 93 investigative positions to 30 locations
    as backfill for the investigative functions previously performed by
    Border Patrol agents in the redeployment plan. Vacancy announcements
    for the investigative positions were announced the first quarter of
    fiscal year 1997. Selections were made for 70 positions, with the
    balance to be selected shortly. Of the 70 selections, 57 (81 percent)
    were Border Patrol agents from the interior stations.
        Question. What is your current assessment of the law enforcement
    staffing situation in New Mexico?
        Answer. The INS will continue to support the staffing requirement
    and distribution of overall resources to meet the operational needs for
    all INS offices including New Mexico. On-board staffing levels within
    New Mexico have increased 76.4 percent since fiscal year 1994 (from 212
    positions to 374 positions). In fiscal year 1997, the New Mexico
    stations received the initial deployment of 52 Border Patrol agents and
    will be considered in the final deployment of the pending 286 agents.
    According to the 5-year staffing plan, New Mexico will receive
    increased resources through fiscal year 2000.
        Question. How would the additional Southwest border resources
    requested in the President's budget affect New Mexico and your
    assessment of the law enforcement situation in New Mexico?
        Answer. The President's budget for fiscal year 1998 requested a
    total of 550 positions (500 Border Patrol agents and 50 support
    positions). The 5-year staffing plan proposes that an additional 50
    positions of the requested increase of 500 Border Patrol agents be
    directed to New Mexico for fiscal year 1998.
                       Violent Crime Reduction Trust Fund
         $1.4 billion cut in vcrtf after 1999 proposed by the president
        Question. The President's Budget proposes additional funding for
    the INS, Drug Enforcement Administration, and Federal Bureau of
    Investigation (FBI) out of the Violent Crime Reduction Trust Fund
    (VCRTF). Would you characterize the Violent Crime Trust Fund spending
    as funds to support ongoing programs or one-time investments?
        Answer. The fiscal year 1998 budget request supports ongoing
    programs within INS. The request includes 1,641 positions, 1,530 full-
    time equivalent (FTE) employment and $510.6 million for budget base
    spending, which is for ongoing activities previously approved by the
    Congress. These include border control, the Institutional Hearing
    Program, the detention of criminal and other deportable aliens, and
    continuing information resource management activities. The increases
    requested, which would be funded by the VCRTF in fiscal year 1998,
    include 1,163 positions, 611 FTE and $221.6 million. If approved by the
    Congress, the increases would require continuing funding support beyond
    fiscal year 1998.
        Funding appropriated for the FBI under the VCRTF is used for both
    ongoing programs and for one-time investments. For example, in 1997,
    the FBI was appropriated $20,240,000 for the National Instant Check
    System. That amount was a one-time-only investment for system
    development and does not recur in the President's 1998 budget request
    for the FBI. Beginning in 1996, the FBI was also appropriated
    $5,500,000 for forensic DNA programs. This requirement is recurring and
    is included in the President's 1998 budget request. For 1998, the
    President's budget proposes a total of $171,121,000 of VCRTF for the
    FBI, of which $30,959,000 is for program increases and $140,162,000 is
    for ongoing programs.
        Funding appropriated for the DEA under the VCRTF can be used for
    one-time investments, but primarily is used for ongoing programs. For
    example in fiscal year 1996, DEA funded many on-going programs with the
    VCRTF funds, including: domestic heroin programs, MET Teams, contract
    linguists, ADP programs, and advanced telephony base for equipment
    purchases. For fiscal year 1997, DEA is funding its entire State and
    Local Task Forces Decision Unit and the funds received for the Source
    Country/International initiative with its VCRTF funds.
        Question. After 1999, the President proposes overall reductions of
    $1.4 billion in the VCRTF. Can you tell the Committee which programs
    will be terminated or scaled back after the dip in funding?
        Answer. The reduction in the VCRTF is a result of the completion of
    the Community Oriented Policing Services program. By 2001, all
    authorized funding for this program will have been provided and the
    program is expected to have met the goal of providing another 100,000
    community policing officers to the states and localities. Other funding
    from the VCRTF is expected to continue.
                                     ______

              Questions Submitted by Senator Kay Bailey Hutchison
                     Immigration and Naturalization Service
                         border patrol agent increases
        Question. The Illegal Immigration Reform and Immigrant
    Responsibility Act of 1996 requires the number of Border Patrol agents
    to increase by 1,000 per year through the year 2001. However, the
    Administration has requested an addition of only 500 agents in fiscal
    year 1998. I have written to the President and Attorney General and you
    on this matter. What have you done, or intend to do, to seek an
    increase in the number of Border Patrol agents from 500 to 1,000, as
    mandated by the 1996 Immigration Act?
        Answer. The INS is requesting 500 new Border Patrol Agents for
    fiscal year 1998, even though the Illegal Immigration Reform and
    Immigrant Responsibility Act of 1996 (IIRIRA) specifies that the Border
    Patrol is to increase by 1,000 new agents every year for the next five
    years. Over the past four years, between fiscal year 1993 and fiscal
    year 1997, the Border Patrol Program's budget has more than doubled. In
    addition, the number of Border Patrol agents has increased from 3,965
    on-board at the end of fiscal year 1993 to an estimated on-board
    strength of 6,859 agents by the end of fiscal year 1997. The addition
    of 500 new Border Patrol agent positions in fiscal year 1998 would
    bring the total to 7,359. This figure represents an 85 percent increase
    over the fiscal year 1993 total and will exceed the ambitious goal of
    7,000 that the President had previously announced. The sustained growth
    of the Border Patrol into fiscal year 1998, and the number of
    additional agents requested in the fiscal year 1998 budget, clearly
    demonstrates the President's continuing commitment to a strong
    enforcement presence at the border.
        These 500 new agents will allow for responsible, manageable growth
    of the Border Patrol and further improve our ability to control our
    Nation's borders. This level of measured growth will allow us to
    maintain integrity in our law enforcement activity. An increase of
    agents at a level greater than this would outstrip the supervisory and
    support staff available and jeopardize the integrity and efficiency of
    INS's law enforcement efforts. While the growth in the Border Patrol is
    clearly important, it is also important that the Service's
    infrastructure, which supports not only the Border Patrol, but all
    other Service programs as well, has a balanced growth with the Border
    Patrol. Over the past four years, the growth of the Service's
    infrastructure has not kept pace with the growth of the Border Patrol.
    The fiscal year 1998 budget, while continuing to add additional Border
    Patrol agents to a level that exceeds the President's previous
    commitment, places emphasis on the increased resource needs of INS
    infrastructure that are vital to maintaining a strong, effective, and
    properly equipped Border Patrol.
                                bars to reentry
        Question. Under the 3-year/10-year rule, which took effect on April
    1 of this year, those in the U.S. illegally for 6 months or more, will
    be barred from re-entry to the U.S. for 3 years. Those here illegally
    for over a year will be barred from re-entry for 10 years. Beginning
    October 1, 6 months from the effective date, your agency will take on
    this additional duty to bar re-entry of those persons, as mandated by
    Congress. How do you plan to implement this law barring re-entry for 3
    or 10 years? Do you plan to publicize it?
        Answer. Interim guidelines have been provided to the field for
    implementing the new grounds of inadmissibility found in sections
    212(a)(6)(A) and 212(a)(9) of the Immigration and Nationality Act
    (``the Act''), as amended by IIRIRA. The effective date for each of
    these sections is April 1, 1997. Sections 212(a)(6)(A) and 212(a)(9) do
    not apply to applications for admission or adjustment of status
    adjudicated by an immigration judge in deportation or exclusion
    proceedings commenced prior to April 1, 1997. Except as otherwise
    required by law, these grounds of inadmissibility apply at the time of
    any other administrative determination regarding admissibility,
    including but not limited to the issuance of a visa, inspection of an
    alien at a port of entry, disposition of an application for admission
    by an inspector or an immigration judge, or adjudication of an
    application for adjustment of status. Further guidance will be released
    and proposed regulations published in the Federal Register at a later
    date.
        The following addresses the general implementation of the sections
    of law, the manner in which time ``unlawfully present'' in the United
    States is measured, and the effect of these grounds of inadmissibility
    on applications for adjustment of status.
    I. General Implementation Issues
        As a preliminary matter it is noted that the section 212(a)(6)(A)
    ground of inadmissibility applies to any alien present in the United
    States without having been admitted or paroled, but the 212(a)(9)
    grounds of inadmissibility only apply to aliens who have previously
    physically departed the United States and are now either seeking
    admission or have entered or attempted to enter the United States
    without being inspected. Therefore, section 212(a)(6)(A) does not apply
    to visa applicants outside of the United States, but section
    212(a)(9)(B) does apply to visa applicants outside of the United States
    who previously did accrue sufficient unlawful presence in the United
    States. Likewise, section 212(a)(9) does not apply to aliens seeking
    adjustment of status in the United States who have not previously
    departed the United States. Aliens will not be able to avoid the
    consequences of unlawful presence by claiming that their re-entry after
    their previous physical departure was brief, casual and innocent.
        Section 212(a)(6)(A) of the Act provides that ``an alien present in
    the United States without being admitted or paroled, or who arrives in
    the United States at any time or place other than as designated by the
    Attorney General, is inadmissible.'' Written into the section is an
    exception for battered spouses and children. The battered spouse
    exception will be applied to both women and men.
        Section 212(a)(9)(A)(I) of the Act provides that aliens who have
    been ordered removed from the United States through expedited removal
    proceedings or removal proceedings initiated on the alien's arrival in
    the United States and who have actually been removed (or departed after
    such an order) are inadmissible for 5 years. Section 212(a)(9)(A)(ii)
    of the Act provides that aliens who have been otherwise ordered
    removed, ordered deported under sections 242 or 217 of the Act or
    ordered excluded under section 236 of the Act and who have actually
    been removed (or departed after such an order) are inadmissible for 10
    years. Aliens who have been removed more than once are inadmissible for
    20 years and aliens who have been convicted of aggravated felonies are
    permanently inadmissible. The provision holding aliens inadmissible for
    10 years after the issuance of an exclusion or deportation order
    applies to such orders rendered both before and after April 1, 1997. In
    this context, it should be noted that pursuant to section 101(a)(13)(C)
    of the Act, permanent residents often are not regarded as seeking
    admission upon return to the United States. The statute does include an
    exception to the 212(a)(9)(A) ground of inadmissibility for those who
    have, prior to their return to the United States, obtained consent from
    the Attorney General to reapply for admission. The Service is
    considering a regulation or policy that would grant this exception to
    aliens excluded or deported prior to April 1, 1997, who had either been
    subsequently lawfully admitted to the United States or granted an
    immigrant or nonimmigrant visa prior to the effective date of the new,
    lengthier prohibitions against readmission. In the interim, applicants
    who have already remained outside of the United States for the one or
    five years required under pre-IIRIRA law, in the absence of other
    adverse discretionary factors, should be granted advance consent to
    reapply for admission. Those who have been convicted of an aggravated
    felony are eligible to apply to the Attorney General for consent to
    reapply for admission but remain subject to all other applicable
    grounds of inadmissibility. All requests for such a waiver should be
    filed on Form I-212, Application for Permission to Reapply for
    Admission into the United States After Deportation or Removal.
        Pursuant to section 212(a)(9)(B)(I)(I) of the Act, aliens
    ``unlawfully present'' in the United States for more than 180 days but
    less than one year who subsequently depart from the United States
    voluntarily prior to the initiation of removal proceedings under
    section 235(b)(1) or section 240 are inadmissible for a period of 3
    years. For purposes of this section, ``voluntarily departed'' includes
    any departure by an alien from the United States prior to the
    initiation of removal proceedings, whether or not pursuant to an order
    of voluntary departure issued by the Service. Pursuant to section
    212(a)(9)(B)(I)(II) of the Act, those aliens ``unlawfully present'' in
    the United States for one year or more, who depart or are removed and
    then seek admission are inadmissible for 10 years. The Attorney General
    may waive inadmissibility under section 212(a)(9)(B) in the case of an
    immigrant who can show that refusal of admission would result in
    extreme hardship to the alien's spouse or parent who is a citizen or
    lawful permanent resident. The Service will retain authority to grant
    the extreme hardship waiver in consular cases (with no administrative
    appeal available); however, those seeking admission at a Port-of-Entry
    who seek such a waiver will be referred to an immigration judge (with
    administrative appeal to the Board of Immigration Appeals, as part of
    an appeal of a removal order). Form I-724, Application to Waive
    Inadmissibility Grounds and Permission to Reapply is being designed to
    accommodate this provision.
        Pursuant to section 212(a)(9)(C) of the Act, aliens who were
    unlawfully present in the United States for an aggregate period of more
    than one year and subsequently departed or who were previously ordered
    removed (and actually left the United States) and have subsequently
    either entered the United States without inspection or sought to enter
    the United States without inspection are permanently inadmissible. The
    statute makes an exception for aliens who seek admission more than 10
    years after their last departure who have obtained advance consent from
    the Attorney General to reapply for admission. This ground of
    inadmissibility applies only to aliens who have attempted to re-enter
    or actually have re-entered the United States without being inspected
    and admitted or paroled.
    II. Measuring Time ``Unlawfully Present''
        When determining whether sections 212(a)(9)(B) and (C) of the Act
    are applicable in a particular case, Service officers will be required
    to determine the length of time that an alien spent ``unlawfully
    present'' in the United States prior to their initial departure. A
    number of factors are relevant to this calculation.
        When is an alien unlawfully present? The first question in every
    case will be whether an alien has been previously ``unlawfully
    present'' in the United States. By statute, ``an alien is deemed to be
    unlawfully present in the United States if the alien is present in the
    United States after the expiration of the period of stay authorized by
    the Attorney General or is present in the United States without being
    admitted or paroled.'' See Section 212(a)(9)(B)(ii) of the Act. The
    Service interprets time ``unlawfully present'' to include any time
    spent in the United States by aliens after they have violated the terms
    and conditions of any form of non-immigrant status, because time spent
    in violation of status is not authorized.
        For purposes of section 212(a)(9)(B), time in ``unlawful presence''
    begins to accrue on April 1, 1997. For example, although an alien may
    have been in the United States illegally for one year prior to April 1,
    1997, as of April 2, 1997, the same alien has accrued only one day of
    ``unlawful presence'' for purposes of section 212(a)(9)(B). For
    purposes of section 212(a)(9)(C), time in ``unlawful presence'' may
    accrue prior to April 1, 1997. Thus, the same alien who would only have
    one day of unlawful presence for purposes of section 212(a)(9)(B) on
    April 2, 1997, would have one year and one day of ``unlawful presence''
    for purposes of section 212(a)(9)(C). In addition, when measuring time
    spent ``unlawfully present'' in the United States, the time is measured
    cumulatively for purposes of section 212(a)(9)(C), but not for purposes
    of section 212(a)(9)(B). For example, an alien who was ``unlawfully
    present'' in the United States for 5 months, departed the United
    States, returned, and was ``unlawfully present'' for 2 more months
    would have accrued 7 months of ``unlawful presence'' for purposes of
    section 212(a)(9)(C), but not for purposes of section 212(a)(9)(B).
        Unlawful presence may be triggered either by overstaying the time
    authorized or by entering into an activity that violates the terms or
    conditions of status. For example, an alien present on a visitor visa
    begins to accrue unlawful presence on the day that he or she enters
    into unauthorized employment. Unlawful presence is also triggered by
    the commission of a criminal offense that renders an alien inadmissible
    or removable.
        When does an alien stop being unlawfully present? Once an alien
    goes out of status, he or she is ``unlawfully present'' until the
    Service restores status or he or she leaves the United States. Service
    policy governing restoration of status will be disseminated under
    separate cover.
        Section 212(a)(9)(B)(iii) enumerates instances in which an alien
    does not accrue ``unlawful presence'' for purposes of section
    212(a)(9)(B):
        1. Time in which an alien is under 18 years of age.
        2. Time during which an alien has a bona fide application for
    asylum pending (unless the alien was employed without authorization at
    any time during the period that the application was pending).
        3. Time during which an alien is a beneficiary of family unity
    protection.
        4. For those admitted or paroled--time during the pendency of a
    non-frivolous application for change or extension of status (up to a
    maximum of 120 days).
        5. Those who qualify as a battered spouse or child as provided in
    section 212(a)(9)(B)(iii)(IV) of the Act.
        These exceptions are not applicable when considering ``unlawful
    presence'' for purposes of section 212(a)(9)(C).
        The exception for up to 120 days during the pendency of an
    application for change or extension of status only applies when the
    application is submitted prior to the expiration of status by a person
    who has been lawfully admitted or paroled into the United States, and
    includes not only time during the pendency of an application for
    ``change or extension'' of status but also time during applications for
    ``adjustment'' of status.
        An alien who is ``unlawfully present'' continues to accrue time as
    such while in removal proceedings. See 8 CFR section 239.3. Likewise,
    the grant of voluntary departure by the Service or an immigration judge
    will not stop the running of time ``unlawfully present.'' However, time
    in certain forms of Attorney General ``sanctioned'' status will not
    count in measuring time unlawfully present. By proposed regulation,
    this will include refugees admitted under section 207 of the Act,
    aliens granted asylum under section 208 of the Act and aliens granted
    cancellation pending adjustment of status. The proposed regulation
    addressing these groups will be specific in nature and not leave
    ``sanctioned'' status open to broader interpretation. Aliens with
    pending change or extension of status applications after the 120-day
    period and aliens present but not yet removed after a final removal
    order will not be considered to be in a period of stay ``authorized by
    the Attorney General.''
    III. Impact of these Grounds of Inadmissibility on Applications for
            Adjustment of Status
        Aliens inadmissible pursuant to 212(a)(6)(A) of the Act are
    eligible to apply for adjustment of status under section 245(i) of the
    Act. However, aliens inadmissible pursuant to section 212(a)(9) of the
    Act are ineligible for adjustment of status under section 245 of the
    Act, subject to the waiver and exception provisions of those grounds of
    inadmissibility.
        The INS plans to issue a regulation in June to implement the re-
    entry bar provisions. The regulation will be a proposed rule with a
    public notice and comment period.
                          extension of section 245(i)
        Question. Under Section 245(i), those here illegally can now adjust
    their status without leaving the country. The filing fee paid under
    245(i) has provided INS with additional resources. However, Section
    245(i) will lapse on October 1, requiring all those not ``in status''
    or here illegally to leave the U.S. in order to adjust their status.
    What accommodation in your budget have you made for the fact that there
    will be no Section 245(i) application fees in fiscal year 1998? Do you
    intend to seek an extension of 245(i), which undermines the effect of
    the bars to re-entry?
        Answer. The INS fiscal year 1998 budget includes a provision to
    extend Section 245(i) indefinitely. Therefore, the fiscal year 1998
    budget for the Examinations Fee Account assumes that Section 245(i)
    will be extended.
                                     ______

             Question Submitted by Senator Ben Nighthorse Campbell
          consolidation of the federal law enforcement training center
        Question. Commissioner Meissner, as you know, there is a Memorandum
    of Understanding (MOU) in place regarding the future consolidation of
    the Federal Law Enforcement Training Center (FLETC). This MOU also
    includes the future disposition of FLETC satellite facilities. Could
    you please provide the Subcommittee with INS progress towards
    fulfillment of its obligations under the MOU?
        Answer. The MOU is still being finalized. We are presently
    negotiating with FLETC about technical requirements put forth in the
    MOU.
        We are using Charleston as a satellite facility because FLETC did
    not have the capacity to meet our training requirements. When FLETC has
    the capacity to meet our training requirements, INS has every intention
    of returning to FLETC at Glynco, Georgia.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
     Immigration and Naturalization Service/Federal Bureau of Investigation
                            fingerprints/immigration
        Question. There has been a great deal of controversy over the
    failure of the Immigration and Naturalization Service (INS) and the
    Federal Bureau of Investigations (FBI) to conduct fingerprint checks of
    immigrants applying for citizenship. Apparently, as many as 100,000
    immigrants were naturalized without checks to ensure that they do not
    have criminal records.
        I remember in 1994 that the INS proposed to stop having the FBI
    make fingerprint checks altogether in order to save $3 million. Well
    Senator Byrd and I wrote to Janet Reno and put a stop to that.
        But now, 4 years later, it appears that the INS began developing a
    naturalization project called ``Citizenship USA'' that still had the
    same fingerprint problems that Senator Byrd and I highlighted three
    years ago.
        Commissioner Meissner, did the INS notify the FBI that it was
    concerned about the backlog of naturalization applications and that
    your agency was planning to shorten its application process and
    therefore would be assuming that if the FBI had not contacted INS
    within 60 days, that the application was okay?
        Answer. After the February 1994, Office of Inspector General report
    on weaknesses in the INS fingerprint clearance process, INS began
    frequent meetings with the FBI. At these meetings the increase in
    naturalization receipts, and the Citizenship USA plan to reach a 6-
    month processing goal was discussed. In addition, the growing INS
    processing backlog, subsequent to implementation of new quality
    assurance fingerprint processing procedures, was addressed with the
    FBI, and led to INS/FBI plans to enhance the electronic transfer of
    data between the two organizations.
        Question. Director Freeh, did the FBI ever inform INS that it would
    be unable to meet the 60 day requirement?
        Answer. Yes. The ability of the FBI to meet a 60-day requirement
    was discussed at operational working levels between individuals of both
    agencies. This issue was not, however, discussed between senior levels
    of FBI and INS management.
        Question. Did you ever tell INS to hold up and not proceed?
        Answer. No. INS was often advised by the FBI that it could not
    handle the volume of naturalization work on an expedited basis, and
    that the FBI could not guarantee any particular response time.
        Question. Much is made of this DIAP or Director of Investigative
    Agency Policy mechanism that was established to coordinate Justice
    agency programs. Does the DIAP deal with technology and criminal
    background checks?
        Answer. No, to date the DIAP has not addressed the issue of
    fingerprint technology and criminal background checks.
                            fingerprint card backlog
        Question. I recently read where the FBI's fingerprint
    identification operation is overwhelmed and that there is a backlog of
    2.8 million fingerprint cards to be processed. According to one media
    report, the FBI has fallen at least three months behind on completing
    checks on criminal suspects and background checks on teachers, child
    care providers, security guards, private investigators, bank employees,
    and others who must have an FBI fingerprint check.
        What is the status of the fingerprint card backlog?
        Answer. On May 19, 1997, the backlog of fingerprint cards was in
    excess of 2,600,000.
        Question. How long does it take to process a criminal fingerprint
    card? A civil fingerprint card?
        Answer. As of May 19, 1997, it took an average of 148 days from the
    time a criminal fingerprint card was received by the FBI, until a
    response was returned. As of May 19, 1997, it took an average of 36
    days from the time a civil fingerprint card was received by the FBI,
    until a response was returned.
        There are several reasons why it takes more time to process a
    criminal fingerprint card than a civil card. Only nine percent of the
    civil fingerprint cards received are identified or matched up with
    criminal history records. Since the identification rate is low, the
    civil cards are processed more quickly because there are fewer steps
    involved in the processing of cards when there is no identification.
        Conversely, approximately 65 percent of the criminal fingerprint
    cards submitted are identified or matched up with existing criminal
    history records, which increases the number of steps involved in the
    processing of these fingerprint cards.
        The Criminal Justice Information Services (CJIS) Division has over
    35 million fingerprint cards in its master criminal history file. When
    a current fingerprint submission is matched up with a criminal record,
    an employee has to physically pull a paper fingerprint card from the
    criminal file and compare it with the current fingerprint card
    submitted for identification to determine if they are identical. These
    existing cards in the master criminal file are then refiled.
        After the current fingerprint cards are identified, the current
    arrest record is added to the existing criminal history record. If the
    current print is identical with a non-automated criminal record, that
    record has to be pulled and converted to the automated format.
        Question. How did the backlog grow to such high levels and what
    actions have the FBI taken to eliminate the backlog?
        Answer. The average fingerprint cards received daily by the FBI is
    at the highest level since World War II. One of the primary causes of
    the increase in fingerprint card submissions is new legislative
    requirements at the state and Federal levels for fingerprint checks to
    be conducted for licensing and employment purposes. Listed below are
    the daily average receipts for all fingerprint cards received by the
    FBI during fiscal year 1994 through 1996, and fiscal year 1997 to date:

    Average cards received daily

    1994..............................................................34,992
    1995..............................................................39,334
    1996..............................................................45,520
    1997..............................................................55,038

        In the fourth quarter of fiscal year 1995, the CJIS Division
    reduced the backlog of fingerprint cards from 1,200,000 to
    approximately 850,000 by using overtime extensively. Due to the
    Government-wide shutdown that occurred during the first quarter of
    fiscal year 1996, the CJIS Division was unable to work any overtime and
    the backlog once again began to increase. Furloughs during the first
    quarter of fiscal year 1996 prevented other Federal Government agencies
    from processing and submitting their fingerprint cards on a regular
    basis. This resulted in the highest daily average receipts of
    fingerprint cards in recent history during the second quarter of fiscal
    year 1996.
        The FBI's CJIS Division uses a fingerprint card processing system,
    the Identification Automated System (IDAS), that was built to process
    approximately 31,000 fingerprint cards daily, with occasional
    ``spikes'' in daily receipts up to 37,500 cards. This system was also
    designed to have a staffing level of 3,045. Although the IDAS
    processing capability has continually improved, the staffing level
    assigned to fingerprint card processing has diminished while workloads
    have increased remarkably.
        Due to the relocation of the CJIS Division to its new fingerprint
    identification facility in Clarksburg, West Virginia, the CJIS Division
    has encountered a major decrease in its experienced staff (1,675 at the
    beginning of 1997 versus 2,310 at the beginning of 1996). Hundreds of
    highly experienced fingerprint examiners and others decided not to
    relocate to the new facility and either left the FBI or found positions
    elsewhere at FBI Headquarters. These employees were replaced with new
    personnel who are in training but will require time to develop
    necessary expertise.
        Additionally, during the first quarter of fiscal year 1997 the FBI
    received a Congressional subpoena to recreate years of prior work
    produced for the INS special project.
        The FBI has taken several actions to eliminate the backlog:
      --The FBI is hiring 1,100 new CJIS Division employees in fiscal year
            1997 to assist in fingerprint-related matters at the West
            Virginia facility. The majority of these employees will be
            trained to process fingerprint cards and related criminal
            history record data/information.
      --As of March 31, 1997, the FBI has hired 490 employees of the 1,100
            CJIS employees.
      --The CJIS Division's fingerprint processing staff continues to work
            extensive overtime of over 20,000 hours a pay period. The
            continuation of this overtime utilization is viewed as a short-
            term solution.
      --The FBI's incremental development of its new fingerprint
            identification system, the Integrated Automated Fingerprint
            Identification System (IAFIS), will enable it to process
            fingerprint cards more quickly beginning with IAFIS ``Build
            C,'' a stand alone Image Storage and Retrieval Element, by the
            first quarter of fiscal year 1998. The time saved by digitally
            storing and retrieving fingerprints for comparison and other
            technical advancements in this early delivery by IAFIS will
            allow the FBI to continue to address the reduction of the
            fingerprint card backlog and eventually eliminate the backlog
            entirely.
        Question. Does reducing the criminal backlog receive priority?
        Answer. No. The entire backlog is of concern to the FBI.
    Approximately 50 percent of all receipts are criminal and 50 percent
    are civil. They are both entered proportionately into the process.
    However, civil prints move through the process much faster, due to the
    fact that only 8 to 10 percent are identified with existing criminal
    records. Comparatively, 65 percent of criminal prints are identified
    with previously existing records. The higher ``hit'' rate for criminal
    prints requires lengthening processing time and more personnel
    resources to compare the incoming prints to those in the existing
    master criminal history file.
        Question. When does the FBI anticipate having the backlog
    eliminated?
        Answer. If receipts remain constant, it is estimated that with the
    additional 1,100 employees, the backlog could be eliminated when by
    IAFIS reaches Full Operating Capability (FOC) or mid calendar year
    1999. Due to the uncontrollable variable of daily receipts, that
    estimate could be shortened or lengthened depending upon future volume.
    In any event, within 1 year of IAFIS FOC, the FBI anticipates
    elimination of the backlog.
        To date in fiscal year 1997, fingerprint card receipts are
    averaging in excess of 55,000 per day while output is averaging
    approximately 52,000 per day and employee productivity per year is
    averaging 4,900 prints. These figures are significantly higher than
    fiscal year 1996 figures which averaged daily receipts of approximately
    45,000 per day and employee productivity per year was at a 4,592 annual
    average.
        These figures can, and, do fluctuate rapidly with the variances
    experienced in receipts and available personnel to address the
    workloads. As additional employees are hired, trained and become
    proficient in the processing of fingerprint cards, the rate of growth
    of the backlog will be stabilized and eventually reduced to manageable
    levels. This process will also be enhanced by the addition of new
    automated capabilities becoming available during the first quarter of
    fiscal year 1998.
                          mt. pleasant illegal aliens
        Question. In your written testimony, Commissioner Meissner, I note
    that you are emphasizing interior enforcement. I think this is very
    important. Too often we think of illegal immigration as a border issue
    that requires resources for San Diego, Arizona and Texas. But, I can
    tell you that public support for your program can dissipate quickly if
    you don't pay attention to that interior issue.
        Let me give you an example. Last summer, local police near my home
    in Mt. Pleasant, South Carolina arrested five individuals caught
    speeding on the Cooper River Bridge with open alcohol containers in the
    car. On further investigation, the police ascertained that these
    individuals were illegal aliens. They contacted INS, the nearest office
    of which is in Charlotte, North Carolina, and were told to let the
    aliens go. They weren't ``criminal'' aliens, and so INS wouldn't get
    involved. This unfortunate event eventually got the Department of
    Justice (DOJ) and INS a lot of bad press in my backyard.
        What can be done about situations like this? Is it true that INS
    will only be concerned if aliens are ``criminal'' aliens? Could we
    allow the Border Patrol officers in Charleston who are training
    recruits to also have an enforcement role?
        Answer. During the summer of 1996, the Mt. Pleasant South Carolina,
    police contacted the Charlotte, North Carolina, INS office. The
    Charlotte office is a sub office of the Atlanta, Georgia, INS District
    Office. The Mt. Pleasant Police Department (MPPD) requested that the
    INS assume custody of the 5 alleged illegal aliens that they had
    arrested for traffic violations. Charlotte is the closest INS
    enforcement office to the MPPD, which is 200 miles away. The INS
    special agents did not have information indicating whether or not the
    MPPD was arresting the subjects or had lodged criminal charges on which
    to detain them for the 5 to 7 hours it would have taken the INS agents
    to respond. Criminal aliens are a higher priority than aliens not
    convicted of crimes. Had we known that the MPPD was charging the
    suspects with state violations, the INS Charlotte office would have had
    time to respond and to interview the suspected illegal aliens. The INS
    does not have the resources to respond to every alleged illegal alien
    arrest.
        The Border Patrol is hiring and training new agents at an
    unprecedented rate. Both detailed and permanently assigned instructors
    at the Glynco, Georgia, and Charleston, South Carolina, facilities are
    doing an outstanding job of meeting the challenges associated with the
    dramatic staffing increase authorized by Congress. These instructors
    are already working beyond their normal duty day to meet training
    schedules. At this point particularly, I believe it would significantly
    impact the training mission to divert these instructors to enforcement
    activities.
                        Drug Enforcement Administration
                          permanent change of station
        Question. Administrator Constantine, your fiscal year 1998 request
    asked for an additional $7.8 million to establish a Permanent Change of
    Station (PCS) operating account of $31 million. I find this interesting
    as over the last several years the Drug Enforcement Administration
    (DEA) has been reprogramming funds out of this account for what the
    agency has described ``as critical law enforcement needs.
        But, according to your budget justification that without this
    additional funding DEA will be forced to lengthen the tours of its
    special agent work force, which would adversely effect the quality and
    competency of DEA special agents, as well as pose additional concerns
    for the agency in the area of safety and integrity assurance.
        For the last 6 years your agency has been dealing with this
    problem. Why with an average of 594 employee moves a year, at a cost of
    $21.6 million annually does DEA need an additional increase?
        What is the average cost of an agent's move--are my calculations
    correct, is it over $60,000 per move? On average how often do your
    agents need to be moved?
        Answer. During the last 3 years (1995 to 1997), there has been no
    reprogramming of funds out of the PCS operating account. To the
    contrary, due to funding shortfalls and a significant PCS backlog,
    which the agency only began to address in 1995 and 1996, it was
    necessary to make one-time reprogramming into the PCS account.
        The need for the requested increase is based primarily on the
    increase in the number of moves. The agency averaged 594 employee moves
    per year between 1990 and 1996. However, the average number of moves in
    1995 and 1996 was 800 per year. This is a result of the increase in
    permanent positions as well as backfilling managerial positions due to
    a large number of retirements. PCS requirements are projected to remain
    at this increased level.
        Moving costs have also increased during the time period. The
    average move now costs between $30,000 and $40,000. Average cost per
    move varies from year to year with the number of new agents hired. The
    average cost to move a new agent is $10,000 while moving a senior agent
    may cost more than $60,000. On the average, agents need to be moved
    every 5 to 7 years. The maximum overseas tour for an agent is 6 years.
        Question. Director Freeh and Commissioner Meissner, do you move
    your agents like the DEA? If so, how often do you move your agents and
    what is the cost?
        Answer. All FBI agents are subject to transfer at any time to meet
    the organizational and program needs of the FBI. FBI agents accept the
    possibility of transfer as a condition of their employment. The FBI and
    DEA both have mobility agent transfer policies.
        In general, FBI agent transfers are made to field offices that are
    below their authorized funded staffing level or have a critical
    specialty need. The FBI determines whether vacancies in field offices
    will be filled through first office, rotational, or Personnel Resource
    List (PRL) transfers to maintain an adequate combination of various
    investigative experience levels in a particular field office.
        First Office Transfers (new agents).--When an agent has
    successfully completed new agents' training at the FBI Academy,
    Quantico, Virginia, he/she is assigned to one of the Bureau's field
    offices based on the current staffing and/or critical specialty needs.
    New agents may list their preference for assignment and consideration
    is given to their desires; however, assignment is based upon the
    staffing needs of the Bureau. An agent can generally expect to remain
    in his/her first office of assignment for a minimum of 4 years.
        Rotational Transfers.--After completing 4 years in his/her first
    office of assignment and until reaching 10 years in his/her office of
    assignment, an agent can be considered for a rotational transfer to a
    second field office depending on staffing needs. Rotational transfers
    are usually based on reverse seniority utilizing the agent's entry-on-
    duty date at his/her office of assignment and the staffing level of
    his/her office of assignment. The junior-most agent having served four
    years in his/her first office of assignment is considered first for
    rotational transfer.
        Personnel Resource List (PRL) Transfers.--The PRL system was
    established to provide a means for agents to document a preferred
    office of assignment. The assignment to a preferred office is not a
    system of reward nor is it a guarantee. It is, however, a means by
    which the personnel resource needs of the Bureau may be addressed
    effectively while satisfying the preference of employees. This system
    is based generally upon seniority, consistent with the needs of the
    Bureau and budgetary considerations. Agents are limited to one PRL
    transfer during their career (with limited exceptions such as those
    agents who received a PRL transfer from a then-Top 12 offices
    [Baltimore, Boston, Chicago, Cleveland, Detroit, Los Angeles, Miami,
    Newark, New York, Philadelphia, San Francisco, and Washington, D.C.] to
    another Top 12 office prior to June 9, 1987; additionally agents
    receiving PRL transfers to Anchorage, Honolulu or San Juan can be
    eligible for a second PRL transfer.).
        Specialty Transfers.--Specialty needs of the field offices are
    generally identified by the Special Agent in Charge for essential
    skills such as: Bureau Pilot-In-Command; Technically Trained Agent;
    Agent Accountant; and agents with foreign language ability. An agent
    who receives a specialty transfer is expected to serve in that capacity
    for at least 3 years.
        In addition, agents are afforded cost transfers in connection with
    hardship requests, undercover assignments, assignment of the Hostage
    Rescue Team, and Executive Development and Selection Program (EDSP).
        The estimated 1997 cost associated with each transfer is as
    follows:

    New agents....................................................   $12,798
    Specialty/Operational/Rotational..............................   $50,115
    PRL...........................................................   $50,115

    EDSP

                                                                     $66,224

        The following is an estimate of the number of transfers to be
    effected for fiscal year 1997 by the FBI:

    New agents....................................................     1,120
    Specialty/Operational/Rotational..............................       214
    PRL...........................................................       214

    EDSP

                                                                         279

        The INS does not have a formal agent rotation policy. Most new or
    enhancement agent hiring is currently done at the entry level where
    transfer costs are not an issue. As vacancies for higher graded
    positions become available, many are backfilled with local agents.
    However, this type of hiring is not limited to local area hiring and
    may require transfer funds. The INS transfers its agents to address
    operational requirements. The average fiscal year 1996 cost per move
    for a Border Patrol agent was approximately $66,400 and for a special
    agent the average cost was $75,400.
                director for investigative agency policy [diap]
        Question. Several years ago, as an alternative to the Vice
    President's call for consolidating the FBI, DEA, and Alcohol, Tobacco
    and Firearms, the DOJ created the coordinating position of the ``DIAP''
    or Director of Investigative Agency Policies.
        Could you give us some examples of DIAP accomplishments?
        Answer. On November 18, 1993, Attorney General (AG) Reno
    established the Office of Investigative Agency Policies (OIAP) to
    increase efficiency within the DOJ and to coordinate specified
    activities of the Department's criminal investigative components. AG
    Reno selected FBI Director Louis J. Freeh as the first Director of
    Investigative Agency Policies (DIAP) from among the principals of the
    participating OIAP agencies.
        Shortly after the appointment of Director Freeh as the DIAP, an
    Executive Advisory Board (EAB) was established to assist in the
    development and analysis of issues suitable for the OIAP review. The
    EAB consists of officials drawn from the ranks of the OIAP member
    agencies. These agencies include the United States Marshals Service
    (USMS), INS, DEA, FBI, and the Criminal Division. Although they are not
    members of the EAB, other DOJ components, including the Bureau of
    Prisons (BOP), AG Advisory Committee, and the Office of the Inspector
    General, participate in many of the OIAP's efforts. Senior level
    employees from the member agencies provide staff support to the DIAP
    and the EAB in fulfilling the mission of the OIAP. Although the OIAP is
    purely a DOJ organization, it coordinates some of its activities with
    the investigative agencies of the Department of the Treasury.
        Several OIAP working groups have been established. These working
    groups unite experts who address technical matters in their areas of
    expertise. The working groups report to and provide advice to the EAB
    and DIAP.
        Over the past 3 years, the DIAP has proven to be an effective
    policy maker and coordinator within the Department as well as with
    other Federal agencies. Among the achievements of the DIAP are the
    development and implementation of 20 resolutions. For example, some of
    these resolutions set forth the following:
      --Directed the FBI and DEA to create a common drug intelligence
            database.
      --Established guidelines to improve coordination of criminal overseas
            investigations, with respect to drug trafficking and related
            areas, to prevent duplication and maximize investigative
            efforts conducted in foreign countries.
      --Established the Interagency Budget Advisory Council to develop
            yearly budget priorities for OIAP investigative agencies for
            incorporation into the Attorney General's budget guidance.
      --Established guidelines regarding the use of FBI crisis management
            resources in the field during crisis situations to avoid
            duplication of efforts among agencies, while promoting safety,
            effectiveness, and cooperation.
      --Established a uniform policy regarding the use of cooperating
            individuals and confidential informants.
      --Established guidelines regarding the reporting and review of post-
            shooting incidents.
      --Established guidelines regarding the use of deadly force in
            custodial or escape situations.
      --Established guidelines regarding Federal law enforcement agencies'
            issuance of warnings to persons, and notification to other law
            enforcement agencies, of threats to life or of serious bodily
            injury.
        Question. When I look around the country things seem pretty
    separate. The FBI is building its own new offices to be more secure. In
    Columbia, South Carolina, the FBI is moving out of the Federal Building
    downtown to a more secure building in the suburbs. But the DEA is
    staying in the Federal Building.
        The FBI is building a new $130 million FBI laboratory at Quantico,
    but the budget before us is requesting $25 million for reconstruction
    of its aging labs, and the Treasury appropriations bill has a $55
    million request for a separate Bureau of Alcohol, Tobacco and Firearms
    (ATF) laboratory.
        Can you give any examples where the DIAP has disapproved requests
    by law enforcement agencies and has forced consolidation and savings?
        Answer. The DIAP created a Field Structure Working Group (FSWG) to
    examine the field structure of the DOJ and identify possible areas of
    consolidation. Based on its findings, the FSWG determined a collocation
    of offices would not be cost effective, efficient, and/or might not
    fulfill the security requirements of each agency. Another aspect of co-
    location is operative limitations. For example, DEA is a single mission
    investigative agency, whereas the FBI is responsible for multiple types
    of investigations. As a result of the difference in jurisdiction,
    access to space would be cumbersome due to differing security
    clearances required by each agency.
        Although the OIAP has coordinated some of its activities with other
    investigative agencies, such as ATF, the DIAP can only make decisions
    regarding the activities of investigative agencies under the DOJ.
    Because the ATF is funded within the Department of the Treasury, the
    DIAP cannot make decisions regarding its appropriations request.
        There are no specific examples that can be cited where the DIAP
    disapproved requests by law enforcement agencies. The policy of the
    DIAP was not to disapprove requests directly. The DIAP created working
    groups, which brought together experts to address technical matters in
    their areas of expertise, to provide advice to the DIAP and the
    Executive Advisory Board. This was proven to be an effective means to
    increase efficiency and coordinate specified activities of DOJ law
    enforcement agencies.
        The guiding principle for the OIAP has been whether a proposed
    course of action would benefit our nation at large, especially the men
    and women of law enforcement. At the OIAP, partisan agency interests
    have been greatly diminished and interagency cooperation has become the
    norm. The OIAP's results have been the product of many persons'
    efforts. For example,
      --The DIAP's first Resolution directed the FBI and DEA to create a
            common drug intelligence database to allow agents from both
            agencies to coordinate their investigative activities in a
            manner that maximizes the impact on drug targets and enhances
            the safety of law enforcement personnel. As a result of this
            resolution, millions of FBI drug records were segregated and
            entered into the joint FBI and DEA joint drug intelligence
            database. The volume of those records' integration is
            increasing daily.
      --FBI participation was mandated at the El Paso Intelligence Center
            (EPIC). The FBI has permanently assigned personnel to EPIC to
            retrieve FBI data relative to EPIC's tactical drug enforcement
            mission.
      --The DEA was reaffirmed as the single point of contact with foreign
            law enforcement officials on drug law enforcement operational
            and intelligence matters. FBI personnel are assigned to various
            offices at DEA Headquarters and certain DEA offices overseas to
            prevent duplication of investigative efforts and enhance drug-
            related investigations conducted in foreign countries.
      --The role of the National Drug Intelligence Center was clarified by
            vesting it with primary responsibility for the DOJ strategic
            organizational intelligence activities relating to drug
            trafficking organizations.
      --The use of VISA credit cards in lieu of purchase orders for
            transactions under $2,500 was endorsed. The savings are
            estimated to be $54 in administrative costs for every purchase
            made with the VISA credit card.
      --The air transportation systems of the INS and USMS were merged into
            one system, the Justice Prisoner and Alien Transportation
            System (JPATS). This merger provided the DOJ, for the first
            time, a consolidated passenger transportation system. The
            objective of the merger was to take advantage of centralized
            management, scheduling, maintenance, and associated economies
            of scale for both the INS and USMS. While this implementation
            strategy focused on aviation system benefits, other related
            benefits include better and more economical use of ground
            transportation resources and personnel, greater combined
            utilization of jail/detention facilities; and reduced security
            risks by enabling INS and the USMS to reduce both the use of
            labor intensive, commercial flights and higher risk ground
            movements. The merger of the JPATS was also implemented with
            the assistance of the BOP to ensure that the air route
            decisions mesh with BOP's extensive ground transportation
            system. Additionally, the FBI also participates with a commuter
            type plane and pilots to support the historically under
            serviced mid-Atlantic/northeast corridor on a reimbursable
            basis. The USMS, INS, BOP, and the FBI, working in a spirit of
            true cooperation, have developed a transportation system with
            great advantages to the DOJ and as a key element in addressing
            the prompt deportation of criminal aliens.
      --Began collocation for the servicing of DEA Official Government
            Vehicles (OGV's) by the FBI. For several years, the FBI has
            serviced OGV's for the USMS and INS. To increase efficiency and
            cost effectiveness, the FBI has begun servicing DEA
            Headquarters OGV's. This year, the FBI will begin servicing all
            DEA Washington, D.C., and Denver, Colorado, field office OGV's.
      --Contracts were identified that are utilized by the USMS that the
            FBI could use to purchase authorized pepper gas spray systems
            and handcuffs, which resulted in estimated savings of $223,900.
                           fbi laboratory management
        Question. Director Freeh, the FBI has requested $32.6 million to
    complete funding for the completion of its new $130 million laboratory
    located in Quantico, Virginia. We are all aware of the allegations
    regarding the current laboratory here downtown. The Washington Post
    reports that prosecutors have been notified in over 50 criminal cases
    that there may be problems with the quality of the lab's work. It
    reported that Oklahoma City suspect ``Tim McVeigh may have gotten his
    biggest break when an internal Justice Department investigation of
    shoddy practices at the FBI's crime lab indicated that key evidence in
    the bombing case could have been tainted.''
        Obviously, this could affect many law enforcement agencies and
    cases since 10 percent of the forensic examinations are performed for
    state and local law enforcement.
        What can you tell us about this investigation of the FBI lab and
    these allegations?
        At our Internet child pornography hearing earlier this week, you
    said the lab is still the premier forensic lab in the world. Could you
    give us some assurance of why you believe this? I'm sure that I am not
    alone when I shudder to think that an accused terrorist might go free
    because the evidence is suspect.
        Answer. Over the course of 18 months, the Inspector General
    conducted the most extensive investigation of the FBI Laboratory ever
    performed. That investigation, which focused on three of the
    Laboratory's units (Explosives, Materials Analysis and Chemistry-
    Toxicology), found serious deficiencies and errors in some of the most
    important cases handled by the FBI in recent years, including the World
    Trade Center case and the Oklahoma City bombing. Such deficiencies and
    errors are inexcusable and will not be permitted to recur. It should be
    noted, however, that the Inspector General found no merit to the most
    serious allegations made against the Laboratory. The Inspector General
    found no evidence fabrication, evidence tampering or perjury. The
    Inspector General also found no indication of systemic contamination of
    evidence within the Laboratory.
        Since the Inspector General's investigation began, the FBI has been
    working with prosecutors to ensure that the problems in the Laboratory
    did not compromise any case. Because of the ``gag order'' issued by the
    judge in the Oklahoma City case, we cannot comment directly on that
    matter. However, the FBI has no reason to believe that any pending or
    future cases will be compromised by the conduct of any Lab employee. We
    do not believe that any prosecutions will be declined or that any
    defendant's right to a fair trial will be threatened.
        With respect to past cases, the FBI and the DOJ have been reviewing
    and will continue to review past cases involving the examiners
    criticized by the Inspector General. We believe that an exhaustive
    review of those cases is necessary to ensure that no one's right to a
    fair trial has been jeopardized.
        At the time the Inspector General issued the final report regarding
    the Laboratory, on April 15, 1997, the Justice Department had provided
    material regarding the Laboratory to prosecutors on in approximately 55
    cases. Since that time, the Justice Department has broadly disseminated
    the Inspector General's report, in part by publishing that report on
    the Internet. The FBI and Justice Department will work together closely
    to fulfill our legal obligation to make material related to the
    allegations about the Laboratory available to prosecutors for their
    determination as to whether information should be furnished to the
    defense.
        The FBI remains confident in its Laboratory for several reasons.
    The FBI has agreed with all of the recommendations made by the
    Inspector General to improve the Laboratory's policies and procedures
    and is actively implementing the recommended changes. One such
    recommendation was that the Laboratory should pursue accreditation as
    quickly as possible, which it will do. During the accreditation
    process, the Laboratory will be subject to extensive external reviews,
    which will identify any additional improvements that might be required.
        We believe that these efforts to improve the Laboratory will be
    greatly facilitated by the hiring of a new Assistant Director to lead
    the Lab. The FBI has initiated a national search for the new Assistant
    Director. We are seeking an individual who will have instant
    credibility and will be recognized as a leader both by FBI Laboratory
    employees and the forensic community generally. We are also seeking an
    individual who will bring extensive scientific and management expertise
    to the Laboratory.
        The FBI remains very proud of its Laboratory and the dedicated men
    and women who serve it. A commitment to quality has always been a
    central part of their values and mission. The new Assistant Director
    for the Laboratory will work closely with the Inspector General and the
    Justice Department in solving all of the problems that have been
    identified in the FBI Laboratory. We are confident that, with their
    assistance, the FBI Laboratory will remain the preeminent forensic
    laboratory in the nation, if not the world.
                     telecommunications carrier compliance
        Question. Last year you testified that you were working with the
    intelligence community and other Federal law enforcement agencies to
    get their financial support for the telecommunications carrier
    compliance effort. In the 1997 Appropriations Act, we established a
    Fund in the Treasury to accept funding from these agencies and gave
    them authority to transfer funding to the Fund. Now, I see in the 1998
    budget that you are asking for $100 million for this project.
        Have you received firm commitments from other agencies to transfer
    funds to help pay for this project? Can you tell us which agencies are
    providing funding and how much?
        Answer. The Telecommunications Carrier Compliance Fund (TCCF) has
    received firm funding commitments from the following entities:
        On January 17, 1997, the United States Postal Inspection Service
    electronically transferred a contribution of $1,000,000;
        In a letter dated February 28, 1997, the Department of the Treasury
    advised that it has identified approximately $1,800,000 which could be
    transferred from the United States Customs Service (USCS) and the
    United States Secret Service; and
        In a letter dated March 4, 1997, the DEA advised that it has
    identified $15,000,000 in prior year funding that can be transferred to
    the Working Capital Fund for subsequent allocation to the TCCF.
        Question. Some industry groups have written the Committee that the
    FBI is enhancing its wiretap capability in developing its
    administrative procedures outside the scope of CALEA. Could you
    respond?
        Answer. The FBI has not developed administrative procedures that
    are outside the scope of CALEA. To the contrary, as part of the
    consultative process mandated by CALEA, the FBI has made every attempt
    to work cooperatively with the telecommunications industry to ensure
    the industry-wide implementation of the assistance capability
    requirements of CALEA.
        In response to specific requests from the industry, the FBI, in
    collaboration with other Federal, state, and local law enforcement
    agencies, created a technical recommendation for the delivery of
    intercepted communications from a carrier's network to a law
    enforcement agency's monitoring facility. This document, entitled the
    Electronic Surveillance Interface (ESI), was submitted to the industry
    standards setting body as a law enforcement contribution and
    recommendation to the process. The ESI was intended to aid carriers in
    understanding how law enforcement conducts electronic surveillance,
    what information it needs, and what information it historically has
    received in order to properly do its job. The FBI has prepared and
    submitted other technical contributions to respond to industry requests
    for more detail on law enforcement's needs and to advance the standards
    process. These contributions were aimed at ensuring the integrity of
    evidence gathered through the use of electronic surveillance and at
    identifying technical options for the efficient delivery of intercepted
    communications and call identifying information.
        Additionally, in accordance with the Section 104 provisions of
    CALEA, the FBI has published Capacity Notices for comment. These
    notices represent fulfillment of the statutory mandate to provide
    notice for potential future interception activity that may occur. The
    Second Notice of Capacity was published on January 14, 1997. Comments
    were accepted through March 15, 1997. The comments have been reviewed
    and analyzed. A Final Notice of Capacity will be issued in June 1997
    that will fulfill the obligations of Section 104.
        Finally, in accordance with CALEA Section 109(e), on March 20,
    1997, the FBI published the Final Cost Recovery Rules for
    telecommunications carriers, now codified as 28 CFR Sec. 100.21.
        Question. Some elements of the telecommunications industry are
    saying that Congress should slip the date that defines ``the embedded
    base'' so that more telecommunications switches qualify under CALEA.
    Have you taken a position on this issue?
        Answer. Law enforcement does not believe that the January 1, 1995,
    date should be changed as CALEA provides sufficient mechanisms for
    carriers to reasonably achieve compliance without being unduly
    burdened.
        Since the $500 million authorized for reimbursements by CALEA was
    intended to apply to pre-January 1, 1995 equipment, facilities and
    services, carriers who offer post-January 1, 1995 services may recover
    costs under two CALEA provisions:
      --A carrier may petition the Federal Communications Commission (FCC)
            to determine whether compliance with the Section 103 assistance
            capability requirements is reasonably achievable with respect
            to equipment, facilities, or services deployed after January 1,
            1995.
      --A carrier may also petition the FCC to recover its costs expended
            for making modifications to equipment, facilities, and services
            to achieve compliance with the Section 103 assistance
            capability requirements.
        In addition to the aforementioned provisions, a carrier may
    petition the FCC to receive an extension of time within which to comply
    with CALEA.
        The equitable provisions in CALEA to seek cost recovery, extensions
    of time, etc., have not yet been utilized by carriers to reduce any
    effort that might be burdensome. Law enforcement believes these
    processes are more than adequate to address those circumstances in
    which compliance cannot be reasonably achieved. Such processes should
    be employed, as envisioned by CALEA, rather than seeking to change the
    statutory demarcation date for reimbursements globally.
                   investigating misconduct of fbi employees
        Question. Director Freeh, the FBI has experienced a number of
    instances recently, such as the inquiry into the shooting incident at
    Ruby Ridge, the handling of Richard Jewell as a suspect in the Olympic
    Park bombing in Atlanta, and the examination of evidence by the FBI
    Laboratory, that has caused many to wonder if the FBI is capable of
    policing itself. The FBI is the only agency within the DOJ--and may be
    the only Federal law enforcement agency in the Federal Government that
    has its own Office of Professional Responsibility and performs its own
    inquiries into allegations involving the conduct of its personnel.
        Recently, you made the FBI's Office of Professional Responsibility
    a separate office within the FBI, with direct responsibility to the
    Deputy Director and yourself. You also provided more staffing to the
    Office.
        Why does the FBI require an inspection office that is separate from
    the Inspector General?
        Answer. The FBI, like DEA and major police departments around the
    United States, finds that its law enforcement integrity is absolutely
    dependent on the agency being responsible and accountable to
    investigate itself, with appropriate independent oversight. Further,
    attorney misconduct within the DOJ is investigated by the Department's
    Office of Professional Responsibility (OPR), not by the Inspector
    General (IG).
        The power and authority to identify, correct and punish misconduct
    is an essential part of establishing and maintaining discipline within
    an agency. Agency enforcement of internal discipline has inherent
    advantages in that knowledgeable, effective internal investigations
    require the expertise and initiative of agents and managers who are
    familiar with the FBI's structure, procedures and standards of conduct
    and are motivated to identify and root out misconduct. Removing that
    authority from agency management would, by definition, make that agency
    ethically irresponsible, as it could not enforce its own standards of
    conduct.
        Agency self-policing should not be unchecked. Ample independent
    oversight is provided pursuant to Attorney General Reno's order of
    November 8, 1994. FBI employees may report allegations of improper
    behavior outside of the agency, and the Deputy Attorney General may
    assign the matter for investigation to an another DOJ entity, as was
    done with Ruby Ridge, the Richard Jewell matter, and the FBI
    Laboratory. Pursuant to that order, FBI OPR reports its internal
    investigations to DOJ's OPR and to the IG. The IG may seek assignment
    of any matter by the Deputy Attorney General. Moreover, Director Freeh
    has not been reluctant to recuse himself in cases where his
    impartiality might be questioned, as when allegations, now determined
    by the IG to have been baseless, were made against him in connection
    with the FBI Laboratory investigation.
        Question. Why did the Inspector General of Justice end up
    investigating the FBI Laboratory instead of the Office of Professional
    Responsibility? Do you think the investigation would have been handled
    differently?
        Answer. Among the complaints about the FBI Laboratory made by Dr.
    Whitehurst were allegations of prosecutorial misconduct by Director
    Freeh and General Counsel Howard Shapiro during the VANPAC case, which
    involved the investigative prosecution of the murder of United States
    Federal Appeals Court Judge Robert Vance in Birmingham, Alabama, in
    December 1989. Director Freeh and General Counsel Shapiro were the
    Government's lead prosecutors for that case. In view of these
    allegations, Director Freeh recused himself and the FBI from the
    investigation of Dr. Whitehurst's allegations and referred the matter
    to the DOJ. If the FBI's OPR had continued to participate with the IG
    in the investigation there is no reason to believe that the results
    would have been any different.
                     Immigration and Naturalization Service
                                     245(i)
        Question. Commissioner Meissner, your testimony indicates that the
    section 245(i) surcharge fee, which this subcommittee created in 1994,
    will expire this year if it is not extended--how much money would INS
    lose if this subcommittee does not extend the fee? What would be the
    impact on INS?
        Answer. If Section 245(i) is repealed, the INS estimates that it
    will lose approximately $129.7 million in receipts in fiscal year 1998.
    Section 286 of the Illegal Immigration Reform and Immigrant
    Responsibility Act of 1996 authorized a new detention account titled
    the Immigration Detention Account. Receipts from this account are to be
    derived from the penalty portion of receipts collected under the
    provisions of section 245(i). The $129.7 million estimated to be lost
    by the repeal of 245(i) is the same amount expected to be deposited
    into this Account in fiscal year 1998.
        If these receipts are lost, the INS will not be able to maintain
    the new Detention Fund Account at a level that would fund the expenses
    for which it was established. Those expenses include those incurred for
    the detention of aliens under Sections 236(c), mandatory detention of
    criminals and terrorist aliens, and 241(a), mandatory detention of
    aliens with final orders of deportation).
                            charleston border patrol
        Question. Commissioner Meissner, it seems to me that the Border
    Patrol School at the former Charleston Navy Base has been a success. We
    are training over 1,400 new agents this year. The community loves the
    Border Patrol being there and from what I have heard, the Border Patrol
    loves being in Charleston. The agents tell me that it has been a total
    success and that we are adding getting the agents trained so that they
    can be deployed from Texas to California. This has been done with a
    minimal investment--less than we added for just firing range
    construction at the FBI Academy at Quantico.
        The Border Patrol is in Charleston because the Federal Law
    Enforcement Training Center [FLETC] in Glynco, Georgia, was unable to
    provide the training needed to produce an additional 1,000 agents per
    year. I've heard that FLETC now is testifying that Charleston should be
    shut-down by 1999. I think they are jealous that it is so successful
    and cheap compared with their center.
        When I look at your Border Patrol training loads and the current
    attrition rate, it seems to me that INS is going to need this facility
    for the foreseeable future.
        Don't you agree? Are you conveying that viewpoint to FLETC?
        Answer. The INS needs a place to train Border Patrol agents both
    now and in the foreseeable future. With the growth that INS has
    experienced in recent years, the Service will need to train Border
    Patrol agents in response to attrition as well as any new agents added
    in the appropriations process in the future. If the Federal Law
    Enforcement Training Center at Glynco, Georgia, cannot accommodate our
    training requirements, INS will continue to rely on the Charleston
    Border Patrol training facility to meet its needs.
                             naturalization process
        Question. What is INS doing to ensure a naturalization process
    which can once again serve as a source of strength for our country--one
    which can be carried out efficiently and with integrity?
        Answer. The present goal of the INS is to increase efficiency,
    improve reliability of existing systems, and switch manual processes to
    electronic systems. Reduction in backlogs in fiscal year 1996 was
    addressed by increased resources at district offices and use of service
    centers. In November 1996, the INS began the enormous task of improving
    the quality and consistency of the naturalization process. Steps to
    strengthening control of the naturalization process include:
    standardization of the work process; fingerprint integrity checks;
    enhanced supervisory review of naturalization adjudications; and
    implementation of a standardized quality assurance review program. By
    these measures, the INS intends to maintain the goal of timely
    processing of naturalization applications without compromising the
    integrity of the naturalization process.
        Question. What does INS consider to be a reasonable period of time
    in which to naturalize without compromising the integrity of that
    process, and when does INS expect to reach that goal throughout the
    country?
        Answer. Given the re-engineering that is currently taking place
    within the naturalization program, it is difficult to set a firm
    processing goal until the results of the re-engineering efforts are
    known.
        Question. What does INS need to carry out this important duty, and
    to get it done right?
        Answer. INS continues to work in conjunction with the FBI to
    improve the fingerprint clearance process. INS is preparing a two-part
    reprogramming proposal as a part of its overall efforts to improve the
    naturalization process. The first reprogramming proposal, which will be
    forwarded for your consideration in the coming weeks, requests approval
    to fund mandatory expenses, i.e., FBI fingerprint charges, overtime and
    records support, contract costs, and costs of conducting ceremonies.
    This funding will allow INS to address immediate needs in order to keep
    the program on course. In June, INS will forward a reprogramming
    proposal that will focus on new initiatives, currently being explored,
    to improve the overall effectiveness of the naturalization program and
    improve customer service. Mr. Robert Bratt has been named Executive
    Director of Naturalization Operations and is leading the INS effort to
    improve overall efficiency of the program. Mr. Bratt is working to
    ensure the integrity of the naturalization process and to lay the
    groundwork for a complete re-engineering of the naturalization process
    at INS.
                                mexico/colombia
        Question. Administrator Constantine, you have testified before the
    Foreign Relations Committee that Mexico is dominated by organized crime
    and that law enforcement officials are on the payroll of the drug
    cartels. I respect you for going on record that you could not certify
    that Mexico was cooperating with us in the war on drugs.
        Now with respect to Colombia, my understanding is that DEA has
    developed a close working relationship with the Colombian National
    Police, its commander General Serrano, and the chief prosecutor Alfonso
    Valdievieso. You have testified that the Colombians have made great
    strides to support our anti-narcotic programs.
        Now, United States policy doesn't seem to make sense to me.
    President Clinton certified that Mexico is cooperating but he continued
    to decertify Colombia. Does that make sense to you? I mean doesn't that
    undercut the progress that you have made in Colombia and send the wrong
    signal to the Mexican officials?
        You and the FBI have extensive efforts underway to build evidence
    and get indictments against Mexican drug barons and cartels. How many
    outstanding indictments do we have now? What has been the response of
    the Mexican government?
        Answer. Once again, DEA will defer to others within the
    Administration regarding the certification decisions.
        Currently, the United States has indicted many of the major Mexican
    drug traffickers in the U.S., in the hope that they will someday be
    extradited to this country. Further, we have identified a list of
    priority extradition cases upon which we have requested that the
    Mexican law enforcement authorities act most vigorously and
    expeditiously.
        On a law enforcement operational level, DEA is working with the
    Mexican authorities to develop a credible, corruption-free law
    enforcement system in their country (as described above). The
    Government of Mexico must combat corruption at both senior as well as
    operational levels of government. Corruption jeopardizes the integrity
    of the entire Mexican counternarcotics program, and recent and ongoing
    anti-corruption programs will be the most important aspect of future
    efforts. While there has been some progress in removing corrupt
    personnel from law enforcement and military agencies, greater steps
    must be taken to ensure that Mexico has a credible law enforcement
    regime.
        DEA has dedicated significant resources to assist in the Mexican
    efforts in the following ways: (1) the selection of new candidates to
    Mexican counterdrug enforcement agents; (2) the ``vetting'' process of
    new Mexican agent recruits; (3) training programs for Mexican
    counterdrug agents; (4) the Border Task Forces in Juarez, Tijuana, and
    Monterrey; (5) the Organized Crime Unit; and (6) the creation and
    establishment of Mexico's new Special Prosecutor's Office for Crimes
    Against Health (FEADS).
        The problems of establishing a corruption-free law enforcement
    infrastructure are large, but not insurmountable. However, to develop a
    credible and trustworthy law enforcement capability, the Government of
    Mexico must ensure the integrity of the units that have the
    responsibility of tracking down and arresting the drug syndicate
    leaders, ensuring these individuals are either prosecuted in Mexico and
    receive meaningful sentences commensurate with their crimes, or
    alternatively, that they are extradited or expelled to the United
    States and brought to justice. The best approach is, in simple words:
    to work with people we feel we can trust, based on the best information
    we have at the time; and to design safeguards in our operations should
    they later be compromised.
        Question. Operationally, is there anyone that you can trust on the
    Mexican side?
        Answer. United States law enforcement efforts, despite hopeful
    beginnings over the last several years, have been frustrated by the
    absence of secure and effective Mexican counterpart agencies with whom
    to work cooperatively. The recent arrest of the head of the Mexican
    INCD (the principal Mexican federal drug law enforcement agency) on
    charges of assisting cartel leaders further underscores the obstacles
    presented when drug-related corruption is pervasive. The disbanding of
    the INCD was recently announced by Mexico. An Organized Crime Unit was
    recently formed within the Mexican Attorney General's Office. This unit
    is staffed by fully vetted agents. The formation of this new vetted
    unit, coupled with broad changes to Mexican law to allow more
    investigative tools for the agents assigned to it, will likely improve
    Mexico's ability to prosecute traffickers. However, for effective
    efforts against traffickers to exist there must be evidence that long-
    lasting criminal justice institutions within Mexico have been formed.
        Answer. With regard to the issue of the trustworthiness of Mexican
    officials, on occasion, there have been a few Mexican officials with
    whom DEA can work. However, they are few and far between. The
    Government of Mexico has been wrestling with widespread incidences of
    corruption among law enforcement officers for decades. DEA Agents have
    been forced to operate in a manner that requires a continual weighing
    of the pros and cons of passing information to Mexican counterparts.
    Much of the information is sensitive and cannot be passed unless there
    are persuasive reasons to believe in the integrity of the involved
    Mexican unit. The situation is exacerbated by the reality that,
    although we work with certain counterparts who have demonstrated a high
    degree of integrity, we have no control over the chain of command and
    eventual dissemination of our information.
        No better example of this dilemma can be demonstrated than that of
    former INCD Commissioner, General Gutierrez-Rebollo having had line
    authority over the Sensitive Investigative Unit (SIU). The SIU was
    vetted in order to serve as an investigative arm to provide Mexican
    follow up to significant United States counternarcotics investigations.
    Since the SIU ultimately reported to Gutierrez-Rebollo, their vetting
    was seriously imperiled if not rendered useless.
        The problems of establishing a corruption-free law enforcement
    infrastructure are not insurmountable. To become credible in the law
    enforcement arena, the Government of Mexico must ensure the integrity
    of the units that have the responsibility of arresting the syndicate
    leaders, thereby ensuring these individuals are either prosecuted in
    Mexico and receive meaningful sentences commensurate with their crimes,
    or agree to extradite them to the United States where they will receive
    punishment similar to that of Juan Garcia-Abrego.
        Since March of this year, DEA has made considerable efforts to
    further develop working relationships with its Mexican counterparts.
    DEA assisted the GOM in the restructuring of Mexico's primary drug law
    enforcement agency. This new agency, the Special Prosecutor's Office
    for Crimes against Health, was established on April 30, 1997 and
    replaced the corruption ridden National Institute to Combat Drugs
    (INCD). DEA is committed to assist the GOM in the vetting and training
    of the members of this new agency. DEA has already successfully
    ``vetted'' approximately 50 new recruits, 40 of whom are scheduled to
    attend DEA's second four week specialized narcotics training course for
    vetted units commencing July 14, 1997 in Leesburg, Virginia.
                           fenfluramine descheduling
        Question. Administrator Constantine, I have been contacted by
    several members regarding a diet drug called fenfluramine. Apparently,
    the DEA was asked to deschedule this drug in 1991. The Food and Drug
    Administration gave its approval in September 1995 and the Department
    of Health and Human Services formally recommended descheduling to the
    DEA in June 1996. Both agencies found that there are no scientific
    evidence of abuse potential, patterns of abuse or diversion. However,
    DEA has not approved descheduling.
        Why? What are DEA's reasons for not allowing descheduling of
    fenfluramine?
        If there are no further reasons to hold up on approval, when do you
    anticipate letting the drug be approved?
        Answer. The Controlled Substances Act (CSA) requires that the DEA
    consider all relevant data to determine whether there is substantial
    evidence of abuse potential so as to warrant control or decontrol of a
    substance. After a thorough review of all available data, including the
    recommendation of the Department of Health and Human Services and
    abuse, trafficking and diversion data, the Deputy Administrator of the
    DEA has determined that at this time there is insufficient data to
    establish that fenfluramine has a potential for abuse, which warrants
    control under the CSA. Accordingly, the Deputy Administrator signed a
    Federal Register notice proposing to decontrol fenfluramine. This
    proposal was published during the week of May 5, 1997. Interested
    parties will be provided a 60-day opportunity for comments and requests
    for a hearing.
                                     ______

               Questions Submitted by Senator Frank R. Lautenberg
                     Immigration and Naturalization Service
                        detention representation project
        Question. I am proud to acknowledge that the INS District in New
    Jersey has worked with a coalition of local voluntary organizations to
    create a program through which asylum-seekers detained at the Elizabeth
    Detention Facility can obtain legal counsel. This initiative is known
    as the ``Detention Representation Project,'' and has helped ensure that
    individuals with asylum claims are not returned to their persecutors.
    At the same time, the project has been useful to the INS, in that
    detainees without a basis for relief from removal are so advised by
    legal counsel by voluntary agencies, and are therefore less likely to
    crowd the overburdened immigration docket with meritless claims.
    Through the project, legal representation is provided to indigent
    detainees without any cost to the government.
        With the implementation of the ``summary removal'' provisions of
    the new immigration law beginning on April 1 of this year, the
    Detention Representation Project has taken on even greater importance.
    Without the legal representation, which the project provides, many fear
    that asylum-seekers would in advertently be delivered back into the
    hands of their persecutors by our government.
        Since January of this year, the agencies which founded the
    Detention Representation Project have been trying to pursue the project
    with the INS District in New York. These agencies had hoped to launch
    the project in New York before the opening of the new Wackenhut
    Detention Facility in Queens, and certainly before the onset of Summary
    Removal this past April 1. New York INS had been unresponsive to the
    many overtures of the voluntary agencies until after Wackenhut had
    opened and summary removal has been implemented.
        I am concerned that this problem may be representative of a larger
    phenomenon; namely, that the immigration laws of this country, and the
    due process protections afforded to those fleeing from persecution,
    vary from INS district to INS district.
        Please tell me what prevented the New York District from
    cooperating with the voluntary agencies, as has been done in the New
    Jersey District, prior to the opening of Wackenhut and the
    implementation of summary removal. Was INS Headquarters aware of this
    initiative, and if not, why not? If INS was aware of this initiative,
    why was INS New York allowed to drag its feet in implementing the
    project in a timely fashion? What, if anything, is INS Headquarters
    doing to encourage such private-public partnerships at the local level,
    in order to ensure that summary removal proceedings do not summarily
    deprive asylum-seekers of due process?
        Answer. I have been advised that representatives of our District
    Office in New York City and the Catholic Legal Immigration Network
    (which includes other volunteer agencies), have communicated with one
    another and have also participated in a meeting (on April 22) during
    which related issues were discussed. It does not appear to us that
    there actually is a misunderstanding between those offices, or a lack
    of cooperation.
        At the meeting on April 22, a schedule for pro bono legal
    representation was presented for the next three months, with the first
    representation taking place on April 29, by Ms. Mary McClenahan, an
    attorney for the project. The INS headquarters was not notified of any
    difficulty in establishing a meeting.
        The INS District Director, New York City, has advised INS
    Headquarters that the coordinated time frame for the opening of the
    facility was not immediately known to the District, but that as soon as
    the date was known, contact with the agencies was made. Although
    schedule coordination between the two parties proved difficult, a time
    frame was reached and a subsequent meeting took place to the
    satisfaction of the volunteer agencies.
        Private-public relationships are important to this Service. We
    recently took action to establish Community Liaison positions in
    various cities throughout the country. As resources are available, the
    INS will continue to recruit and fill these valued positions. It should
    also be noted that various other kinds of INS personnel participate in
    liaison activities with charitable and relief organizations. In cases
    where asylum seekers are detained, careful scrutiny of each case takes
    place.
        We believe that what occurred at Wackenhut facility was an anomaly.
    The Service strives to set up advance meetings with volunteer groups
    prior to the operation of new facilities for the express purpose of
    forging bonds with volunteer agencies and concerned community groups.
                           drug trafficking by gangs
        Question. As you know, since the late 1980's drug trafficking gangs
    have transformed many of our cities and rural areas into combat zones.
    A few years ago you indicated that the Drug Enforcement Administration
    (DEA) was prepared to launch a new enforcement initiative, which you
    called Mobile Enforcement Teams. This initiative was designed to assist
    local law enforcement agencies to deal with the escalating problem of
    drug-related violence.
        Answer. In 1995, DEA established the Mobile Enforcement Team (MET)
    program to combat the growth of violent drug trafficking organizations
    and prevent these organizations from taking over the streets of our
    communities. The growth of drug-related violence is straining the
    resources of our local police agencies. Intelligence reports, public
    opinion polls, and statistical trends have all verified the strong
    connection between narcotics trafficking and violent crime. The DEA MET
    initiative is designed to assist state and local police departments
    combat violent crime and drug trafficking at the local level.
        At the request of a police chief, sheriff, or district attorney, a
    MET (composed of eight to twelve DEA Special Agents) will work in
    concert with local police to extricate violent drug offenders from a
    targeted community. The MET's primary mission is to assist the
    requesting local agency with the dismantling of drug organizations by
    securing the conviction and incarceration of those individuals dealing
    drugs and spurring violence in the affected community.
        DEA has developed a deployment review system designed to assist in
    the evaluation of the MET program's overall effectiveness. All MET's
    are required to submit two reviews for each deployment. The first
    review occurs immediately following the deployment, and the second
    review is conducted 6 months after the deployment is completed.
    Programmatic performance measurements include: impact of the reduction
    in drug sales and/or reduced visibility of drug sales; the stability of
    the target area, including any noticeable reduction in the violent
    crime activity; the community reaction and involvement; summary of
    media coverage; and an overall assessment prepared by the requesting
    agency including crime rates (e.g., drug related assaults, homicides,
    drive-by shootings, robberies, etc.). Thus far, these program
    deployment reviews have generally shown the MET program to have a
    positive impact on targeted communities, often revealing both
    significant decreases in area crime and narcotics trafficking.
        The following are a few examples of successful MET program
    deployments:
        Spartanburg, South Carolina.--The City of Spartanburg was
    experiencing a significant escalation of gang and drug-related
    violence, and the city's frequency of major crime was five times higher
    than the average for other cities with similar size populations. The
    MET and the Spartanburg Police Department identified the David Young
    crack cocaine organization as having the most significant influence on
    the violent crime and drug situation in the Spartanburg area. This
    September 1996 MET deployment ultimately resulted in a Federal
    indictment charging David and Darrell Young, and 50 members of the
    Young Trafficking Organization, with conspiracy for distributing 1,000
    kilograms of cocaine. A current and former police officer were also
    arrested and charged in the investigation. Seizures included nine
    weapons, $320,000, nine residences, one business, and eight vehicles.
        Lynn, Massachusetts.--Lynn law enforcement officials requested
    assistance from the DEA MET program in helping them address the
    escalation in cocaine and methamphetamine trafficking in their city and
    the drug related violence that it produced. The MET targeted the local
    chapter of the Hells Angels Motorcycle Club, which controlled the
    neighborhood where their clubhouse was located, leaving residents in
    silent fear. The investigation involved a wiretap on the phone of
    Chapter President, Greg Domey, and undercover purchases from members
    and associates of the club. In November 1996, the deployment culminated
    with the arrest of Domey and 16 of his associates for drug trafficking
    and related acts of violence. Domey and one other member of the club
    were charged with operating a continuing criminal enterprise, which
    carries minimum/mandatory Federal sentences.
        Rampart Area--Los Angeles, California.--Los Angeles Police Chief
    Willie Williams requested the help of the DEA MET program to assist his
    officers in regaining control of the Rampart District of Los Angeles,
    which was described as a ``battle front'' controlled by numerous street
    gangs. In April 1996, the MET joined forces with several other agencies
    and initiated enforcement targeting several violent street gangs. The
    deployment resulted in the incarceration of over 400 gang members, the
    seizure of numerous weapons and drugs, and an overwhelming response
    from the local residents. Neighbors in this area joined together to
    collect money from residents, and subsequently erected a street
    billboard thanking DEA and the other agencies for making their streets
    safe.
        Paterson, New Jersey.--Chief of Police Vincent Amoresano of
    Paterson, New Jersey requested the help of the DEA MET program to
    assist in combating the area's violent gangs/organizations engaged in
    drug trafficking and street violence. The city is rife with illegal
    firearms, which are closely connected to illicit drug operations.
    According to city police, intimidation shootings--shooting to wound to
    scare away competition--are more and more common. Passaic County and
    Paterson authorities identified Yeidy Gonzalez-Inoa as the head of a
    violent Dominican organization trafficking in cocaine, crack cocaine,
    and weapons, in Paterson. This March 1996 deployment ultimately
    resulted in the arrest of Gonzalez and 37 others (4 charged with
    retaliatory homicide for the murder of a confidential source during the
    deployment; 33 charged with narcotics and weapon violations). In
    addition, this highly successful deployment resulted in the seizure of
    4\1/2\ pounds of crack cocaine; 1 ounce of heroin; 1\1/3\ pounds of
    marijuana; 7 weapons; and $4,300.
        Statistical accomplishments of the MET program through February
    1997 are as follows:

    Total MET deployments.............................................    98
        Initiated.....................................................    98
        Completed.....................................................    70
    Total arrests..................................................... 3,411
        Drug.......................................................... 3,117
        Non-drug......................................................   294
    Seizures:
        Cocaine (pounds)..............................................   780
        Methamphetamine (pounds)......................................   106
        Heroin (pounds)...............................................    17
        Marijuana (pounds)............................................   353
        Weapons.......................................................   647
        U.S. currency (millions)......................................  $4.2
        Vehicles......................................................   110
        Residences....................................................    11
                                     ______

               Questions Submitted by Senator Barbara A. Mikulski
                           major drug investigations
        Question. The Immigration and Naturalization Service conducts
    criminal investigations including investigations into drug dealing by
    criminal gangs.
        It is my understanding that the INS has suspended major drug
    investigations. In some cases, agents have been withdrawn in the middle
    of major drug investigations due to a change in INS policy.
        Why have you stopped participating in major drug investigations and
    what are you doing to insure that existing investigations are not
    jeopardized?
        Answer. The INS has not stopped participating in major drug
    investigations. The INS is not the primary agency responsible for
    investigating illicit drug trafficking organizations. The INS has 110
    Organized Crime Drug Enforcement Task Force (OCDETF) special agents.
    These special agents are the only INS employees solely dedicated to the
    investigation of illicit drug trafficking organizations. Also, INS
    currently has 119 special agents assigned to Violent Gang Task Forces
    (VGTF). These VGTF's are proactive, interagency, multi-jurisdictional
    efforts involving other Federal law enforcement agencies as well as
    state and local entities. Many VGTF investigations have a nexus to drug
    trafficking organizations. The INS also participates in numerous local
    community task forces. It is the responsibility of local field mangers
    to determine whether INS' participation in a particular task force is
    warranted. It is also incumbent upon local managers to assess the
    merits of ongoing investigations to determine whether INS' continued
    participation on specific task forces is justified. As a rule, INS
    special agents are not pulled off ongoing task force investigations
    where it would jeopardize the success of a case. If this has occurred,
    the specific case would have to be identified in order to provide an
    accurate response.
        Question. What is the reason for this policy change?
        Answer. There have been no recent national policy changes.
        Question. Do you have any plans to put agents back on major
    criminal drug investigations?
        Answer. Currently, the INS has 110 special agents assigned to
    OCDETF's. These 110 positions represent 12 more positions than shown on
    the OCDETF reimbursable account. In fiscal year 1996, INS obligated
    $10.3 million in the OCDETF program. Only $10.1 million was reimbursed
    by the Office of National Drug Control Policy. The remaining
    obligations were absorbed by INS funds. The local INS field offices
    have reported that their OCDETF special agents are involved in OCDETF
    work and investigations 100 percent of the time. We are fully committed
    to the success of the OCDETF program.

                              subcommittee recess

        Senator Hollings. Let the record show that we have just
    certified that the Government of Mexico is not corrupt.
        Senator Gregg. Yes, I know.
        Senator Hollings. You cannot go out on the range, you might
    get shot, so you might not walk over here because you might
    become a witness or get shot. But Mexico ought to be certified.
    They are doing a wonderful job.
        Senator Gregg. Thank you.
        [Whereupon, at 10:51 a.m., Thursday, April 10, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                           WEDNESDAY, APRIL 16, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 10 a.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Campbell, Domenici, and Hollings.
        Also present: Senator Burns.

                       FEDERAL COMMUNICATIONS COMMISSION

    STATEMENT OF HON. REED E. HUNDT, CHAIRMAN
    ACCOMPANIED BY ANDREW S. FISHEL, MANAGING DIRECTOR

                                opening remarks

        Senator Gregg. We will begin the hearing here on the
    Federal Communications Commission [FCC] appropriation.
        Senator Hollings, how are you today?
        Senator Hollings. Good morning, Judd. You all right?
        Senator Gregg. I am great, great.
        Senator Hollings. Good.
        Senator Gregg. We have somebody with some knowledge base on
    this subject here. We can actually begin. I have no opening
    statement. Did you have an opening statement?
        Senator Hollings. No; thank you.
        Senator Gregg. We would be happy to hear from you, Mr.
    Hundt.

                         opening statement of mr. hundt

        Mr. Hundt. Thank you very much.
        Let me introduce Andy Fishel, our Managing Director, who is
    sitting to my right.
        Thank you very much for having this hearing. As I am sure
    you know, at this particular time in history, the Federal
    Communications Commission is wrestling with some of the most
    difficult problems that the agency has ever had to address, and
    they certainly are time-consuming, and voluminous problems.
        In the last year, pursuant to the Telecom Act, and the
    normal crush of business, we have initiated 265 separate
    rulemakings, and have reviewed one-quarter of 1 million pages
    of comments filed by 72,000 parties. At the same time, we have
    completed 14 auctions; we began our 15th yesterday. Our daily
    workload over the course of the last year has led to us
    granting 425,000 separate applications, resolving more than
    80,000 separate complaints. And our overtime electricity bill
    has tripled in the past year. And the work is just beginning.
        We anticipate filings under section 271 of the new law for
    Bell companies to get into long distance. Ameritech's filings,
    this year, so far, in Michigan alone, have been supplemented by
    17,000 pages of documents.
        We have also been dealing with some very daunting economic
    and intellectual problems, not just voluminous but just plain
    hard. Let me give you two examples and then bring my statement
    to a close, so that we can proceed as you would wish.
        An example. Congress asked us to take implicit universal
    subsidies and make them explicit, and establish a universal
    service system that expressly contemplates that there could be
    multiple universal service providers that receive that subsidy.
        Consequently, we have been working very hard in recent
    months to figure out how to implement this mandate in a way
    that preserves and addresses universal service for small
    telephone companies, and particularly for small telephone
    companies in rural America. In many parts of America,
    particularly those that are rural, it is not the six large Bell
    companies and GTE that are the service providers, but it is, in
    total, 1,400 small telephone companies and rural cooperatives.
        We understand, clearly, that Congress has asked us in no
    way to have these companies be victims, or sufferers from the
    policy of competition. Instead, we need to reconcile the policy
    of competition with the country's historic commitment to
    preserving, maintaining, and supporting universal service in
    this country. The first step, pursuant to the congressional
    mandate, was to work with the joint board of State and Federal
    commissioners to write a report. This was done in November.
        Here is where I think we are now. I speak not for the whole
    Commission, which will vote on this matter on May 6, but just
    to give you some insight, Mr. Chairman, on this particular
    matter, as an example of the kind of work that we've been
    pleased to do, but have been somewhat burdened by.
        Rural telephone companies, the backbone of universal
    service to rural America should, I think, continue to receive
    all the universal service assistance that they are receiving
    today, and that they would be receiving if we did not need to
    reform the methods. The methods today, known by acronyms like
    LTS and DEM weighting, and high cost fund, do need to be
    reformed pursuant to the mandate of Congress. They need to be
    made explicit. But the reform should not be one, in my view,
    that shortchanges these telephone companies in any way.
        The joint board thought that it might be a good idea to
    freeze high cost support based on 1995 investment. My own
    personal conclusion is that in this respect, we should not
    follow the joint board's recommendation and we should continue
    to distribute high cost support according to existing formulas,
    which will allow support to rise in 1998 and 1999, based on
    investments made in 1996 and 1997. For the year 2000, it is my
    view that we should adopt a proposal made by smaller telephone
    company associations to adjust the level of support by
    inflation.
        Another instance of some of the work we have been doing--
    the joint board report was read, by some, to suggest that we
    should eliminate all support for second residential lines and
    multiline businesses. Members of this committee, including the
    distinguished ranking Democratic member, have suggested to us
    that this is not an aspect of the joint board report that we
    should adopt, and we agree--at least I agree with that view.
    Rural telephone companies, in my view, should continue to
    receive support for all lines through at least January 1, 2001.
        And a last example of a problem that we are struggling
    with, and I think we are coming up with the right and happy
    solution--how do we fulfill Congress' mandate to connect every
    classroom and library and rural health care clinic in the
    country to our Nation's telephone networks, without, in any
    way, causing any threat, direct or indirect, to the price of
    basic residential dialtone service?
        I believe that the recommended decision is circulating now,
    or virtually now--I have not checked my clock--but essentially
    today, among the commissioners of the FCC, will accomplish this
    goal, it will not be necessary in any way, to directly or
    indirectly threaten, prejudice, or increase basic residential
    dialtone in order to accomplish the goals of connecting rural
    health care clinics providing service to low-income people, or
    connecting classrooms and libraries.

                               prepared statement

        As to the specific techniques that we suggest instead, they
    bear substantial resemblance to today's techniques where
    purchasers of interstate tariffs, particularly businesses, do,
    in fact, carry the bulk of the load of maintaining the
    communications networks of America. I could describe it in more
    detail, if you wish, and possibly you would like me to bring
    this to a conclusion now.
        Thank you for your indulgence.
        [The statement follows:]
                      Prepared statement of Reed E. Hundt
                                  introduction
        Mr. Chairman and Members of the Subcommittee, thank you for this
    opportunity to testify on the Federal Communications Commission's
    fiscal year 1998 Budget Estimates. The Telecommunications Act of 1996
    updates the FCC's charter first granted in the Communications Act of
    1934. Congress sought to establish a pro-competitive, deregulatory
    national policy framework for communications. This framework reflects a
    bipartisan consensus that introducing competition and deregulation in
    America's telecommunications marketplace offers numerous potential
    benefits for consumers, business users, communications companies, and
    the economy as a whole.
        If our competition policy is a success, then the market, not
    government, will declare industries or firms winners or losers. And, as
    The New York Times editorial page observed last month, if competition
    succeeds, customers used to squabbling with their local
    telecommunications service provider over installation, service repairs,
    or rates can do more than fight. They can switch. Accordingly,
    implementation of the Telecommunications Act remains the FCC's day-to-
    day agenda.
        We also remain committed to the goal of public benefits from
    communications. Market forces alone will not always adequately meet all
    of society's public interest goals, such as addressing public safety
    needs. Consumer education and outreach is also an integral part of our
    mandate.
        Finally, we are working to make the FCC's operations as smart,
    simple, and streamlined as possible. The payoff is that our
    productivity is up. Even as we project the return of FCC staffing to
    pre-Telecommunications Act levels, our workload continues to grow.
                     telecommunications act implementation
        We have been able to meet or beat every deadline the
    Telecommunications Act sets for us, while continuing to carry out all
    of our other responsibilities. So far, we have completed 44
    implementation-related rulemakings and adopted 146 individual items. We
    have also held 18 public forums on issues related to Telecommunications
    Act implementation, including interconnection, access charge reform and
    universal service, national wireless facilities siting policies, and
    market entry barriers for small businesses. We are in the process of
    completing 23 proceedings, and the Telecommunications Act requires us
    to initiate at least 12 additional proceedings.
        As we continue to implement the Act, we are discovering a number of
    things we did not realize previously. One is that the process of
    introducing the competition envisioned by the Act is increasing our
    workload in ways that are difficult to predict and to plan. We have
    been inundated with filings in the various proceedings before us. For
    example, we have reviewed 75,000 pages of comments and other filings by
    parties in the universal service proceeding alone. On access reform we
    received a four-and-a-half foot stack of comments that does not include
    over 300,000 e-mail comments concerning charges that Internet Service
    Providers and similar companies pay to local telephone companies. In
    both proceedings, we have spent hundreds of person hours in meetings
    with interested parties. We have also spent almost $450,000 in overtime
    electric bills during the past year, more than triple what we spent the
    year before, just to keep our buildings open to support the longer
    staff hours.
        With respect to Bell Operating Company (BOC) entry into the long
    distance market, we now know that the 49 anticipated filings by BOC's
    under Sec. 271 of the Act may not be as neat as the process suggests.
    Earlier this year, for example, Ameritech filed twice before
    withdrawing its application, which resulted in over 17,000 pages of
    filings. Last Friday, SBC Communications filed the third in-region long
    distance entry petition, which consists of 5,000 pages of filings. In
    fact, for fiscal year 1997 we project filings received in all docketed
    proceedings will increase 88 percent over fiscal year 1996.
    Additionally, while Telecommunications Act implementation has required
    us to increase Full Time Equivalents (FTE's) devoted to policy and
    rulemaking activities by 50 percent since fiscal year 1995, filings
    received for review in docketed proceedings have increased by 227
    percent during the same period. We are required to, and do, give
    consideration to every one of the filings and comments received by the
    agency.
        The Telecommunications Act impacts our workload in other ways as
    well. Veronis, Suhler & Associates reported two weeks ago that mass
    media mergers and acquisitions totaled $113 billion in 1996. How many
    new broadcast license transfers will be filed with the Commission as
    the industry continues to benefit from the new structural freedom the
    Act affords? How many complaints will be filed concerning over-the-air-
    reception devices? How many preemption cases will the FCC be called
    upon to address pursuant to Sec. 253 of the Act? Five of the ten
    largest U.S. business mergers in 1996 were between telecommunications
    companies, and each one required FCC review. With the digitization of
    communications, the entire computer industry has become part of the
    communications sector of our economy, and has a number of issues before
    the FCC. Moreover, each action we take has advocates and opponents.
    Many decisions will be challenged in court. The subsequent workload
    from implementing the Telecommunications Act's changes is very large.
    Being prepared to handle this growing workload, like implementation of
    the Act itself, requires that we have sufficient resources.
                  overview of fiscal year 1998 budget request
        The FCC proposes an fiscal year 1998 budget of $217,000,000 with
    2,155 FTE's. This represents an increase of $30 million over an
    adjusted fiscal year 1997 appropriation level, as described below. The
    proposed increase is for one purpose only: to reimburse the General
    Services Administration (GSA) for one-time, non-recurring costs to
    relocate FCC headquarters to a consolidated working space at the
    Portals project in Southwest Washington. The reimbursable costs are
    attributable to expenses for information systems at the Portals, as
    well as design requirements and systems furniture that have to be paid
    for in fiscal year 1997 in order for the items to be available by the
    time the move begins early in fiscal year 1998. It is anticipated that
    $10 million in additional funding will be required in fiscal year 1999
    to repay GSA for the remaining costs associated with the relocation. We
    are advised the roof will be in place at the Portals building later
    this Spring. The building itself incorporates design elements necessary
    to accommodate the specific requirements of the FCC. The schedule calls
    for the FCC to move in six equal phases beginning approximately
    December 1997 and ending June 1998.
        With the exception of the increased funding for headquarters
    relocation, the FCC's fiscal year 1998 appropriations request is $187
    million. Please note that this is $2.1 million less than our total
    fiscal year 1997 appropriation of $189,079,000. It is also $2.1 million
    less than the base appropriation included in the President's budget.
    This reduction reflects a change in the estimated cost of salary
    increases.
        We are requesting no additional funding to cover $7.3 million in
    anticipated uncontrollable costs, primarily to cover the cost of fiscal
    year 1997 and fiscal year 1998 locality and pay raises. Also included
    are inflationary costs for various non-compensation accounts including
    rent, mail, and service contracts. We have assumed that these costs
    will be funded from the savings generated by the reduction of 100 FTE's
    through 1998. These staff reductions will be accomplished through
    attrition and a decrease in the number of employees initially hired on
    term appointments, as those appointments expire in fiscal year 1998.
    Our proposal to operate at a current service baseline for fiscal year
    1998 of $187 million is less than last year's appropriation. The amount
    to be collected from regulatory fees would increase from $152,523,000
    in fiscal year 1997 to $162,523,000 in fiscal year 1998.
        As you know, in fiscal year 1996 Congress appropriated $10 million
    to the FCC for Telecommunications Act implementation. The FCC obligated
    $7.2 million of this amount prior to September 30, 1996. The balance of
    $2.8 million has been carried forward into fiscal year 1997 to complete
    Telecommunications Act initiatives begun in fiscal year 1996. Almost
    all of the $2.8 million is either obligated or committed in the
    agency's accounting system for the completion of implementation-related
    initiatives, such as the continuation of required paralegal and data
    support services, and economic analysis of telecommunications issues.
    The FCC has also carried forward into fiscal year 1997 $2.4 million of
    spectrum auction receipts that are obligated for necessary auctions-
    related expenses in the current fiscal year. Finally, we carried
    forward into fiscal year 1997 $3 million in regulatory fees collected
    in excess of the appropriation requirements for fiscal year 1995 ($2.9
    million) and fiscal year 1996 ($100,000). Our plan is to redirect these
    funds to programmatic activities, such as electronic licensing, which
    is a significant part of our ongoing efforts to streamline the
    Commission's processes.
                             public safety spectrum
        In addition to promoting competition, the second fundamental task
    of the FCC is to secure the public interest in communications. One of
    the public's most urgent needs is for more public safety spectrum. The
    Commission took a giant step toward addressing this need two weeks ago
    when it adopted the Digital Television (DTV) Table of Allotments, which
    recovers immediately 60 MHz of spectrum previously used for TV channels
    60-69. I hope that 24 MHz of this newly recovered spectrum (out of a
    total of 138 MHz to be recovered over the next ten years) can be
    reallocated quickly to help address the serious spectrum needs of
    public safety agencies. As I noted when we adopted the DTV Table, the
    benefits of this reallocation can be measured, literally, in lives
    saved. Affording the public safety community new spectrum with
    nationwide capacity will also facilitate development of network
    interoperability and will create new efficiencies in equipment
    manufacturing that can be passed on to public safety users.
        Additional spectrum, however, is only one step in improving public
    safety wireless communications. The Public Safety Wireless Advisory
    Committee (PSWAC) identified other areas in which improvements are
    needed. For example, the public safety community has long been beset by
    the problems of operating in many different frequency bands--meaning
    that police, fire, and emergency agencies in one town often cannot talk
    to each other because they operate on different frequencies. Past FCC
    policies contributed to the problems we see today. The Commission
    allocated spectrum on a piecemeal basis--leading to the fragmentation
    that characterizes public safety communications. A significant portion
    of our ongoing public safety proceeding will be devoted to addressing
    interoperability problems.
        We are also working on ways to improve the features and delivery of
    emergency communications, for example, examining the various ways that
    we can increase the accuracy and reliability of wireless 911 and
    enhanced 911 services. To alleviate congestion on 911 circuits, the FCC
    earlier this year announced the availability of a new 311 code as a
    means of quick access to non-emergency police and other government
    services. We also made available 711 for quick access to
    Telecommunications Relay Services, a service that allows for persons
    with hearing or speech disabilities to use the telephone.
                        consumer education and outreach
        Consumer education and outreach is an integral part of our mandate,
    and we continue to receive an increasing number of consumer inquiries,
    many of them forwarded to us by you on behalf of your constituents. In
    1996, our Office of Legislative and Intergovernmental Affairs handled
    more than 7,000 Congressional inquiries, an increase of 25 percent over
    1995. During the first ten days of this month alone, we received 524
    Congressional letters, an increase of 160 percent over the same period
    last year.
        Last year, our Office of Public Affairs answered more than 105,000
    inquiries from consumers and the media and issued over 6,000 documents.
    During February and March, the FCC's home page received an average of
    135,643 hits per day, up from an average of 37,647 hits per day during
    the same period in 1996. In fiscal year 1996, the FCC responded to over
    65,000 requests for reference materials as compared to 62,600 in fiscal
    year 1995. To move the agency further onto the Internet, two weeks ago
    we issued a Notice of Proposed Rulemaking to allow electronic comments
    to be filed in FCC rulemaking proceedings, using the World Wide Web and
    electronic mail. Electronic filing of comments in FCC rulemaking
    proceedings will make it easier for the estimated 40 million people in
    the United States who have access to the Internet to file comments and
    to access comments filed by others in an efficient manner.
        Thanks to Congress' wisdom in providing us with resources for
    upgraded computers and modern information technology, we are able to
    keep pace with unprecedented public interest in matters before the FCC.
    Consistent with our increased productivity and following the closure of
    18 FCC field offices in fiscal year 1996, our fiscal year 1998 budget
    estimates project 14 percent fewer FTE's for public information
    services than were devoted to the same activity in fiscal year 1995.
        Industry and the public also continue to file complaints with us,
    giving rise to increased levels of enforcement activity. Our Common
    Carrier Bureau, for example, processed 28,381 written consumer
    complaints and inquiries in fiscal year 1996, 63 percent more than in
    fiscal year 1995. The majority of these complaints were received
    directly from consumers, accompanied by bills and other supporting
    documentation. A majority of them concerned ``slamming'' (i.e.,
    unauthorized switching of long distance carriers) and operator service
    providers. While the types of complaints change over time, the total
    number of complaints received by the Bureau continues to rise.
    Similarly, our Wireless Telecommunications Bureau handled 1,239
    enforcement matters in fiscal year 1996, 71 percent more than in fiscal
    year 1995. At the same time, the number of FTE's devoted to enforcement
    activity agency-wide is down 19 percent since fiscal year 1995.
                            improving fcc operations
        Deregulation means that we need to be sure that both incumbents and
    newcomers are able to innovate without being discouraged by our rules
    or processes. Later this year, we hope to commence a Notice of Inquiry
    into the impact of our rules on innovation and investment in
    telecommunications networks, including incentives to deploy advanced
    technologies for data networks such as the Internet.
        We also continue to ask whether the FCC is doing things it should
    not be doing. It was this question that led us to cut the number of FCC
    field offices from 34 to 16 (including the first reduction-in-force in
    FCC history). To better serve the needs of the public, we created a
    new, centralized call center at 1-888-CALL-FCC to provide toll free
    service for information or assistance from anywhere in the United
    States.
        In 1995, we made 37 streamlining recommendations to Congress
    concerning functions we no longer believed it was necessary for us to
    perform, 21 of which were enacted as part of the Telecommunications
    Act. Just one such change, removing an individual licensing requirement
    for domestically-operated recreational ships and aircraft, eliminated
    the need to track about 710,000 radio licenses.
        It was also this question about what we should not be doing that
    led us to issue a Notice of Inquiry immediately after the
    Telecommunications Act became law asking how we could improve our
    processes. In gathering suggestions responding to the NOI, we worked
    with the Federal Communications Bar Association. The NOI served as an
    umbrella proceeding under which the public could comment on FCC-wide
    and Bureau-specific streamlining efforts. In reply to the NOI, the FCC
    received numerous proposals ranging from major policy initiatives to
    suggestions for minor adjustments in the way we do business. Many
    proposals have been adopted. Last month, for example, we simplified and
    clarified our rules governing ex parte presentations in proceedings
    before the Commission. The amended rules will make compliance easier,
    while enhancing their effectiveness.
        We also last month adopted a Notice of Proposed Rulemaking
    proposing to simplify the existing equipment authorization process, to
    deregulate equipment authorization requirements for certain types of
    equipment, and to provide for electronic filing of applications for
    equipment authorization. Simplifying and streamlining the equipment
    authorization process will benefit both large and small manufacturers,
    encourage the development of innovative products for consumers, and
    enable new products to be introduced into the market more rapidly. The
    proposals, if adopted, would reduce the number of equipment
    applications required to be filed with the Commission annually from
    about 3,500 to approximately 1,800, significantly reducing paperwork
    burdens on manufacturers.
        Two weeks ago, we eliminated the limit on directional gain antennas
    for spread spectrum transmitters operating in the 2,450 MHz and the
    5,800 MHz bands and made a number of related rules changes intended to
    promote the use and development of spread spectrum systems. The new
    rules will expand the ability of equipment manufacturers to develop
    radio links without the delays and costs associated with formal
    frequency coordination and licensing. The new rules will also
    facilitate the growth of the spread spectrum industry by enabling and
    encouraging practical applications for spread spectrum transmission
    system products, which may include intelligent transportation system
    communications links; high speed Internet connections for schools,
    hospitals, and government offices; energy utility applications; PCS and
    cellular backbone connections; and T-1 common carrier links in rural
    areas.
        Additional FCC streamlining actions already completed include
    reducing reporting requirements by more than 50 percent for the
    National Exchange Carriers Association, among others; eliminating our
    Review Board; reducing international tariff notice periods to one day
    from two weeks; reducing the size of the Office of Managing Director as
    a percentage of the agency from 16 percent to 9 percent; and providing
    status information on audio service applications on the FCC's web site
    (www.fcc.gov), thereby affording immediate and direct access to that
    information to licensees and applicants.
                              electronic licensing
        Just as computers have improved our ability to respond to public
    requests for information, we also want to use information technology to
    promote electronic licensing. Electronic licensing reduces processing
    time by at least 25 percent, and in many instances reduces processing
    time from 30 days to overnight. The FCC's Wireless Telecommunications
    Bureau has been a leader in using electronic licensing to speed its
    work.
        The Wireless Bureau has developed the capability to receive over 60
    percent of its more than 500,000 annual applications electronically. To
    date, more than 150,000 license applications have been filed
    electronically. Additionally, the Wireless Bureau has developed
    software that will analyze and automatically determine licensing
    accuracy of thousands of applications annually. This electronic
    licensing combined with electronic filing has reduced processing time
    for some customers, such as Amateur Radio operators, from more than 75
    days to overnight.
        Other FCC Bureaus are moving to electronic filing as well. The
    International Bureau has instituted electronic filing for earth station
    applications. The Mass Media Bureau has begun a project to provide for
    the electronic filing of broadcast applications. The filing software
    will scan for incomplete or inaccurate applications, and provide
    automatic computer analysis of much of the information currently
    processed by hand, such as interference analysis. As I described above,
    electronic filing of applications for equipment authorization should
    reduce by more than half the current application processing time of
    approximately 40 days.
        We also hope to begin electronic payment of filing fees by credit
    card, so as to create an added incentive for applicants to use the
    electronic method of filing. We are also working on implementing a
    universal form on the Internet for all electronic filing and renewals.
    Thanks to efficiencies created by electronic licensing as well as
    streamlining proposals such as delicensing, we project that FTE's
    devoted to authorization of service will decrease in fiscal year 1998
    by 11 percent over fiscal year 1996 levels.
            shifting management responsibility for fcc auction debt
        In the area of what the FCC should not be doing, it is also time to
    assess whether it is consistent with our statutory mandate under the
    1993 Budget Act to act as both the promoter of wireless competition and
    as banker to the wireless industry. Pursuant to the direction of
    Congress, as expressed in the 1993 Budget Act, the FCC adopted rules
    allowing small businesses to pay for their new spectrum licenses in
    installments over the term of their licenses. While these policies have
    helped hundreds of small businesses obtain spectrum licenses in our
    auctions, these new businesses now owe the Federal government
    substantial sums for their licenses.
        It is becoming increasingly apparent that there is tension created
    by the FCC's present dual role as regulator of, and creditor to, the
    wireless industry. The Commission will continue to face requests from
    some small business licensees for temporary relief from their
    installment payment obligations, or for renegotiation of the terms of
    their loans. Commercial lending institutions routinely engage in these
    practices, but the FCC does not have the necessary expertise or
    experience to perform these functions. In addition, such a function may
    also conflict with our statutory duty to expeditiously issue licenses
    for new communications services.
        The responsibility for all of these creditor functions should be
    transferred to some other government entity with appropriate expertise,
    such as the Treasury Department, while the Commission would retain its
    ultimate authority over the licenses themselves. Treasury could work
    out any relief that should be granted to an auction debtor, and make
    appropriate recommendations to the Commission with respect to whether
    licenses should be retained, revoked, or transferred. The Treasury
    Department's assumption of these creditor responsibilities would be
    consistent with the fact that the auction funds are deposited in the
    U.S. Treasury, and the Department would be in the best position to make
    decisions on payment terms.
                                   conclusion
        While competition and deregulation remain the FCC's mantra, the
    agency will continue to need the resources to do the job Congress, the
    telecommunications industry, and the American people are calling upon
    us to do. The New York Times editorial page last week characterized the
    Commission's deregulatory efforts to date as ``sure-footed.'' Adherence
    to our twin goals of private competition in communications and public
    benefits from communications should continue to promote significant
    investment in all telecommunications industries, and hasten the day
    when business and residential users will be afforded a marketplace
    choice in telecommunications services. It also means that all Americans
    can look forward to the benefits of modern communications.
        This concludes my statement. Thank you again for this opportunity
    to meet with you. I would be pleased to answer your questions.

                         funding for Universal service

        Senator Gregg. Thank you.
        I would turn to the ranking member whose expertise in this
    area far exceeds mine.
        Senator Hollings. I defer on the expertise part, but I
    think the chairman has answered the questions that many of us
    had with respect to the Commerce Committee. Namely, the joint
    board recommendation about connecting up, now, all the schools
    and libraries. You say that that is not going to threaten any
    basic rural phone service.
        Well, it is a $3 billion amount. You only get, what is it,
    $1.6 billion, now, or what is the universal service fund? So I
    mean, you are going to double it. You are not going to do it
    all at once. You know, like that ad, ``I can't believe I ate
    the whole thing''? In other words, you cannot distribute the $3
    billion in 1 year to every library and every school--I doubt--
    or can you? That is the question.
        Mr. Hundt. Well, I do not know how many will come to take
    the money. That certainly is true. But the joint board
    suggested that we make available for connecting classrooms and
    libraries, not more but not less than $2.25 billion on a per-
    year basis. And under the proposal that is circulating now,
    Senator, that recommendation would be followed. As to how much
    would actually be requested and how many schools or libraries
    would meet the requirements, that I cannot predict.
        Senator Hollings. Well, I hope your Commission will show
    care in distributing it. I mean, obviously, everybody is going
    to apply.
        Mr. Hundt. I am not sure that everyone----
        Senator Hollings. Congressmen and Senators apply for their
    libraries.
        Mr. Hundt. Well, I am not sure that everyone will be able
    to meet the requirements immediately, but I do not doubt that
    in the fullness of time everybody will----
        Senator Hollings. Well, in the fullness of time, but I was
    trying to think of an orderly phase-in. With respect to the
    secondary line and the multiline users, that joint board
    recommendation to up the rates there in order to try to enhance
    the universal service fund, I understand you to say you are not
    going to follow that recommendation. I hope we do not.
        Mr. Hundt. I think that that recommendation--there was a
    good thought behind it, but I think that as we studied it more,
    and as we took more in the record, we realized that there are
    instances in which a second-line service that did not get
    support in some of the States, the United States, would really
    be priced prohibitively high, and that would hurt business
    development, even Internet access in these States. So we are
    changing our techniques here, but your concerns, in particular,
    Senator Hollings, I hope and sincerely believe are met in a way
    that you would be pleased with, by the proposal that is
    circulating.
        For example, we have a totally new method, but, you know,
    just to illustrate the point, a company called Consolidated, in
    North Dakota, right now is receiving total support of $1.211
    million. A totally new method. Their support under the new
    method would be $1.211 million.

                            Subscriber line charges

        Senator Hollings. I see. Well, again, about trying to
    enhance that universal service, and the problem of access
    reform, as I remember before the Commerce Committee, you said
    the Commission would be taking no action to increase local
    phone bills, and there has been some misgiving about any flat
    or user fee increases in the subscriber line charges, and all.
        That is not contemplated at this time, is it?
        Mr. Hundt. No, sir; at least not by me. And again, I am
    sure you all know that I am speaking for myself here, since the
    Commission will vote on this May 6.
        Senator Hollings. Right.
        Mr. Hundt. But I personally think that it is inconsistent
    with the congressional intent. You want us, as I understand
    it--and you have said this more than a few times on the
    record--you, Senator, and many other Senators. You want to make
    sure the basic dialtone service, which is the access product,
    the gateway product in buying anything else, is affordable. We
    know it is affordable now, because it is at about 95 percent
    penetration. We do not want that to go up in price. So if you
    have a universal service program that makes that go up in the
    name of universal service, you have kind of done the wrong
    thing in saying you have done the right thing.
        We are trying to keep basic, affordable dialtone at the
    levels that exist today. That is why raising the subscriber
    line charge, in my view, cannot be consistent with the
    directions that you gave us.

                                  Cable rates

        Senator Hollings. Now the real concern among consumer
    groups, and this Senator, is with respect to the increase in
    cable rates. Now we know that we had tried, and we did keep
    control against any increases in the 1996 act until 1999.
    However, under the 1992 act allowing increases for inflation,
    it seems to many to have been abused in the sense that there
    have been three to four times the inflation rate.
        What is your response to that?
        Mr. Hundt. Well, we have looked into this in some detail.
    As far as we can tell, Senator, the main two things driving
    increases in cable rates as of this moment, are, No. 1, the
    programming costs, the costs that are paid by the cable
    companies. Those are going up.
        And the cable company does not have much choice when its
    program supplier says, ``I am raising my prices.'' The cable
    company, we can understand--the cable company has to raise that
    price in the same way that, when Starbucks had a higher price
    for coffee beans, they ended up passing that on to a higher
    price for a cup of coffee.
        And No. 2 is that some cable companies are spending a lot
    of money to upgrade their systems in a way that will make them
    be more competitive and more efficiently able to provide
    telephony service, which, of course, Congress opened the door
    for in the 1996 act. Those upgrades are being passed on. That
    is, however, not true for most companies. The first point
    applies to virtually every cable company.
        Senator Hollings. Well, look at that carefully because
    there is some evidence to the effect that more than the program
    increase costs that is--and actually triple the rate of
    inflation cost, and I know the study is being made.

                              FCC relocation cost

        Do you have $30 million in here, I think, to move to your
    new headquarters?
        Mr. Hundt. I think it might be $40 million, actually.
        Senator Hollings. Forty.
        Mr. Hundt. Forty million dollars over 2 years, and $30
    million in the year in question.

                              Personnel reduction

        Senator Hollings. Yes; I understand. And actually, you have
    cut back the personnel some 100?
        Mr. Hundt. Yes; we re going to be working with fewer people
    in order to accommodate the increases that otherwise always
    happen. The CPI increases the salary, and the other increases
    that you cannot do anything about. So to have a flat level in
    the appropriation, we have contemplated a smaller number of
    people.
        Senator Hollings. Thank you, Mr. Chairman.
        Senator Gregg. Thank you, Senator.
        Senator Campbell.
        Senator Campbell. Thanks, Mr. Chairman.
        I just had one little question. I do not know how Starbucks
    got in this conversation, but I fly United all the time. This
    is just related. I think they have done more damage to United
    Airlines flight service--Starbucks--than I think if the wheels
    fell off that airplane. [Laughter.]

                             Radio channel licenses

        I wonder, I will just one little--it is kind of a parochial
    question, but I live in an area where there are nine separate
    law enforcement agencies, and I am not sure I understand this
    correctly, but to use different radio channels, they have to
    obtain permits to use different radio channels. Is that
    correct?
        Mr. Hundt. Yes.
        Senator Campbell. Through the FCC?
        Mr. Hundt. Yes; I mean, all of the licenses to use those
    radio channels come from us.
        Senator Campbell. With nine agencies--and where we live,
    there seems to be an awful lot of frequency congestion because
    they do not have enough channels. Is there anything that
    prevents local government from expanding them? Does local
    government have to get the permits from you, or State
    government also have to get----
        Mr. Hundt. Yes; this comes out of the FCC, because we have
    a national licensing scheme for radio use.
        Senator Campbell. Is that a difficult thing to do in
    situations----
        Mr. Hundt. It is very difficult to do, but I have some good
    news, which you might want to let me share with you on this
    particular topic.
        Senator Campbell. Please.
        Mr. Hundt. As I am sure you know, not very long ago, we
    issued the digital television licenses, and that is a pretty
    big deal for broadcasters, and I think we have done a good
    thing for the country. But a small part of our decision is a
    very big deal for the public safety community. Because in the
    course of that decision, we found some spectrum in what we call
    the 60's, the channels on the TV set that are in the 60's, that
    are not used in most places in the United States; 63, 64. There
    is no TV station that operates in those kinds of channels,
    almost everywhere in the United States.
        So because we have now carved that out as not being part of
    the digital TV transition, we can commence a rulemaking process
    at the FCC in the next few months, that would allocate a chunk
    of that spectrum for coordinated, comprehensive use by the
    public safety community all across the country.
        Senator Campbell. I see.
        Mr. Hundt. Just yesterday, and this does not happen every
    day, the public safety community came in and thanked all the
    commissioners of the FCC. And like I said, that does not happen
    every day. They should not thank us. They should thank our
    engineers who worked for, really, 2\1/2\ years, and built a
    fantastic computer model that solved this problem for the whole
    country.
        And I think when we get that model out and we get this
    rulemaking out in the next couple of months, you will be
    really, really proud of these engineers.
        Senator Campbell. Do you think that will make it easier to
    get an expanded number of channels?
        Mr. Hundt. It is really going to make a big difference.
        Senator Campbell. That is great. That is the only question
    I had, Mr. Chairman.

                    Spectrum cost for public safety entities

        Senator Hollings. What is the cost to the public safety
    entities, now, in order to take on that spectrum?
        Mr. Hundt. Well, you know, that is a good question. The
    primary costs that they face, right now--and I do not know how
    to quantify it--but when a police department and a fire
    department in a single town both have to go and get radio
    licenses and radio equipment that they want to use, they find
    that it is hard to find enough spectrum to use, enough
    capacity, and they end up not coordinating. They end up getting
    different licenses, and they end up not being able to talk to
    each other. So the prices go through the roof, not to mention
    the fact that they cannot do as good a job as they would like
    to do.
        So that we had this instance at the World Trade Center
    bombing, where we found that one law enforcement agency on one
    floor could not communicate to another one one floor away. We
    are talking about lives being lost, you know, not just extra
    expense.
        So if we carved out a 63, or a 64, one of those TV channels
    that is not used, it is the same frequency all across the
    country, and we could at last get the long-desired coordination
    possibility.
        So I have never quantified the savings here, and we should
    do that, Senator, but it is big. It is big.

                           technology to use Spectrum

        Senator Gregg. Do we not also have an issue on the capacity
    of these law enforcement agencies to have the technology to
    undertake the use of this spectrum?
        Mr. Hundt. Yes.
        Senator Gregg. Now the FBI thinks, estimating, it will cost
    $1 billion for them just to get up to speed on the spectrum
    cost.

                               Spectrum auctions

        Mr. Hundt. Yes; in this connection, another thing that we
    have underway right now is an effort with the public safety
    community in which we might take some of these 60's that I was
    mentioning, and auction them, and then divert some of the money
    to help let the public safety community have a way to pay for
    using the other 60's, and in that way try to kill two birds
    with one stone.
        Senator Gregg. Would you have to limit that just to 60's? I
    mean, as you auction off other spectrums, should not some of it
    be set aside to pick up the cost that these----
        Mr. Hundt. You could target any of the spectrum auctions
    for this purpose.
        Senator Gregg. You would not have any problem with that?
        Mr. Hundt. I certainly would not. It just happens to be a
    neat solution, that we could take this batch of the 60's, as we
    are calling them, and then have an auction for some and raise
    the cash, and then for the others, you know, dedicate them
    directly to the public safety community, and then, really, one
    solution to address this issue that has plagued the country for
    an awful long time without a good solution.
        Senator Gregg. I think we should do that, follow along with
    those courses.
        Senator Burns has joined us. We are honored, of course.

                        conversion to Digital television

        Senator Burns. Well, I do not have any questions. A
    followup to the channels. Those channels were initially
    assigned to the television industry, were they not?
        Mr. Hundt. That is right.
        Senator Burns. How does that fit, when you convert some of
    those channels, how does that fit with your conversion to
    digital?
        Mr. Hundt. Well, two things. First of all, where the 60's
    are currently being used for analog TV, we would still have
    that happen. For example, Congressman Markey always delights to
    remind me that one of the 60's is used in Boston for the Boston
    Red Sox being broadcast. We would not be taking that channel
    away.
        Senator Burns. I am not a Red Sox fan.
        Senator Hollings. We do not mind.
        Mr. Hundt. You all do not mind about that? [Laughter.]
        Well, in any event----
        Senator Gregg. Hold it. Hold it. Hold it. [Laughter.]
        Mr. Hundt. Well, you know, as you please, really. I would
    take your direction on this.
        But in any event, we would grandfather the existing analog
    licensees of the 60's. It is just that there are not very many
    in the aggregate across the country. The key thing that our
    engineers figured out was a way to give out the digital
    television licenses without using any of the 60's, and that is
    a brilliant engineering solution that is all expressed in the
    computer model.
        Senator Burns. Where will they go now?
        Mr. Hundt. Different answers for different stations, but
    basically between 2 and--I can't remember, right now.
        Senator Burns. It will be under 50, you mean?
        Mr. Hundt. Yes, sir; for example, in Washington, 8 would be
    used, because no one uses 8 in Washington. Or 14 would be used,
    because no one uses 14 today. I am not competent to explain the
    intricacies, but because, as you well know, the allocation
    system involves a interaction among 2,000 separate licenses. It
    is very complicated to make them all fit, and the model,
    computer model that our engineers have developed does this job
    and is in the process of being publicly disclosed to the
    industry, even now.
        Senator Gregg. Well, I think this is a very important
    issue. This committee has been aggressively pressing the
    Justice Department, and I think we have even written you a few
    letters on this issue of taking the spectrum for the law
    enforcement community and for the Defense Department as we go
    through the auction process. So, hopefully, this will alleviate
    some of the concern that we have had.
        I also think we need to pursue how we pay for a $1 billion
    price tag that the FBI faces, and to say nothing of what local
    law enforcement faces in technology upgrading. The ideas you
    have on that are very helpful, and we appreciate them.

                                 Portals lease

        On the issue of your move to Portals, I understand that
    this arises out of your desire to go there, but also because
    the General Services Administration [GSA] lost a lawsuit over
    the leasing of this facility, and the new lease price seems to
    be rather high. I think it is $35 a foot. I am just wondering
    why you should have to pay this and why GSA should not pay the
    difference?
        Mr. Hundt. GSA, as a matter of law, was the agent of the
    FCC for purposes of the lease negotiation. That was not
    something that we have any role in, and as our agency, they
    bound us to the lease which they did sign.
        Senator Gregg. So why shouldn't we let them pay for it? It
    comes out of another committee. It is out of another account.
        Mr. Hundt. I really have no comment for you. We do not have
    an appropriated sum to pay for our move at this time, and we
    have told GSA that we do not have the money to pay for the
    move, and GSA will have to find that money. I am in a very
    receptive mode as to any suggestions that you might have.
        Senator Gregg. Have you ever tried tents?
        Mr. Hundt. Yes; but it is so hard to work those computers
    in there; you know. [Laughter.]
        Senator Gregg. You run them off the lightning.

                             Alcohol advertisements

        Can you assess the alcohol advertising policy.
        Mr. Hundt. Yes; the networks have publicly said that for
    their owned and operated stations, and for the advertising the
    networks are responsible for, they are making the individual
    decisions not to welcome hard liquor advertising.
        However, the affiliates, you know, the bulk of the stations
    in this country, they have their own time as everybody knows,
    and some of them--no one knows exactly how many--are carrying
    hard liquor ads. We do not actually have the facts here. You
    know, one thing that I think we ought to do is have a notice of
    inquiry so that we learn the facts. Some people say that there
    are 100 plus stations carrying these ads. Others say that there
    are 50 some stations.
        I would like to be able to give you the facts on this
    situation and that is why I think we should vote a notice of
    inquiry and develop a factual record, and be able to report to
    you and to the country on this topic. I want to say that I am
    certainly not faulting the networks. I mean to be complimenting
    them. But I just cannot tell you what the pattern is across the
    country, and the percentage amount of advertising time is
    primarily local. So that is a big concern.

                         Direct appropriations increase

        Senator Gregg. Now the dollar increase that you have here
    in direct appropriation goes up rather dramatically on a
    percentage basis, dollarwise. It is not dramatic, I suppose, by
    our numbers, but still, percentagewise an increase. The vast
    majority of that is a function of your higher rent costs?
        Mr. Hundt. The primary, indeed, the overwhelming reason for
    the fact that you are remarking is the move to Portals.
        Senator Gregg. Senator Domenici.
        Senator Domenici. I have a series of questions regarding
    digital TV, and I think I am just going to submit them to you.
    I would really appreciate it, if the chairman would concur in
    this, and the ranking member, if you would answer them for the
    committee, quickly.
        I would ask exceptionally quickly. We are reviewing the
    numbers in the Budget Committee, and we would like to get your
    version of various spectrum ideas that are being discussed.
    Could you do that for us?
        Mr. Hundt. Sure. Would next week be all right?
        Senator Domenici. Noon. Start on them today. [Laughter.]
        It would be very helpful if you could have the response by
    tomorrow night.
        Mr. Hundt. OK. We will give it a crack. Oh, you have got it
    right here.
        Senator Domenici. I am going to leave the questions with
    you.
        Mr. Hundt. OK.
        Senator Domenici. I was going to ask them while we are
    here, but I do not want to keep all these people. I arrived too
    late to delay people.
        Mr. Hundt. All right. We will get you something, for sure,
    by tomorrow night, and if one of them seems to take a little
    longer, I will tell you by tomorrow night.
        Senator Domenici. All right.
        Mr. Hundt. Is that all right?
        Senator Domenici. It should come to the committee, even
    though--I mean, this should not be with me.
        Senator Gregg. No; communicate directly to the chairman of
    the Budget Committee.
        Senator Domenici. Thank you.

                             Appropriation request

        Senator Burns. Mr. Chairman, what is the increase in the
    request?
        Senator Gregg. Well, it is about 55 percent on a percentage
    basis of the direct appropriations as opposed to, I think, $36
    to $55 million. Last year, we went up about $10 million on the
    direct appropriation, so it is going up, rather dramatically.
    But I am not really sure it is all the FCC's problem. A lot of
    it is the cost of this new building.

                         Additional committee questions

        Does anybody else have any questions?
        Senator Burns. No; I would like to get a copy when you
    furnish it----
        Senator Gregg. Yes; obviously copy us with the answers, but
    do please go directly to the chairman of the Budget Committee.
        Senator Hollings. I would not be too bullish on this
    spectrum. It is a disease. Everybody's got a program and they
    are going to sell spectrum, sell spectrum, sell spectrum, and
    it is not going to happen, ultimately, as you and I both know.
        Senator Gregg. And it is important that we protect the
    spectrum for the law enforcement community and the Defense
    Department.
        [The following questions were not asked at the hearing, but
    were submitted to the Commission for response subsequent to the
    hearing:]
                Questions Submitted by Senator Pete V. Domenici
                                 access charges
        Question. Chairman Hundt, many rural telephone companies and
    cooperatives are quite concerned about the FCC's forward looking costs
    in interconnection and proxy models under Joint Board's recommendation.
    The rural providers believe that such cost models are inadequate and do
    not provide sufficient flexibility and predictability. I am concerned
    about the interaction of the FCC's interconnection and access charge
    reform proceedings with universal service. If the Commission does not
    provide an adequate cost formula for rural and high cost areas, it
    could have a profound effect on phone rates and infrastructure
    development and investment.
        Does the FCC have any plans to significantly modify current Access
    Charge fees?
        Answer. According to the FCC's plan, all rural telephone companies
    would receive universal service support according to the same formulas
    used today. The plan adopted by the Commission on May 7th reforms the
    access charge system for the largest local telephone companies that are
    subject to the FCC's price cap regulation. These companies include the
    Bell Operating Companies, GTE and other large independents. For
    companies other than price cap carriers, which includes the vast
    majority of local telephone companies that provide service in rural
    areas, we will, with minor exceptions, maintain the current access
    charge regime. Later this year, we will consider what changes are
    warranted for these companies in a separate rulemaking proceeding,
    where we can give proper attention to the special circumstances these
    companies face. In its May 7th decision, the Commission balanced
    various goals, which included keeping low flat rates for residential
    consumers to promote universal service, lowering per-minute charges for
    long distance service to stimulate demand and promote efficient use of
    the network, and ensuring that local telephone companies have
    incentives to continue to invest in the local network. For the largest
    local telephone companies, the Commission will reduce the per-minute
    charges collected and will allow them to recover more of their revenues
    through flat charges collected from long distance companies. This will
    make the recovery of access charges more economically efficient and
    reflective of the way costs are incurred. These changes should help
    permit all carriers, both incumbent local telephone companies and new
    entrants, to compete fairly for the local exchange business, without
    either having an advantage for a particular type of customer.
        Question. Does the FCC currently have any plans to eliminate the
    cap on End User Charges or Subscriber Line Charges placed on second
    telephone lines for either residences or businesses in rural areas?
        Answer. In its recent Order, the Commission did not change the
    Subscriber Line Charge (SLC) for small rural carriers. For large price
    cap companies, the Order maintains current SLC caps for primary
    residential and single-line businesses and gradually reduces the
    subsidy for second line residential and multi-line businesses. This is
    consistent with the unanimous recommendation of the Federal-State Joint
    Board. The Universal Service Joint Board concluded that the current
    $3.50 cap on the Subscriber Line Charge (SLC) for primary residential
    and single-line business lines should not be increased. The Joint
    Board, however, did not recommend that the SLC cap should be maintained
    for multi-line business or residential connections beyond the primary
    connection. The Commission's plan, consistent with the Joint Board's
    view, does not increase SLC charges on primary residential or single-
    line businesses.
        In its rulemaking, the Commission ensured that the prescribed
    changes in access charges would have minimal impact on residential or
    business consumers, and especially those in rural areas. We believe
    that the resulting plan will lead to lower long distance charges on
    these customers' bills. The May 5th pledge by AT&T to pass-through
    access charge reductions to consumers underscores the validity of this
    approach. In addition, a recent SBA study shows that small businesses
    in rural areas are bigger users of long distance than urban small
    businesses. Therefore, we predict these businesses will be recipients
    of even larger decreases in their long distance bills.
        Question. Is the FCC currently working to develop a more accurate
    proxy model for local telephone companies which will ensure adequate
    and accurate cost recovery? Please explain your answer.
        Answer. The Joint Board recommended that the Commission use a
    forward-looking cost model to calculate the forward-looking costs of
    providing the supported services but it did not recommend a specific
    model.
        On March 26, 1997, the state members of the Joint Board submitted a
    report to the Commission regarding the cost models. In the report, the
    state members stated that they have serious concerns about the adequacy
    and accuracy of the cost models at this point. Nonetheless, the state
    members recommended that the Commission select one model as soon as
    possible to focus the efforts of the Commission and industry. The state
    members, however, did not make a recommendation on which model the
    Commission should select.
        We remain committed to using a forward-looking cost methodology to
    determine universal service support. However, we are also concerned
    about which model provides the most workable, reliable mechanism that
    could be used to calculate universal service support for large, non-
    rural carriers. As recommended by the Joint Board, we will take
    specific steps to adopt a forward-looking economic cost methodology for
    determining support in high cost areas. First, by the end of June 1997,
    the Commission will issue a further Notice of Proposed Rulemaking
    seeking additional information to help the Commission select a model.
    By August 15, 1997, the states will notify the Commission of their
    intent to either develop their own forward-looking economic cost study
    or use the one developed by the Commission. By February 6, 1998, states
    must file their forward-looking economic cost studies with the
    Commission. The Commission will place the state-filed forward-looking
    economic cost studies on public notice and review them to ensure
    consistency with federal guidelines. The mechanism for determining high
    cost universal service support, based on forward-looking economic cost,
    will become effective on January 1, 1999.
        Question. Understanding the dilemma the FCC is currently facing
    regarding proxy models which do not work, is the FCC confident that an
    accurate proxy model can be developed for rural high cost local
    telephone carriers and cooperatives?
        Answer. The Commission intends to provide support for universal
    service in rural areas consistent with section 254(b)(3), which states:

              Access in rural and high cost areas.--Consumers in all
            regions of the Nation, including low-income consumers and those
            in rural, insular, and high cost areas, should have access to
            telecommunications and information services, including
            interexchange services and advanced telecommunications and
            information services, that are reasonably comparable to those
            services provided in urban areas and that are available at
            rates that are reasonably comparable to rates charged for
            similar services in urban areas.

        The Commission recognized that it will be more difficult to develop
    a forward-looking economic cost model methodology for rural carriers
    than for non-rural carriers and more time would be necessary to develop
    a model that accounts for the unique needs of rural carriers. This
    concern led the Joint Board to recommend that the Commission, working
    with state commissions, review any proxy model used by the Commission
    to ensure that it takes into consideration the unique circumstances of
    rural carriers. On May 26, 1997, the state members of the Joint Board
    submitted a report to the Commission regarding the cost models. The
    report found that the cost models were not sufficiently developed to be
    used for rural carriers.
        Consistent with the recommendation of the Joint Board, the
    Commission has determined that rural carriers should move to a forward-
    looking economic cost methodology, but should not do so immediately. We
    will require rural carriers to calculate support based on forward-
    looking economic costs once a method suitable for application to rural
    carriers is developed and validated. The Commission will issue a
    Further Notice of Proposed Rulemaking to address issues unique to rural
    areas by October 1998. The Commission also supports the establishment
    of a rural task force, consistent with commenters and the State
    Members' Report, to study the development and impact of a forward-
    looking cost methodology for rural carriers.
        Until a forward-looking cost methodology is selected for rural
    carriers, they will receive universal service support for all lines,
    using the same formulas in effect today, with slight modifications,
    until December 31, 1999. On January 1, 2000, this support will be
    adjusted for inflation.
        Question. Chairman Hundt, one concern we are hearing with regard to
    the Interconnection order is how that order may have adverse
    implications on the Universal Service fund.
        Is it true that a competing telephone company can purchase
    unbundled network elements and then rebundle those elements to avoid
    paying access charges? And if it is true, would you please explain why
    this is permitted.
        Answer. First, in the Local Competition Order, the Commission held
    that a competing telephone company that purchased unbundled network
    elements should not also be required to pay intrastate and interstate
    access charges to the incumbent local telephone company to use those
    elements to provide long-distance service. Parts of that order have
    been stayed by the United States Court of Appeals for the Eighth
    Circuit on jurisdictional grounds.
        We examined this issue in our current interstate access reform
    proceeding based on our jurisdiction over interstate access charges.
    Specifically, we examined whether any new entrant paying cost-based
    rates to the incumbent local telephone company would have already
    compensated that company for the ability to deploy unbundled network
    elements to provide originating and terminating access. We considered
    whether adding access charges to the price of unbundled elements, would
    impair, if not foreclose, new entrants' ability to offer competitive
    access services through the use of unbundled network.
        In our Access Reform Order released on May 9, 1997, we stated that
    we will exclude unbundled network elements from Part 69 access charges.
    This conclusion applies to all incumbent LEC's. As we noted in the
    Local Competition Order, payment of cost-based rates represents full
    compensation to the incumbent LEC for use of the network elements that
    carriers purchase. We further noted that sections 251(c)(3) and
    252(d)(1), the statutory provisions establishing the unbundling
    obligation and the determination of network element charges, do not
    compel telecommunications carriers using unbundled network elements to
    pay access charges. Moreover, these provisions do not restrict the
    ability of carriers to use network elements to provide originating and
    terminating access. Allowing incumbent LEC's to recover access charges
    in addition to the reasonable cost of such facilities would constitute
    double recovery because the ability to provide access services is
    already included in the cost of the access facilities themselves.
    Excluding access charges from unbundled elements ensures that unbundled
    elements can be used to provide services at competitive levels,
    promoting the underlying purpose of the 1996 Act.
                               universal service
        Question. Does the FCC plan on discontinuing Universal Support
    services to multi-line small businesses in rural, high-cost regions?
    And if so, when would this plan take effect?
        Answer. Under our plan, ``rural'' phone companies (phone companies
    serving study areas with less than 100,000 lines) will continue to
    receive support for all lines--including business lines--using the same
    formulas used today. We will maintain the existing mechanism for ``non-
    rural'' carriers (phone companies serving study areas with more than or
    equal to 100,000 lines) for an additional year while we resolve issues
    concerning a forward-looking economic cost methodology. The existing
    support system will continue to be applied to large non-rural carriers
    and to fund all lines. This system will be funded on a new basis--with
    funds collected based on interstate revenues of all telecommunications
    providers. By August 1998, we will adopt a forward-looking cost
    methodology on which support for all non-rural carriers will be based,
    with implementation beginning January 1, 1999.
        Question. Does the FCC propose to limit Universal Service support
    to second telephone lines in homes of rural, high-cost regions? And if
    so, when are these plans to be implemented?
        Answer. As noted above, under the Commission's plan, rural phone
    companies will continue to receive universal service support for all
    lines--including second residential lines--using the same formulas in
    use today. We will review these decisions during the course of
    implementing a forward-looking cost methodology for determining high
    cost support for rural carriers.
        Question. Does the FCC have plans to place a cap on the Universal
    Service fund? And if so, would you explain your reasoning for this
    decision.
        Answer. The Joint Board did not recommend a specific cap for the
    universal service fund. However, the Board recommended that support for
    schools and libraries be capped at $2.25 billion per year. The
    Commission adopted the annual cap for the school and library fund in
    its recent Order. However, in assessing the certainty for universal
    service to respond over time to meet the changing needs of consumers
    and the marketplace, the Commission did not institute a cap on the
    overall universal service fund as part of its May 7th decision.
        Question. Does the FCC still contend that only Interstate revenues
    should be used to fund the Universal Service Fund? And if so, could you
    please explain why you are not considering Intrastate revenues?
        Answer. The Federal-State Joint Board on Universal Service
    recommended that support for schools, libraries, and rural health care
    providers be based on interstate and intrastate telecommunications
    revenues. The Joint Board did not issue a recommendation regarding the
    assessment base for contributions for the high cost and low income
    programs.
        The Commission adopted the Joint Board's recommendation regarding
    the assessment base for schools, libraries, and rural health care
    providers and will base contributions to federal support for schools,
    libraries, and rural health care providers on interstate and intrastate
    end-user telecommunications revenues. Carriers will be permitted to
    recover their contributions to the universal service fund through the
    interstate jurisdiction. It should be noted that commenters in this
    proceeding contend that any requirement by the Commission to recover
    universal service funding from intrastate revenues would infringe upon
    states' jurisdiction over local rate-setting, as provided in Section
    2(B) of the Telecommunications Act. Because the Joint Board did not
    issue a recommendation regarding the assessment base for support for
    the high cost and low income programs and because states had not
    reached a consensus on this issue, the Commission adopted an approach
    that maintains historical jurisdictional lines and will base
    contributions to federal support for high cost areas on interstate end-
    user telecommunications revenues. Contributions for the new federal
    universal service support mechanisms will be collected beginning
    January 1, 1998.
                               digital television
        Question. Chairman Hundt, the FCC has recently cleared the way for
    broadcasters to begin the transition to digital television. While I
    support the eventual transition to this new and improved medium, I
    still have grave concerns with the transition schedule for smaller
    rural states like New Mexico. I continue to hear from numerous New
    Mexicans who are worried that they will soon be faced with purchasing a
    new, much more expensive television set in the near future. Mr.
    Chairman, I believe the FCC should make better efforts to inform the
    public of the actual digital transition schedule. You may not realize
    it here in Washington, D.C., but $1,000 is still a lot of money in New
    Mexico--especially for a television set.
        Will you please outline before this committee what New Mexico
    citizens and broadcasters can expect with regard to the digital ruling
    by the FCC?
        Answer. The citizens of New Mexico are served by television
    broadcasters in three markets: Albuquerque-Santa Fe (market number 48),
    El Paso (99) and Amarillo (126). Under the rules adopted April 3, 1997,
    commercial broadcasters in those markets (in fact in all markets above
    the 30th largest) would have until May 1, 2002 to build digital
    broadcast facilities. Non-commercial broadcasters would have until May
    1, 2003.
        For New Mexico's television viewers, the situation is as follows.
    For those viewers who rely upon cable or satellite as their primary
    source of video programming, they will, for all practical purposes, see
    no difference other than what their service provider chooses to offer
    with respect to advanced technologies. For the approximately 35 percent
    of the population that relies upon the over the air service, they can
    choose to buy a new digital television when they are ready, based on
    their own needs. By the time broadcasters in New Mexico are required to
    be providing digital signals, the consumer electronics manufacturers
    expect to have reached the necessary volumes of production (in excess
    of 1,000,000 per year) which drive prices down rapidly. Furthermore,
    computer manufacturers have proposed that they will provide tens of
    millions of DTV-ready PC's by that time, with little more than $100
    additional costs to consumers, helping to increase consumer acceptance
    of DTV.
        Still, it is clear there may be some consumers who will not, even
    by 2006, buy new digital televisions. It is our expectation, based on
    the comments received in response to our Notices, that there will be
    low cost set-top convertor devices, similar in size, cost and
    complexity to a cable convertor box today which will allow viewers to
    benefit from the digital signal without needing to buy an entirely new
    set.
        Question. When do you anticipate rural states like New Mexico will
    see the full transition to digital television?
        Answer. As discussed above, it is our expectation that a target of
    2006 for the cessation of analog service is reasonable. As many
    commenters in our proceedings have made clear, as digital technology
    has developed, we have had reason to expect that DTV may be adopted
    more quickly than originally anticipated. Competitors in the video
    programming market, such as DBS, cable and wireless cable, have
    aggressively pursued the potential of digital technology. This
    competitive pressure has lent urgency to the need for broadcasters to
    convert rapidly. Furthermore, technological advances will continue to
    lower costs to broadcasters; for example, new technology may allow some
    broadcasters to use existing towers for digital transmission, thus
    easing the expense of converting to digital equipment. Similarly, on
    the consumer side, ongoing development to meet consumer demand will
    bring down costs of converter boxes necessary to fully transition from
    analog to digital technology.
        Question. New Mexico, due to its large land area and rural
    population, must utilize several translators to provide television
    throughout the state. What impacts, if any, will be felt by translators
    during this transition to digital television?
        Answer. In our Sixth Further Notice of Proposed Rule Making
    (Notice) in the digital television proceeding, we observed that various
    spectrum studies have indicated that in order to provide DTV channels
    for all eligible full service broadcasters it will be necessary to
    displace low power TV (LPTV) and TV translator stations to some degree.
    The task of analyzing the impact of DTV on LPTV and TV translator
    stations is extremely complex and station specific. Because of this, we
    can only approximate the number of LPTV and TV translator stations that
    will be affected or have to cease operation to accommodate new full
    service DTV stations. In the Notice, we estimated that about 55 to 65
    percent of all existing LPTV stations and about 80 to 90 percent of all
    TV translators would be able to continue to operate. We also noted that
    about 17 percent of all LPTV and TV translator stations operate on
    channels 60-69 and could be affected by our proposals to recover those
    channels. We have conducted a similar analysis of the final DTV Table
    of Allotments that was adopted in our recently adopted Sixth Report and
    Order in the DTV proceeding. The estimates provided by this new
    analysis confirm our initial studies of LPTV and TV translator impact.
    There are currently about 360 LPTV and TV translator stations in the
    state of New Mexico. We estimate that about 330 of these stations, or
    92 percent, will not be affected by new DTV operations. However, there
    are about 70 low power stations on channels 60-69 in New Mexico. These
    stations may be affected by our plans to recover this spectrum for
    public safety and other uses.
        LPTV and TV translator stations can be affected in different ways
    by the DTV implementation process. Initially, we note that an LPTV or
    TV translator station will be affected only if it causes interference
    to a new DTV station or if it receives interference from such a
    station. Other LPTV and TV translator stations will not be affected. As
    secondary operations, LPTV and TV translator stations that cause
    interference to DTV stations will be required to take steps to
    eliminate that interference. In some cases, LPTV and TV translators
    will be able to resolve the interference by changing their operation
    through methods such as using a directional antenna or reducing their
    power. In a few cases, the only solution will be to cease operating. If
    the LPTV or TV translator receives interference, the licensee may
    decide to simply accept the interference and continue to operate. This
    could occur, for example, if only a portion of the LPTV or translator
    station's service is affected.
        We have also amended our rules to mitigate any impact on low power
    operations. In this regard, we have amended the low power rules to
    eliminate a number of existing restrictions on their operations and to
    provide more opportunities for low power stations to find replacement
    channels where necessary. We have also allowed low power operators to
    take into account terrain and other factors in avoiding interference to
    full service TV and other primary operations.
        Question. Understanding the significant costs involved in modifying
    a television station to transmit digital signals, how many, if any,
    independent and public television stations does the FCC anticipate will
    be unable to make the transition due to financial reasons?
        Answer. Our requirements to fulfill their obligation to receive
    ``credit'' for building a digital facility are designed to provide
    broad flexibility to licensees. There is no requirement to produce
    programming on site, and licensees need only serve their community of
    license. While we would hope that broadcasters would choose, on their
    own, to develop advanced capabilities and serve large areas, our
    regulation should allow even an independent licensee to meet its
    obligations. Many broadcasters have been investing in digital equipment
    for some years already, due to the inherently more efficient and
    reliable features afforded by digital technology. It was widely
    reported at the recent NAB convention in Las Vegas that equipment
    manufacturers expect costs of digital equipment to keep going down. It
    is our expectation that a well planned capital budgeting process over
    the five years New Mexico broadcasters have to introduce digital
    services would not unduly burden even these small market broadcasters.
        Furthermore, with respect to public television stations, we extend
    an additional year and will grant special treatment to afford them
    every opportunity to participate in this transition, and will deal with
    them in a lenient manner in considering requests for extensions.
        Question. Will any currently operating translators or television
    stations in New Mexico be forced to relinquish any spectrum for the
    transition to digital television?
        Answer. As indicated above, there may be some impact on translators
    in New Mexico. With regard to recovery of channels 60-69, this will
    only occur if this spectrum is used for new services. In largely rural
    areas, such as those served by translators in New Mexico, the volume of
    communications traffic is generally lower and spectrum is less
    congested. We therefore would expect that in those areas the need for
    new services will be lower and fewer translators will be affected than
    the worst case estimate provided above.
                       spectrum-transition to digital tv
        Question. With respect to the rules for Digital Television (DTV)
    service adopted by the Commission on April 3, 1997, what is the
    sequence of events for the transition to DTV that you expect to occur
    over the next ten years? Do you anticipate court challenges against the
    DTV Table of Allotments? Will broadcasters have to apply for the second
    channel? When does the FCC expect to approve the applications and what
    transactions will occur that will constitute the ``loaning'' of the
    second channel? How would any Congressional action related to the
    transition affect the process if such action were to occur before the
    second channel is actually awarded to the broadcasters?
        Answer. On April 3, 1997, the Commission adopted two Reports and
    Orders in the DTV proceeding: the Sixth Report and Order sets forth a
    DTV Table of Allotments listing the channels that will be awarded; the
    other, the Fifth Report and Order, sets forth the rules applicable to
    eligible licensees. The Commission expects to release both Orders next
    week. Like all other Commission decisions in rulemaking proceedings,
    the two DTV Orders are subject to administrative and judicial review,
    upon the filing of a timely petition for reconsideration by an
    interested person. Unless the Commission or a federal court issues a
    stay, however, the rules issued remain effective during any period of
    reconsideration or on appeal.
        The process of obtaining the DTV licenses will be as follows. In
    the Fifth Report and Order, the Commission will issue a list of
    licensees and permittees eligible for a DTV channel, pursuant to the
    Telecommunications Act of 1996. We will also provide a cancellation
    procedure, so that the Commission can reclaim quickly the DTV channels
    of those licensees and permittees not interested in converting to DTV.
    The Commission expects those licensees and permittees that will convert
    to DTV to file an application for a construction permit to build the
    DTV facility. We have provided a streamlined process for them to do so.
    Under this certification procedure, if an applicant can answer ``yes''
    to a list of questions designed to elicit required technical
    information about the proposed DTV facility, the application can be
    granted within a matter of days. Other applicants will be required to
    provide additional technical information. Upon grant of a construction
    permit, the applicant can commence construction of the DTV facility on
    its 6 MHz channel. Finally, once the DTV facility has been built and is
    ready to go on the air, we will authorize the permittee to begin
    operation upon notification to the FCC, provided that an application
    for a license is filed within 10 days. The process is designed to be
    simple and quick, while ensuring that the FCC has the information it
    needs to carry out its interference protection and other
    responsibilities.
        The Commission's rules are also intended to provide for an
    expeditious buildout of DTV. Those rules require affiliates of the top
    four networks in the top 10 markets to be on the air with a digital
    signal by May 1, 1999. Affiliates of the top four networks in markets
    11-30 must be on the air by November 1, 1999. The top ten markets
    include 30 percent of television households, while the top 30 markets
    include 53 percent of television households. A number of broadcasters
    in the top ten markets have committed to begin digital operations
    within 18 months. All other broadcast stations are required to be on
    the air with a digital signal within five years. Because an important
    goal in our DTV proceeding is the return of the analog spectrum at the
    end of the DTV transition period, the Commission has set a target date
    of 2006 as a reasonable end-date for analog television service. The
    Commission will review that date in periodic reviews, which will be
    conducted every two years to allow evaluation of the progress of DTV
    and changes in Commission rules, if necessary.
        In the months leading up to DTV, many broadcasters across the
    country, in anticipation of our DTV Orders, began taking measures to
    prepare for DTV transmissions, including investing in new hardware. The
    Commission expects, and intends to ensure, that unless otherwise stayed
    the transition to DTV will continue at a brisk pace.
        Question. Based on the Commission's experience with spectrum
    auctions to date, does it make sense, as a matter of spectrum policy,
    for the Federal Government to hold an auction five years before the
    date that it may be able to deliver spectrum licenses to those who bid
    on it? Wouldn't an auction raise more money (present value discounting
    aside) if it were an auction of spectrum that the federal government
    had certainty of delivering?
        Answer. The DTV Table of Allotments set forth in the Sixth Report
    and Order recovers 138 MHz of spectrum--60 MHz immediately and 78 MHz
    in ten years. Early recovery is made possible by an allotment plan that
    minimizes the number of digital channels above channel 59. Some of the
    spectrum that the FCC will recovery immediately--24 MHz--can be quickly
    reallocated to help address the serious needs of public safety users.
    The remaining 36 MHz from channels 60-69 can be reallocated
    expeditiously and assigned using competitive bidding. The remaining 78
    MHz, which will become available at the end of the transition ten years
    from now, can be assigned using competitive bidding for any use that
    the public desires.
        Based on the Commission's experience with 14 spectrum auctions to
    date, we have found that prospective bidders for new communications
    licenses generally need at least one year's notice of an upcoming
    auction. We believe, for example, that one reason the Commission's
    ongoing auction for Wireless Communications Services appears to be
    falling short of the Congressional Budget Office's revenue estimates is
    that prospective bidders had only five-and-one-half months' notice
    between the date the auction was enacted into law as part of the
    Omnibus Consolidated Appropriations Act of 1997 (Public Law 104-208)
    and the April 15, 1997 statutory deadline for commencing the auction.
    Bidders need a reasonable time to develop their business plans for new
    competitive communications services and to access capital.
        In the case of recovered broadcast spectrum, there may be
    advantages to an early auction. Recovering analog broadcast spectrum
    expeditiously requires that broadcasters be on notice of a date certain
    for the return of those channels and a corresponding commitment by
    Congress and the FCC to enforce the timetable for recovery. Auctioning
    recovered broadcast spectrum even five years in advance of the
    anticipated recovery would strengthen this commitment by creating a
    class of private parties with an economic interest in assuring that the
    recovery occurs.
        Question. What gives the Commission confidence that it will be able
    to retrieve the analog spectrum from broadcasters to deliver it to the
    winning bidders, especially given that broadcasters say the transition
    to DTV may take longer than the year 2006 and that they may not be in a
    position to return the spectrum that early?
        Answer. As explained in the answer to Question 1, the Commission
    adopted rules designed to provide for an expeditious buildout of DTV.
    As I stated when the FCC adopted the DTV rules on April 3, however, I
    am concerned by the Commission's decision not to adopt a phased-in
    build out rule for markets 30-211. The failure to do so means that over
    90 percent of television stations have no requirement to build out
    before five years. This puts our spectrum recovery goals unnecessarily
    at risk. While I believe there is a good chance that market forces
    generated by a rapid buildout in the top 30 markets will cause the
    remaining markets to build out relatively quickly, I would have
    preferred not to leave this to chance. I hope the Commission will
    revisit this decision as early as next year. Moreover, to the extent
    Congress shares this concern about the prospects for a DTV buildout
    that recovers all 78 MHz of spectrum by 2006, it may want to pass
    legislation codifying the 2006 deadline for the DTV transition. A
    statutory deadline would strengthen significantly the Commission's
    efforts to ensure a timely buildout.
        Question. If the Administration's spectrum proposal were to be
    adopted, how would the FCC levy and collect any shortfall in
    anticipated receipts from an auction of returned broadcast spectrum?
    That is to say, by what mechanism would the FCC ensure the integrity of
    the process of holding broadcasters accountable for this obligation to
    cover any shortfall?
        Answer. The best way to avoid a shortfall in receipts anticipated
    from auctioning the 78 MHz of broadcast spectrum recovered by the
    Commission's Sixth Report and Order is to recover that spectrum as
    rapidly as possible. This is why I hope the Commission will revisit its
    decision not to adopt a phased-in buildout rate for DTV licensees in
    markets 30-211. The Commission has not yet considered a mechanism by
    which it would hold broadcasters responsible for any shortfall in
    spectrum auction receipts. Should such a mechanism become necessary,
    there are many ways of addressing this issue, and the Commission would
    welcome the opportunity and the flexibility to explore these options
    fully and to find a solution that maximizes public and private benefit.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                              cable rate increases
        Question. The 1992 Cable Act authorized the FCC to regulate rates
    for cable service not subject to effective competition. Since that
    time, the FCC has adopted its ``going forward'' rules and allowed
    annual adjustments of rates. The 1996 Act preserved FCC authority to
    regulate rates through March 31, 1999 yet press reports indicate that
    rates continue to rise 3 times inflation. Do you have the authority to
    curtail these rate increases?
        Could you provide for the Committee options available to the FCC
    under its current statutory authority that would curtail these rate
    increases through March 31, 1999?
        Answer. The 1992 Cable Act directs the Commission to ensure,
    through regulation, that cable rates are not unreasonable by simulating
    the effects of competition until actual competition emerges in the
    marketplace. In 1993, the Commission found that, on average, the rates
    charged by cable systems that did not face effective competition were
    approximately 10 percent higher than the rates charged by comparable
    systems that were subject to effective competition. This ``competitive
    differential'' meant that cable systems that were not subject to
    effective competition were generally required either to set cable rates
    to their September 30, 1992 levels and then apply a 10 percent
    reduction or to submit a cost-of-service showing to justify higher
    rates. In 1994, the Commission revised the competitive differential
    from 10 percent to 17 percent. This revision generally reduced cable
    rates by an additional 7 percent.
        The data collected for our 1996 Price Survey indicate that the goal
    of the 1992 Cable Act is being met. The differential between average
    rates charged by competitive and noncompetitive cable operators
    narrowed significantly after the introduction of rate regulation. On
    August 31, 1993, the average cable rate for services and equipment
    charged by the competitive group was $20.51 per month, and the average
    charged by the noncompetitive group was $22.23 per month, for a
    differential of 8.4 percent. After the imposition of rate regulation,
    the differential narrowed significantly, to 2.7 percent in July 1994
    and to 2.3 percent by January 1995.
        Reviewing the entire period of rate regulation (from April 1993 to
    the end of 1996), finds that the Cable CPI increased at a slower rate
    than general inflation. The Cable CPI increased by 8.4 percent, or at a
    2.3 percent compound annual (``CA'') rate, versus a 10.2 percent
    increase for the general CPI, or a 2.7 percent CA rate, over the entire
    forty-five month period. The Commission's rules allow cable operators
    to adjust their rates to account for inflation and to pass through to
    subscribers certain external costs. These costs are: (1) state and
    local taxes applicable to the provision of cable service; (2) franchise
    fees; (3) costs of complying with franchise requirements; (4)
    retransmission consent fees and copyright fees; (5) other programming
    costs; and (6) Commission regulatory fees imposed pursuant to 47 U.S.C.
    Sec. 159. The Commission also allows operators to recover the costs of
    substantial upgrades to their networks.
        Recent rate increases appear to be due to general inflation,
    increases in external costs and expenses associated with network
    upgrades. The Commission has allowed inflation adjustments of 2.15
    percent, 2.96 percent and 2.14 percent for the periods ending June 30
    of 1994, 1995 and 1996, respectively. Over the past five years,
    programming license fees for the national networks have risen at a CA
    rate of 8.4 percent versus a 2.8 percent rate for the general CPI, or
    nearly three times the general rate of inflation.
        The Commission could modify its rules to reduce or eliminate the
    pass-through of some or all of the costs that operators are permitted
    to pass through under the Commission's current rules. The elements at
    stake in such a decision include the diversity and quality of cable
    programming, the financial stability of the cable operator, the
    revenues which flow from the cable operator to the state and local
    governments, and the quality of the nation's infrastructure.
        The Commission adopted new ``going forward'' rules in 1994 as a
    means of encouraging cable operators to provide new programming. Prior
    to the adoption of these ``going forward'' rules, cable operators were
    allowed a rate increase (as determined by the Commission) to reflect
    the costs of adding new channels and to obtain a 7.5 percent mark-up on
    new programming costs. The Commission concluded that this did not
    provide most cable operators with sufficient incentive to provide
    subscribers with additional channels from either unused or new
    capacity.
        Operators electing to use the 1994 ``going forward'' rules may take
    a per-channel mark-up of up to 20 cents for each channel added to a
    cable programming service tier. This 20 cents represents the
    Commission's best estimate of the average amount by which operators in
    a competitive environment would adjust rates for a new channel,
    exclusive of programming costs. Operators are allowed to recover for
    the addition of channels at any time during a three-year period
    beginning on January 1, 1995. The per-channel adjustment to the monthly
    rate cannot exceed $1.20 per subscriber over the first two years (the
    ``Operator's Cap'') or $1.40 over the full three-year period. During
    the third year, operators can only take the final 20 cent adjustment
    for channels added in that year. For channels added pursuant to these
    ``going forward'' rules, operators may not take the 7.5 percent mark-up
    on programming costs allowed under the initial rate rules.
        The Operator's Cap is based on the Commission's observations of
    cable industry behavior prior to the 1992 Cable Act, adjusted for the
    lack of effective competition, so as to replicate a competitive market.
    The Operator's Cap provides an incentive to operators to provide new
    services while protecting consumers by keeping overall regulated rates
    reasonable. Operators may use a portion of the Operator's Cap to pay
    license fees. Operators were also allowed to add a maximum of 30 cents
    per subscriber for programming costs associated with adding new
    channels (the ``License Fee Reserve'') during 1995 and 1996. The
    License Fee Reserve was necessary because, without one, operators would
    have an incentive to add no-cost or low-cost channels instead of
    channels that may have been more in demand by subscribers. In 1997,
    license fees are no longer subject to special rules, but are treated as
    external costs. The 1994 ``going forward'' rules expire on January 1,
    1998, unless renewed by the Commission. If allowed to expire, cable
    operators will no longer be able to adjust their rates pursuant to
    these rules.
        In 1995, the Commission granted operators the option of adjusting
    rates annually, rather than quarterly. The parties involved in this
    proceeding, including local franchising authorities, generally agreed
    that cable operators should be encouraged to reduce the number of rate
    filings. The adoption of the optional annual rate adjustment limits
    subscriber frustration and confusion because subscribers do not have to
    contend with numerous rate adjustments during a given year. Regulatory
    authorities also benefit because the number of rate adjustments
    requiring review is minimized.
        The most effective deterrent to rate increases is the availability
    of competitive choices. In the absence of a competitive environment,
    the Commission's policies have sought to balance the goal of providing
    subscribers choices in cable programming at reasonable rates while
    affording cable operators an incentive for expanding and improving
    service. In the Commission's review of the ``going forward'' rules, we
    will undertake to examine with more focus the source of recent rate
    increases and what direction rate regulation should take.
                               universal service
        Question. In testimony before the Commerce Committee you stated
    that you would take no action to increase local phone bills. Do you
    intend to impose on consumers any flat end user fees or increases in
    the Subscriber Line Charges as part of either the Universal Service or
    Access Reform?
        Answer. The Universal Service Joint Board concluded that the
    current $3.50 cap on the Subscriber Line Charge (SLC) for primary
    residential and single-line business lines should not be increased. The
    Joint Board, however, did not recommend that the SLC cap should be
    maintained for multi-line business or residential connections beyond
    the primary connection. In our Access Reform Notice of Proposed
    Rulemaking, the Commission asked for comment on whether to raise the
    cap on the SLC for second and additional residential lines and for
    multi-line business lines for the largest telephone companies. Raising
    the current SLC cap on non-primary residential lines and multiline
    business lines should lead to lower long distance usage charges for
    consumers because these costs are currently recovered from usage
    charges assessed by local telephone companies to long distance
    carriers.
        Question. Several of the Universal Service proposals under
    consideration would require an increase in the Subscriber Line Charges
    for second residential lines and multi-line businesses in rural areas.
    Do you support increasing these rates for rural areas?
        Answer. As noted in the answer to the previous question, the
    Universal Service Joint Board did not recommend that the SLC cap should
    be maintained for multi-line business or residential connections beyond
    the primary connection. In our Access Reform Notice of Proposed
    Rulemaking, the Commission asked for comment on whether to raise the
    cap on the SLC for second and additional residential lines and for
    multi-line business lines for the largest telephone companies. Raising
    the current SLC cap on non-primary residential lines and multiline
    business lines should lead to lower long distance usage charges for
    consumers because these costs are currently recovered from usage
    charges assessed by local telephone companies to long distance
    carriers. Many rural areas are served by small telephone companies,
    which are not the subject of the current access charge reform
    proceeding. Instead, the Commission intends to adopt a separate Notice
    of Proposed Rulemaking later this year that will address how the
    existing access charge rules should be reformed for small telephone
    companies.
        Question. Chairman Hundt, you have recently been quoted in the
    press as saying that basic residential telephone rates in this country
    are currently being subsidized by long distance and other revenues to
    the tune of about $20 billion. If universal service obligations amount
    to $4 to $6 billion, how will the FCC recommend that the remainder of
    that amount be treated? Will individual states have to create their own
    universal service fund to make up losses in subsidies from interstate
    long distance services? Will local residential phone rates have to
    increase?
        Answer. The majority of subsidies currently available to local
    telephone companies are regulated by states and not by the Federal
    Government. Subsidies include mechanisms to shift costs from rural to
    urban areas, from residential to business customers, and from local to
    long distance service. The result of state requirements that local
    telephone rates be averaged across the state is that high density
    (urban) areas, where costs are typically lower, subsidize low density
    (rural) areas. State pricing rules have also created a business-to-
    residential subsidy by mandating that businesses pay more per line than
    residential customers. In addition, states have historically priced
    vertical services (such as caller i.d.) above cost in order to
    subsidize basic dialtone. On the Federal side, access charges have been
    set in order to recover certain loop costs not recovered through local
    rates, which results in long distance users subsidizing local users.
        In section 254(f), the 1996 Act contemplates that state legislators
    and regulators will establish state universal service support
    mechanisms. Also, section 254(b)(5) states that there should be
    ``specific, predictable and sufficient Federal and State mechanisms to
    preserve and advance universal service.'' The statute further provides
    that universal service support mechanisms should be revised in the
    context of a Federal-State Joint Board proceeding. Thus, states and the
    Commission are responsible for preserving universal service and must
    coordinate federal and state universal service programs.
        The Act also requires that universal service support be
    ``sufficient'' to achieve the Act's goals. We will work with the states
    to maintain sufficient support for universal service, and intend to
    take into account any reductions in implicit support that result as we
    work with the states to move from the current support system to a
    system of explicit support. Under section 2(b) of the Communications
    Act, the states have sole jurisdiction over intrastate rates, and must
    approve any local rate increases. In implementing the 1996 Act, the
    Commission is dedicated to fulfilling the mandate of Section 254,
    ensuring that all consumers, including low-income consumers and those
    in rural, insular, and high cost areas, have access to
    telecommunications and information services at rates that are
    reasonably comparable to rates for similar services in urban areas. The
    Commission believes that its implementation of the 1996 Act will allow
    states to maintain rates at their current levels.
        Question. Chairman Hundt, you have indicated an interest in
    ``preserving comity'' with the states, and therefore you would consider
    not exercising the FCC's authority to assess intrastate revenues for
    the Universal Service Fund at this time. What would be the implication
    of this decision on high cost states like South Carolina?
        Answer. The Commission's goal in establishing a new mechanism for
    universal service support is to maintain telephone subscribership
    through better targeting of the support. Our actions this May will not
    reduce support for high cost rural telephone service. South Carolina
    would continue to receive at least the level of high cost loop support
    it currently receives.
        Question. Effectively, the Joint Board Recommended Decision bases
    the amount of universal service support each rural telephone company
    receives during the transition period on the universal service support
    that company will receive in 1997. Most Average Schedule companies do
    not receive universal service support, but when they convert to cost
    status, many begin to receive it.
        A company making a conversion in the middle of 1997 will only
    receive a partial year of support. Shouldn't their support during the
    transition period be calculated as if they had converted to cost status
    on January 1, 1997 in order to receive an entire year of universal
    service support?
        Answer. Average schedule companies are exempt from the Commission's
    requirement of maintaining and filing annual cost studies to receive
    universal service support because the National Exchange Carrier
    Association, the administrator of the current universal service support
    mechanisms, calculates their operating expenses based on a formula that
    averages the costs of companies of similar sizes. Moreover, the
    Commission's rules do not specify particular accounting procedures for
    average schedule companies that convert to cost. Some average schedule
    companies, however, choose to conduct cost studies voluntarily.
        NECA, through its internal procedures, prescribes the requirements
    that a company must follow to receive universal service support when it
    converts from average schedule to cost status. When an average schedule
    company converts to cost status, NECA gives the company the option
    either to continue to receive universal service support on an average
    schedule basis for the remainder of the year or to file a cost study
    for the previous year's cost data and begin receiving cost-based
    universal service payments as of the date of conversion to cost.
    Companies electing the second option, however, only receive universal
    service support payments for the period during the year they are
    receiving cost-based settlements. For example, if they convert to cost
    on April 1, they will receive eight-twelfths of the annual support
    amount. They will receive the full annual amount in the subsequent
    year.
        If the Commission adopts the Joint Board's recommendation to
    calculate support for rural carriers during the transition based on the
    previous year's levels, we shall consider the impact this rule would
    have on rural carriers, including average schedule companies. We would
    consider proposals to permit average schedule companies that convert to
    cost to file an annualized cost study that projects the costs of the
    entire year based on the months for which a cost study is maintained.
        Question. Chairman Hundt what is your position as to which entity
    should administer the interstate universal service fund?
        Answer. The Joint Board recommended that the Commission create a
    Federal Advisory Committee to recommend a neutral, third-party
    administrator of the federal support mechanisms. The Joint Board stated
    that the third-party administrator must: (1) be neutral and impartial;
    (2) not advocate specific positions to the Commission in proceedings
    not related to the administration of the universal service support
    mechanisms; (3) not be aligned or associated with any particular
    industry segment; and (4) not have a direct financial interest in the
    support mechanisms established by the Commission. The Joint Board also
    recommended that the National Exchange Carrier Association (NECA) be
    appointed the temporary administrator of the support mechanisms,
    provided NECA was made more representative of non-LEC interests.
        A majority of commenters support the Joint Board's recommendation
    that a neutral, third-party should administer the federal support
    mechanisms.
        In January, the Commission initiated a proceeding examining changes
    to NECA's board of directors to include representation of non-LEC
    interests. The Commission initiated this proceeding in order to respond
    to the Joint Board's recommendation that NECA be appointed the
    temporary administrator of the support mechanisms only if its board
    membership were changed.
        I support the Joint Board's recommendation.
        Question. Chairman Hundt as competition for prime locations in the
    payphone market increases, do you not believe that the pressure of
    higher commissions, which will be demanded by location owners, will
    have the effect of driving up current monopoly payphone rates?
        Answer. Competition for prime locations has existed in the payphone
    marketplace for over a decade, since independent payphone providers
    were first allowed to compete with the LEC's in the provision of
    payphone service. In enacting Section 276, Congress sought to take this
    competition a step further by putting all payphone service providers
    (``PSP's'') on the same competitive footing to encourage the
    proliferation of payphones available for use by the public. More
    specifically, Congress sought to ``promote competition among payphone
    service providers and promote the widespread deployment of payphone
    services to the benefit of the general public * * *.'' To achieve these
    dual objectives, the Commission was entrusted with the responsibility
    to take certain actions to effectuate congressional goals in the
    payphone area, including the removal of subsidy schemes, providing for
    nondiscriminatory access to bottleneck facilities, ensuring fair
    compensation for all calls from payphones, and allowing all competitors
    equal opportunity to compete for essential aspects of the pay phone
    business.
        The Commission, in turn, set forth a plan in the Payphone
    Reclassification Proceeding, to be achieved over time, that removes the
    various barriers to vigorous and unfettered competition, including
    barriers that are regulatory, structural, economic, and technological.
    This will allow new competitors to enter into the payphone marketplace
    with ease and, correspondingly, allow others to exit. As a result,
    while competition for prime payphone locations may increase, the
    Commission's deregulatory framework ensures that there will be more
    competitors who seek to provide more payphones at more locations. Thus,
    the Commission has fostered greater competition among market
    participants and simultaneously promoted the widespread deployment of
    payphones.
        Question. The FCC has ordered that local call rates paid to
    payphone providers be priced through market rates by October 6, 1997.
    How do you believe end-user choice is going to be achieved as premises
    owners sign exclusive contracts which allow for only one payphone
    provider per location?
        Answer. Prior to the Commission's adoption of the orders in the
    Payphone Reclassification Proceeding, PSP's frequently signed contracts
    with location owners for the exclusive right to provide payphones to
    callers at those particular locations. Nothing in Section 276 or the
    Commission's proceeding changed this practice, other than the statutory
    provision, Section 276(b)(1)(D), which allows Bell Operating Companies
    (``BOC's'') to negotiate with the location owner about the operator
    service provider that is presubscribed to its payphones, a role that
    previously had been barred by a judicial decision. What Section 276
    changed, however, was the level of competition for the right to provide
    payphones at all locations. Under the statute and the Commission's
    rules, a location owner now has the ability to select the best package
    of payphone services for the benefit of both itself and the payphone
    callers who visit its location.
        As the Commission noted in the Payphone Reclassification
    Proceeding, five states have already deregulated local coin rates,
    which has led to statewide market-based rates ranging from $.25 to $.35
    per call. In addition, whenever payphone end-users are not willing to
    pay the rates that are charged at a particular location's payphones,
    they ``are free to seek alternative payphones in nearby locations or *
    * * make calls from portable phones.'' Callers also have the option of
    waiting until they return to their homes or offices before making a
    call.
        Under the Commission's deregulatory, market-based approach,
    competing PSP's have the ability to negotiate the placement of
    payphones at neighboring locations in an effort to capture business
    from the locations that charge rates the market will not support. In
    the limited circumstances in which an alternative location is not
    available to make a payphone call, the Commission provided that the
    states ``are empowered to act by, for example, mandating that
    additional PSP's be allowed to provide payphones, or requiring that the
    PSP secure its contract through a competitive bidding process that
    ensures the lowest possible rate for callers. If a market failure
    persists after such action, the state should recommend the matter to
    the Commission for possible investigation.''
        In addition, Section 276(b)(2) of the Act directed the Commission
    to determine whether there is a need to maintain payphones to serve
    public health, safety, and welfare goals, and, if so, to ensure that
    such payphones are supported fairly and equitably. To this end, the
    Commission established guidelines by which the states may ensure the
    maintenance of payphones serving public interests in health, safety and
    welfare, in locations where they would not otherwise be available as a
    result of the operation of the market. Consistent with our primary
    reliance on the competitive marketplace, however, these guidelines
    require that the states administer and fund such public interest
    payphone programs in a manner which is competitively neutral, and which
    fairly and equitably compensates entities providing public interest
    payphones.
        Question. The Federal-State Joint Board on universal service has
    advised the FCC to require schools and libraries to seek competitive
    bids for all services eligible for discounts under Section 254(h). Do
    you feel that schools should be required to accept the absolute rock-
    bottom bid, or should they have some flexibility to take quality into
    account and therefore be permitted to accept the bid offering the best
    value?
        Answer. The Joint Board refrained from recommending that the FCC
    require schools and libraries to select the lowest bids offered to
    them. Instead, the Joint Board recommended that the FCC provide schools
    and libraries with ``the maximum flexibility to purchase whatever
    package of telecommunications services they believe will meet their
    telecommunications service needs most effectively and efficiently.''
    When the Joint Board explicitly addressed this issue in the context of
    access to the Internet, the Joint Board only recommended that the FCC
    require schools and libraries to select the most ``cost-effective''
    provider of Internet access, not the lowest cost provider. Both the
    Joint Board and FCC also recognize that state and local procurement
    rules already generally require schools and libraries to satisfy a
    ``best value'' or similar standard and this is the standard with which
    both are most comfortable.
                                     ______

                Questions Submitted by Senator Daniel K. Inouye
        Question. Just one year ago, the FCC ruled that no DBS licensee
    with channels at a full-CONUS location could acquire channels at the
    110 degree DBS orbital location without divesting its existing interest
    in full-CONUS channels. In its Order, the FCC stated: ``We believe that
    we have the obligation to prevent the undue accumulation of full-CONUS
    DBS spectrum by any one firm and to encourage additional DBS entry by
    other firms as long as markets for the delivery of video programming
    remain highly concentrated.'' Clearly the markets for the delivery of
    video programming remain as highly concentrated today as they were one
    year ago. How can such a situation not be considered anticompetitive
    vis-a-vis other DBS providers? Should there be a different analysis on
    the effects of such concentration for a vertically-integrated entity?
        Answer. In the satellite industry, and in particular the portion of
    the industry devoted to direct-to-home delivery of video programming,
    the Commission's recent experience is that rapid change is the norm,
    rather than the exception. For that reason, when we adopted the
    limitation on acquisition of channels at the 110 degree west orbital
    location, we indicated that it was intended as a one-time measure, and
    that it was premised on the circumstances facing us at that time.
    Revision of Rules and Policies for the Direct Broadcast Satellite
    Service, 11 FCC Rcd 9712 (1995)(``DBS Auction Order''). In particular,
    we mentioned the possibility that additional spectrum could become
    available for providing service to the United States, and that this
    could significantly affect any future analysis.
        In the event the Commission is asked to evaluate a transaction that
    would have violated this one-time limitation, we will examine the same
    types of concerns that gave rise to the limit. As required by the
    Communications Act, that review would be undertaken based on the
    complete record and all relevant facts.
        The Commission is aware that certain aspects of vertical
    arrangements can raise competitive concerns. See, e.g., Third Annual
    Assessment of the Status of Competition in the Market for the Delivery
    of Video Programming, January 2, 1997. We would analyze any application
    relating to a proposed merger or similar transaction, including those
    involving vertical integration, to determine whether it presents
    competitive concerns.
        Question. Should the proposed merger of News Corporation and
    Echostar proceed, News Corporation would control a television network,
    28 stations, 24 radio stations, a major movie studio, a major book
    publisher, the New York Post, TV Guide, 9 regional cable sports
    networks, a number of cable television channels, including fX and the
    Fox News Channel, and a national DBS operation that would control a
    majority of the prime DBS slots in the United States. Do you have any
    concerns about the serious media concentrations issues raised by this
    merger?
        Answer. Echostar and the News Corporation have not filed any
    applications with the FCC seeking approval of their announced merger,
    and recent press reports indicate that it is unclear whether the two
    companies intend to proceed with the deal. It is not clear exactly what
    questions any such applications, if filed, would raise regarding media
    ownership. In the event such applications are filed, the Commission
    will, pursuant to the Communications Act, put the applications out for
    public notice and comment and then carefully review them and make a
    determination on whether or not to grant them based on thorough
    consideration of the complete record. The Commission would examine all
    relevant facts and issues, including any which relate to concentration
    and competition.
        Question. Federal law prohibits an entity from owning a cable TV
    system and a TV station in the same market. Yet, if the deal is
    permitted to go forward, News Corporation would control TV stations
    reaching 40 percent of all U.S. homes (News Corp. 1996 Annual Report)
    and a nationwide multichannel video programming distributor. Would you
    support similar cross-ownership limitations on a DBS provider
    retransmitting local signals?
        Answer. The Commission has historically declined to impose cross-
    ownership limits with respect to DBS and other satellite services. As a
    result, the industry today includes investors from a wide range of
    industrial sectors, including cable, broadcast, common carrier, and
    satellite manufacturing sectors. Meaningful economic competition is the
    norm, rather than the exception, in the industry as currently
    structured.
        It has been the Commission's experience that cross-ownership rules
    may prove either an aid or a hindrance to competition, depending on the
    particular competitive circumstances in the industry at any particular
    time. We view a number of provisions in the 1996 Telecommunications Act
    as recognizing this need for periodic service by service, case by case
    analysis. For example, recognizing that rapid changes in industry may
    affect the usefulness of ownership regulations, Congress has directed a
    biennial review of ownership limitations. In general, any ownership
    regulation should be evaluated to determine whether it would advance
    competition by addressing a specific threat to meaningful economic
    competition, or whether it will limit meaningful economic competition
    by limiting marketplace participants artificially, thereby foreclosing
    public interest benefits that additional participants may foster.
        Question. The FCC has an existing rule (100.11) that prohibits a
    foreign company from owning more than a 25 percent stake in a DBS
    license. In fact, all of our trading partners treat DBS as
    broadcasting. Why shouldn't that rule bar News Corporation, an
    Australian company, from acquiring a 40 percent interest in DBS
    licensee Echostar?
        Answer. As a preliminary matter, Echostar and Newscorp have not
    filed any applications with the FCC seeking approval of their announced
    merger. It is not clear what, if any, questions any such applications,
    if filed, would raise regarding alien ownership restrictions.
        The FCC's International Bureau has ruled that Section 100.11 of the
    Commission's Rules was not intended to prevent foreign ownership of a
    DBS licensee that provides service on a subscription basis. MCI
    Telecommunications Corporation, DA 96-1793 (released December 6, 1996).
    Applications for review of that ruling are now pending before the full
    Commission.
        The Commission has regulated subscription DBS as a non-broadcast
    subscription service not subject to statutory provisions that apply
    specifically to broadcasters. Although many other nations regulate DBS
    as a broadcast service, not all countries do so. Moreover, most
    countries, recognizing that satellite services may warrant unique
    regulatory treatment, have not treated those services identically to
    terrestrial broadcast services. Furthermore, in both the United States
    and abroad, regulatory classifications have on occasion been flexibly
    applied to address unique characteristics of particular types of
    services, or to achieve certain public policy goals. For example, some
    European direct-to-home satellite services are provided via ``Fixed
    Satellite Service,'' or FSS, frequencies, not broadcast satellite sound
    (``BSS'') frequencies. In the same vein, for purposes of mandating
    public interest obligations, the Congress treated direct-to-home
    services provided by FSS and BSS identically.
        Question. Would you support applying the existing program access
    rules to vertically integrated DBS providers to ensure against any
    potential anticompetitive behavior?
        Answer. Current statutory and FCC regulatory provisions concerning
    program access were intended primarily to address concerns about the
    effects on competition of vertical integration by the cable industry.
    This concern arises out of cable systems' position as the dominant
    providers of multichannel video programming in most markets. To the
    extent it is proposed that similar limits be applied to vertical
    integration not involving the cable industry, we would wish to analyze
    whether the imposition of such limits would help or hinder competition.
    For example, such limits could impose a cost on an emerging competitor
    to cable, which could frustrate the underlying purpose of the statutory
    provisions.
        Question. Would you support a prohibition on ASkyB from signing
    exclusive carriage agreements with the local Fox TV stations to ensure
    competitors, such as cable, have access to popular sports and
    entertainment packages offered by Fox?
        In the 1992 Cable Act, Congress took steps to ensure competition
    and consumer choice in the video marketplace by enacting the program
    access rules. What happens if some satellite delivered programming
    currently subject to those rules is moved off satellite? For example,
    if cable owned a regional sports network and moved it from satellite to
    terrestrial delivery? Should the program access provision be revised to
    address this issue?
        Answer. Both of these questions pertain to satellite exclusivity
    and are answered in the following response.
        As an initial matter, it should be noted that the program access
    statute does not preclude exclusive contracts in all instances. In the
    1992 Cable Act, Congress prohibited exclusive contracts between
    vertically integrated programming vendors and cable operators in areas
    unserved by cable and prohibited such exclusive contracts within areas
    served by cable, absent a specific public interest showing, for a
    period of ten years.\1\ Congress recognized, however, that in areas
    served by cable, some exclusive contracts between vertically integrated
    vendors and cable operators may provide countervailing benefits to the
    development of competition among distributors.\2\ Congress provided
    that where an exclusive contract is demonstrated to be in the public
    interest, it should be allowed. The Commission's position depends,
    therefore, on whether the exclusive contract would be in the public
    interest, including whether it would have a procompetitive or
    anticompetitive effect on competition among video distributors. The
    Telecommunications Act of 1996 expanded the application of the program
    access provisions to common carriers \3\ and open video system
    operators.\4\
    ---------------------------------------------------------------------------
        \1\ See 47 U.S.C. Sec. Sec. 548(c)(2), (4), and (5); 47 C.F.R.
    Sec. 76.1002(c)(2), (4), and (5).
        \2\ See 47 U.S.C. Sec. 548(c)(2), (4); 47 C.F.R.
    Sec. 76.1002(c)(2), (4).
        \3\ 47 U.S.C. Sec. 548(j).
        \4\ 47 U.S.C. Sec. 573(c)(1)(A).
    ---------------------------------------------------------------------------
        Section 628 of the Communications Act prohibits unfair or
    discriminatory practices in the sale of satellite cable programming to
    multichannel video programming distributors.\5\ Section 705 defines
    ``satellite cable programming'' as ``video programming which is
    transmitted via satellite and which is primarily intended for the
    direct receipt by cable operators for their retransmission to cable
    subscribers.'' \6\ We have interpreted the statutory program access
    provisions to apply only to satellite-delivered programming, although,
    in the open video system context, we have stated that ``we do not
    foreclose a challenge under Section 628(b) to conduct that involves
    moving satellite delivered programming to terrestrial distribution in
    order to evade application of the program access rules and having to
    deal with competing [multichannel video programming distributors].''
    \7\ We have not yet been presented with a situation where a cable
    operator otherwise subject to Section 628 has moved previously
    satellite-delivered programming off of the satellite to terrestrial
    delivery for the purpose of evading the ambit of the program access
    provisions. In the Annual Assessment of the Status of Competition in
    the Market for the Delivery of Video Programming (``Third Annual
    Report''),\8\ several commenters urged the Commission to expand the
    application of the program access rules to include all programming--
    regardless of the method of distribution. In its Third Annual Report,
    the Commission stated that although we have seen no evidence that such
    conduct has actually occurred, if it were to occur, we would have to
    consider an appropriate response to ensure continued access to
    programming. The Commission intends to continue to monitor patterns and
    practices in the industry, but is not prepared currently to make a
    recommendation regarding revision of the statute.
    ---------------------------------------------------------------------------
        \5\ 47 U.S.C. Sec. 548(b); 47 C.F.R. Sec. 76.1001.
        \6\ 47 U.S.C. Sec. 605(d)(1); see also 47 C.F.R. Sec. 76.1000(h).
        \7\ In re Implementation of Section 302 of the Telecommunications
    Act of 1996--Open Video Systems, Second Report and Order, 11 FCC Rcd
    18223, para. 103, n.451 (1996).
        \8\ FCC 96-496,--FCC Rcd--, adopted December 26, 1996; summarized,
    62 Fed. Reg. 5627 (Feb. 6, 1997).
    ---------------------------------------------------------------------------
        Question. The Commission recently decided the allocation and
    assignment process for digital television. What impact will the
    Commission's decision have on Low Power TV stations located in channels
    60-69? Will any of these stations lose their channel assignments?
        Answer. In the Sixth Report and Order in the DTV proceeding, we
    stated that the principal impact on low power operations, LPTV and TV
    translators, will be from the accommodation of all full service
    broadcasters with a second channel for DTV. We further stated that the
    potential benefits of recovering channels 60-69 for other uses, such as
    to meet the urgent needs of public safety, outweigh any additional
    impact this plan may have on low power operations. Nevertheless, we
    recognized the benefits that low power operations provide to the public
    and adopted a number of measures in the Sixth Report and Order to
    mitigate the impact of DTV allotments and our spectrum recovery efforts
    on these low power operations. These measures included allowing
    displaced low power licensees to apply for replacement channels without
    being subject to competing applications, and changing several technical
    rules to provide low power stations with additional operating
    flexibility and increase the use of existing TV channels by low power
    operations. We also indicated that LPTV operations can remain on
    channels 60-69 provided that they do not cause interference to primary
    operations. We estimated that these changes will preserve many existing
    low power operations and will open many new channels for those low
    power stations that may be displaced on their existing channels. We
    also indicated that we would address the issue of compensation for low
    power stations in our forthcoming Notice of Proposed Rule Making on
    reallocation of channels 60-69. Finally, we stated that we intend to
    consider in another future rule making whether to create a new class of
    low power television broadcast stations that would modify the secondary
    status of these stations and provide them some level of protection.
        In summary, the Commission's DTV allocation and assignment decision
    will have an impact on LPTV stations located in channels 60-69. As
    secondary operations, a number of low power stations may lose their
    channel assignments and may have to switch channels or cease operating
    if they cause interference to a primary user of the spectrum. However,
    as indicated above, we are taking a number of significant steps to
    minimize the impact to these stations.
        While we do not have figures for how many stations are actually in
    operation, there are 1,244 low power stations currently licensed by the
    Commission on channels 60-69. Our data base identifies 474 as LPTV
    stations and 770 as TV translator stations.
        Question. Section 254(g) of the Telecommunications Act requires
    that interexchange services be priced using a rate integrated pricing
    structure. Has the Commission ruled in any case that any carrier, class
    of carrier, service, or type of service is not subject to the
    requirement that a rate integrated pricing structure be used?
        Answer. Section 254(g) applies to ``providers of interexchange
    telecommunications services'' with respect to the geographic rate
    averaging requirements of that section, and to ``provider[s] of
    interstate interexchange services'' with respect to rate integration
    requirements. As determined by the Commission in the Rate Averaging and
    Rate Integration Order (paras. 9, 52), Section 254(g) applies to all
    providers of interexchange telecommunications services and to all
    interexchange telecommunications services. In the pending
    reconsideration proceeding of the Rate Averaging and Rate Integration
    Order, the Commission has been asked to consider the extent to which
    Section 254(g) does not apply, or the extent to which the Commission
    should forbear from applying, that section to some wireless services,
    such as mobile satellite service. At this time, the Commission has not
    determined that any carrier, class of carrier, service, or type of
    service is not subject to the rate integration requirements of Section
    254(g).
        Question. Section 254(g) was intended to codify and clarify the
    Commission's ``rate integration'' policy which requires that the rate
    structure employed in the contiguous United States also be employed in
    setting rates for Hawaii and Alaska. Can such a carrier select a
    different rate structure for service to Hawaii or Alaska than other
    points in the Mainland?
        Answer. Section 254(g) of the Communications Act codified the
    Commission's preexisting rate integration policy. As stated by the
    Commission in the Rate Averaging and Rate Integration Order (para. 67)
    released last summer implementing Section 254(g), carriers must use the
    same ratemaking methodology and rate structure in offering service to
    subscribers in states and territories outside the continental United
    States as employed by the carrier in offering services to subscribers
    in the continental United States.
        Question. The Commission's October 1996 Detariffing Order required
    interexchange carriers to stop filing rate information (i.e., tariffs)
    at the Commission. Without such information, it becomes very difficult
    to enforce Section 254(g). How does the Commission intend to ensure
    that consumers have adequate rate and service information in order to
    properly enforce Section 254(g)'s geographic averaging and rate
    integration policies? Specifically, shouldn't carriers be required to
    provide the same amount of rate and service information that was
    provided in tariffs?
        Answer. In the October 1996 Detariffing Order, the Commission
    adopted mechanisms to ensure effective enforcement of Section 254(g)'s
    geographic rate averaging and rate integration requirements in the
    absence of tariffs. The Commission required nondominant interexchange
    carriers to file an annual certification stating that the carrier is in
    compliance with the requirements of Section 254(g). The Commission
    further required nondominant interexchange carriers to maintain
    supporting documentation on the rates, terms, and conditions of their
    interstate, domestic, interexchange services that they could submit to
    the Commission upon request. Finally, the Commission required these
    carriers to make publicly available rate and service information.
    Several parties have filed petitions asking the Commission to
    reconsider or clarify various aspects of these enforcement mechanisms.
    The Commission is currently considering these petitions and examining
    the mechanisms that are necessary to enforce geographic rate averaging
    and rate integration in a detariffed environment. The Commission will
    continue to ensure that effective enforcement mechanisms are in place
    to achieve fully the goals of Section 254(g).
                                     ______

               Questions Submitted by Senator Frank R. Lautenberg
             mandated psa time to encourage response to the census
        Question. Particularly in light of the recent grant of digital
    television spectrum to broadcasters, will the FCC consider imposing a
    requirement that broadcasters provide PSA time to encourage citizens to
    return their census forms in 2000?
        Answer. The Commission will soon issue a notice on the public
    interest. The Commission will consider a variety of proposals on ways
    that broadcasters might satisfy their public interest obligations, and
    provision of public service announcements will be included in that
    discussion.
                               universal service
        Question. On most any basis (including the existing mechanisms),
    New Jersey will be a net payor of funds to support universal service.
    The export of monies from New Jersey for federal programs is a serious
    concern of mine. New Jersey gets back only $0.68 of every dollar it
    sends to the federal government, 49th out of the 50 states. A small
    fund targeted to high cost areas with a real need will mitigate the
    adverse impact on New Jersey.
        Is it the FCC's intention to maintain an amount for supporting high
    cost areas comparable to today's mechanisms, which provide
    approximately $1.5 billion in support. If not, will the FCC's decision
    on high cost areas increase the amount of support, and, if so, will New
    Jersey be required to pay more than it does today. How much more? And
    finally, would that increase disproportionately affect donor states
    like New Jersey?
        Answer. In analyzing the amount of universal support a carrier
    would receive for high-cost areas such as New Jersey, the Joint Board
    recommended that the Commission use a forward-looking cost model to
    calculate the forward-looking costs of providing these supported
    services. While it did not recommend a specific model, the Joint Board
    did state that the Commission and the state commissions should work
    together to choose a model by the statutory deadline. The Joint Board
    recommended that, beginning on January 1, 1998, universal service
    support for large, non-rural carriers should be based on the cost of
    service as determined by a proxy model.
        On March 26, 1997, the state members of the Joint Board submitted a
    report to the Commission regarding the cost models. In the report, the
    state members stated that they have serious concerns about the adequacy
    and accuracy of the cost models at this point. Nonetheless, the state
    members recommended that the Commission select one model as soon as
    possible to focus the efforts of the Commission and industry. The state
    members, however, did not make a recommendation on which model the
    Commission should select.
        We remain committed to using a forward-looking cost methodology to
    determine universal service support. However, we are also concerned
    about which model provides the most workable, reliable mechanism that
    could be used to calculate universal service support for large, non-
    rural carriers. As recommended by the Joint Board, we will take
    specific steps to adopt a forward-looking economic cost methodology for
    determining support in high cost areas. First, by the end of June 1997,
    the Commission will issue a further Notice of Proposed Rulemaking
    seeking additional information to help the Commission select a forward-
    looking universal service support mechanism for non-rural carriers. By
    August 15, 1997, the states will notify the Commission of their intent
    to either develop their own forward-looking economic cost study or use
    the one developed by the Commission. By February 6, 1998, states must
    file their forward-looking economic cost studies with the Commission.
    The Commission will place the state-filed forward-looking economic cost
    studies on public notice and review them to ensure consistency with the
    federal plan. The mechanism for determining high cost universal service
    support, based on forward-looking economic cost, will become effective
    on January 1, 1999.
                                     ______

                  Questions Submitted by Senator Conrad Burns
        Question. What are your staffing needs over the next five years?
    Over time, as competition replaces regulation, I would think that
    staffing needs at the FCC would decrease dramatically. Would you agree?
        Answer. The Commission's fiscal year 1998 Budget Estimates propose
    a ceiling of 2,155 FTE's, 100 fewer FTE's than in fiscal year 1997. In
    fiscal year 1999 the Commission will propose a ceiling of 2,105 FTE's,
    50 fewer than in fiscal year 1998. These staff reductions will be
    accomplished by attrition and a decrease in the number of employees
    initially hired on term appointments, as those appointments expire.
    Because of the ongoing nature of implementing the Telecommunications
    Act and the need for enforcement of our new rules, we cannot predict at
    this time what the Commission's staffing needs will be in the year
    2002. However, our activities are focused on ensuring that a thriving,
    competitive telecommunications market place is created and sustained.
        Question. Tell me how many senior executive positions that the FCC
    had when Chairman Hundt took office? How many does it have now? What
    are these people doing? Based on what they're doing now, how many of
    them do you estimate you will need five years from now?
        Answer. When Chairman Hundt took office in November 1993, the
    Commission had 46 authorized Senior Executive Service (SES) positions.
    Currently, the Office of Personnel Management (OPM) has authorized 50
    SES positions to the agency, plus 1 temporary SES slot. Most of the
    Commission's senior management and policy-making positions, including
    the General Counsel and Common Carrier Bureau Chief, are SES, as are
    many of the Commission's Division Chiefs, such as the Chief of the
    Litigation Division. The Commission does not determine its SES
    allocation. Instead, OPM makes a biennial allocation to us as well as
    to other agencies. We have already indicated to OPM that we will accept
    continuation of our current allocation of 50 SES positions for fiscal
    years 1998 and 1999. At this point in time, it is difficult to predict
    what our needs will be in the year 2002 and beyond.
        Question. As I understand it, there's not only an Office of Public
    Affairs, but there are also press contacts in each bureau and office.
    Similarly, although you have a large Managing Director's office, each
    bureau and office has its own administrative staff with typically 7 to
    8 people. And finally, the FCC has hired a lot of economists and each
    bureau has economists; the Office of Plans and Policy has economists
    and you've created a whole Competition Division with economists. Why
    are all these folks necessary? How many will be needed in five years
    and why?
        Answer.
    Office of Public Affairs
        The Office of Public Affairs (OPA) currently has a staff of 61. In
    addition, there are two Bureau media liaisons employed by the Common
    Carrier (1) and Cable Services Bureaus (1). The Wireless Bureau also
    has a media liaison, who is on detail from OPA and included within the
    61. For purpose of comparison, in December 1995, OPA had 65 staff
    members in addition to 3 Bureau media liaisons.
        During the last year, OPA has experienced a significant increase in
    its workload. This is illustrated by the increased number of inquiries
    from the media and the general public. OPA has received and responded
    to more than 500,000 public inquiries; answered more than 25,000
    inquiries from the media; issued 595 press releases; distributed more
    than 400,000 forms to the public; and responded to 65,000 requests for
    reference materials. OPA staff created the FCC's Internet Home Page and
    are responsible for updating and maintaining the system. There have
    been 21,000,000 visits to the Home Page.
        OPA traditionally was responsible for news media coordination
    functions and had 15 employees, while a larger consumer information,
    public outreach, reference, FCC library, and audio/visual staff of 50
    employees within the Office of Managing Director handled those
    functions. In November 1994, in conjunction with a comprehensive
    organizational reform of the FCC, the consumer, reference, public
    outreach and audio/visual sections, and the 50 employees who made up
    these functions, were merged with the 15 prior OPA employees to create
    one consolidated office.
        The three Bureau media liaisons are necessary in light of the
    increasing number of inquiries as well as the technical nature of the
    questions. For example, the Cable Services Bureau contact is able to
    focus solely on cable issues and provide better service to the
    community as a whole. The Bureau liaisons typically perform a wide
    variety of tasks, which include providing information for the Bureau's
    Internet home page and organizing open forums and other industry
    discussion events. In the past, these functions were typically handled
    by someone with the title ``Special Assistant to the Bureau Chief.''
    Assigning an individual with experience in working with the news media
    and the public to these posts has enabled the FCC to better work with
    the media and the public through such events as open forums and
    industry round tables.
        In five years, the size of OPA will depend to a large extent on the
    ability of the agency to better utilize technology. For example, at
    present the FCC is developing a system that will permit electronic
    filing of comments. Increased electronic access to comments could
    simplify the workload now carried by OPA's Reference Operations
    Division. The overall size of the news media staff and necessity for
    Bureau liaisons will depend on the functions of each area and issues
    before the agency. For example, the Cable Services Bureau may no longer
    need a dedicated liaison within a relatively short period of time,
    whereas spectrum auctions may necessitate the continued presence of a
    liaison for the Wireless Bureau.
    Office of Managing Director
        As of March 1997, the Commission's Bureaus and Offices had the
    following administrative staffing levels: Cable Services Bureau (7
    FTE's), Compliance and Information (9 FTE's), Common Carrier Bureau (10
    FTE's), Mass Media Bureau (6 FTE's), Wireless Telecommunications Bureau
    (8 FTE's), and Office of Engineering and Technology (3 FTE's).
    Administrative staff employed by the Commission's Bureaus and Offices
    are principally responsible for assisting Bureau and Office Chiefs, as
    well as the Managing Director, with Bureau-specific budgeting,
    planning, staffing, and management activities. While it is not possible
    to estimate the Commission's administrative staffing level in 2002, the
    size of the Office of Managing Director as a percentage of the agency
    has been reduced from 16 percent to 9 percent during the past two
    fiscal years, consistent with Commission-wide streamlining efforts. We
    intend to continue efforts to streamline the Commission's operations in
    coming fiscal years and anticipate additional productivity gains.
    Economists
        Economists currently employed in the Commission's Office of Plans
    and Policy (OPP), Competition Division, and other Bureaus and Offices,
    are critical to the Commission's efforts to implement the
    Telecommunications Act in the most pro-competitive manner possible.
    Successful implementation of the Act demands economic analysis of a
    multitude of issues. For example, in the recent universal service and
    access reform proceedings, economists performed a number of critical
    tasks, including providing economic analysis of the benefits to
    consumers that would result from various options before the Commission;
    evaluating the proxy models presented to the Commission; and analyzing
    the disparate economic effects that various changes to our price cap
    regime would have on various carriers. Commission economists helped to
    review 160,000 pages of comments by parties in the interconnection,
    access reform and universal service proceedings alone. Significantly,
    while Telecommunications Act implementation has required us to increase
    FTE's devoted to policy and rulemaking activities by 50 percent since
    fiscal year 1995, filings received for review in docketed proceedings
    have increased by 227 percent during the same period. For the
    foreseeable future, economists will remain central to the Commission's
    efforts to carry out a deregulatory national policy of competition in
    all communications markets.
        Question. As I understand it, the General Counsel's office has
    grown by over one-third from 70 to over 100 since you assumed office.
    What are all the extra folks doing?
        Answer. The Office of General Counsel (OGC) serves as the chief
    legal advisor to the Commission and its various Bureaus and Offices. It
    also represents the Commission in litigation in federal courts. The
    percentage of cases won by the FCC before the U.S. Court of Appeals has
    increased dramatically. Three and a half years ago the FCC was winning
    just under 60 percent of these cases. Today we are winning over 80
    percent. This record of success results in cost savings for industry
    which faces added certainty in interpreting Commission rules.
        OGC has three divisions--the Administrative Law Division, the
    Litigation Division and the Competition Division.
        The Administrative Law Division provides the Commissioners and the
    agency's Bureaus and Offices with legal advice on a broad range of
    communications and general administrative law issues. The Division also
    provides the public with legal information on such matters. The
    Division reviews all draft Commission decisions for legal sufficiency,
    with a particular emphasis on administrative law and statutory
    interpretation issues. Division staff provide legal advice to the
    Commission concerning a wide array of statutes, regulations, and
    procedures, including, for example, the Communications Act of 1934, as
    amended by the Telecommunications Act of 1996, the Administrative
    Procedure Act, the Freedom of Information Act, the Privacy Act, the
    Regulatory Flexibility Act, the Paperwork Reduction Act of 1995, the
    Government in the Sunshine Act, the Contract with America Advancement
    Act of 1996, the Federal Advisory Committee Act, negotiated rulemaking
    and alternative dispute resolution, the Commission's procedural rules,
    procurement issues and the agency's ex parte and ethics rules. The
    Division also drafts all Commission decisions involving matters on
    review from Administrative Law Judges, Freedom of Information Act
    applications for review, and regulatory and filing fee applications for
    review.
        The Litigation Division represents the Commission in federal courts
    of appeals when parties challenge Commission actions, and, in
    conjunction with the United States Department of Justice and United
    States Attorneys offices, represents the Commission in litigation in
    Federal district courts. In addition, Litigation Division attorneys
    work with the Solicitor General of the United States in representing
    the Commission in actions in the United States Supreme Court.
        The attorneys and economists of the Competition Division work to
    ensure a sustained focus on, and a rigorous and consistent analysis of,
    competitive issues throughout the Commission. Competition Division
    staff team with Bureau staff in the production of draft Commission
    decisions and reports to Congress that assess the competitive status of
    various telecommunications markets. The Division reviews draft
    Commission decisions for consistent competitive analysis, particularly
    in light of the Telecommunications Act of 1996. The Division is also
    responsible for implementing provisions in the 1996 Telecommunications
    Act regarding utility holding company entry into telecommunications
    markets.
        The recent increase in OGC's staff is largely attributable to two
    developments--the increased workload resulting from enactment of the
    1996 Telecommunications Act and transfer of the Competition Division to
    OGC from the Cable Services Bureau.
        The 1996 Telecommunications Act required the agency to conduct
    dozens of rulemaking proceedings, many of which are still pending. It
    has also served as a spur to additional rulemaking proceedings
    consistent with the deregulatory and pro-competitive purposes of the
    Act. The 1996 Act also provided for a wide variety of new kinds of
    proceedings to be initiated at the FCC by outside parties--for example,
    petitions for preemption of state and local barriers to entry under
    section 253 of the Act and petitions by Bell Operating Companies for
    entrance into the long-distance market pursuant to section 271. These
    additional burdens have required additional resources in OGC to help
    ensure that Commission orders interpret the 1996 Act in a consistent
    and legally correct manner.
        Apart from the sheer increase in the volume of the work, enactment
    of the 1996 Telecommunications Act has shifted the emphasis of much of
    the agency's legal work from applying broad public interest provisions
    to interpreting detailed and complex statutory provisions. This has
    created an increased need for the kind of high quality and experienced
    lawyers that have been added to the Administrative Law Division. Our
    experience is that devoting the resources at the drafting stage to
    ensuring a high quality and sophisticated legal product increases
    substantially the likelihood of success on appeal, to the ultimate
    benefit not only of the FCC, but of the industries we regulate and the
    public.
        Enactment of the 1996 Telecommunications Act and the implementing
    rulemakings and other proceedings are also leading to an increase in
    litigation against the agency. As the agency issues one after another
    important order for the future of the telecommunications industries,
    there are almost always several entities with the incentives and
    resources to mount a sophisticated and aggressive legal attack in
    court. If current trends continue, for example, there will be a more
    than 25 percent increase in the number of appeals filed against the FCC
    in fiscal year 1998 than in fiscal year 1997. We have added high
    quality, experienced lawyers to our Litigation Division to ensure that
    the agency can effectively defend itself in these appeals.
        I should note that, to some extent, these developments regarding
    increased responsibilities relating to statutory interpretation and
    implementation, as well as related litigation, are a continuation of
    trends that began with the 1992 Cable Act, as well as the 1993 Omnibus
    Budget Reconciliation Act. Implementation of these statutory provisions
    regarding cable television regulation, auctions, mobile radio services
    and regulatory fees substantially increased the FCC's workload.
        Finally, with respect to the Competition Division, the transfer of
    that Division to OGC has enabled it, in response to past criticisms of
    the FCC from courts and commentators, to focus much more broadly on
    ensuring that the FCC provides sophisticated and consistent competition
    analysis across all of its substantive responsibilities. The
    competitive analysis expertise of the Competition Division has enabled
    us to defend successfully several controversial and legally complex
    orders involving competition issues. Moreover, the Competition Division
    has served as a forceful voice within the Commission for pursuing in a
    far-reaching and consistent manner the overarching pro-competitive and
    deregulatory goals of the 1996 Telecommunications Act.
        The increase in OGC resources has brought tangible benefits to the
    FCC and the public. In the last few years, the FCC's success rate in
    the courts of appeals has increased substantially.
        Question. How big was the Wireless Bureau Front Office when it
    started? How big is it now? Why does Wireless need over 20 folks in the
    Front Office alone?
        Answer. In December 1994, the Wireless Telecommunications Bureau's
    Front Office originated with 13 personnel (plus one vacancy). The
    Bureau's total personnel ceiling was 307.5. As of today, the Wireless
    Bureau Front Office consists of 16 personnel, while the Bureau ceiling
    now is 340.5.
        The Wireless Telecommunications Bureau recently completed a
    reorganization of its structure, to enable it to better manage the
    significant changes in its assigned responsibilities resulting from new
    legislative, technological developments, and shifts in the wireless
    telecommunications industry and marketplace. This reorganization is
    designed to improve the Bureau's efficiency and provide for a better
    alignment of division-level activities to industry and consumer
    services and functions. In establishing these new division
    responsibilities, the reorganization plan nominally resulted in a Front
    Office structure with a ceiling of more than 20 staff.
        Dan Phythyon, who recently became the Wireless Bureau Chief, is in
    the process of implementing the final steps of this reorganization, and
    is completing his own review of the Front Office staffing and
    structure. The purpose of this review is to ensure that the Wireless
    Bureau Front office remains no larger than necessary to perform its job
    in an efficient manner. We fully expect that the size of the Front
    Office will remain below 20 staff. Once the Bureau reorganization is
    finalized, there will be a public announcement of its new structure,
    including the composition of and responsibilities covered by its Front
    Office. We will provide the Subcommittee with additional information at
    that time.
        Question. Chairman Hundt, the purpose of the Telecommunications
    Act, we thought, was to promote wide-spread competition in the various
    sectors of the telecommunications industry. We were led to believe that
    different entities would build networks and provide bandwidth so that
    consumers would enjoy the fruits of the information age. As I
    understand it, your policy will lead to many different entities
    reselling the same network or service, but that's not the same as
    building out networks or increasing bandwidth. How would you respond to
    that?
        Answer. As we stated in the Interconnection First Report and Order,
    the Telecommunications Act of 1996 contemplates three paths of entry
    into the local market: the construction of new networks, the use of
    unbundled network elements of the incumbent's network, and resale of
    the incumbent's services. We anticipated that competitive carriers
    would use a variety of methods to enter the local telephone market, and
    that some carriers might first enter the market through resale, and
    gradually offer unique services through the use of their own
    facilities, the incumbent's unbundled network elements, or a
    combination of the two. In its Joint Explanatory Statement at 148,
    Congress recognized that ``it is unlikely that competitors will have a
    fully redundant network in place when they initially offer local
    service, because the investment necessary is so significant.'' The
    Telecommunications Act of 1996 was intended to eliminate statutory and
    regulatory barriers and economic impediments that retard efficient
    entry into the telecommunications marketplace. The interconnection
    provisions of the 1996 Act did not express a preference for any
    particular entry strategy. The Commission's rules are designed to
    permit efficient competitive entry through a variety of methods
    consistent with the 1996 Act. We are in the early stages of what we
    expect will be a thriving competitive market, in which consumers can
    choose from among a variety of providers, services, and service
    packages. As with any burgeoning new market, we anticipate that there
    will be a significant amount of testing different product offerings and
    market entry strategies. It is too early to determine which services
    and entry methods will succeed. A review of the interconnection
    agreements that parties have reached, as well as discussions with
    industry participants, however, suggest that many competitive carriers
    intend to move from resale to use of their own facilities.

                              subcommittee recess

        Senator Gregg. Well, thank you. I appreciate your time.
        Mr. Hundt. Thanks very much.
        Senator Gregg. The subcommittee is recessed.
        [Whereupon, at 10:31 a.m., Wednesday, April 16, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, APRIL 17, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 1:30 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg and McConnell.

                                 THE JUDICIARY

                       Supreme Court of the United States

    STATEMENT OF HON. ANTHONY M. KENNEDY, ASSOCIATE JUSTICE
    ACCOMPANIED BY:
            HON. DAVID H. SOUTER, ASSOCIATE JUSTICE
            JAMES C. DUFF, ADMINISTRATIVE ASSISTANT TO THE CHIEF JUSTICE
            BILL SUTER, CLERK
            DALE BOSLEY, MARSHAL
            TONY DONNELLY, DIRECTOR OF BUDGET AND PERSONNEL

                                opening remarks

        Senator Gregg. OK, we'll get started. I know the Justices
    have hearings going on of their own. So they probably don't
    have too much time, but we do appreciate your coming by in this
    unique constitutional format. I have no opening statement, so
    we'll go right to your thoughts.
        Justice Kennedy. Thank you very much, Senator. Justice
    Souter and I are pleased to be here. And we have with us a
    number of court officers and court staff: our clerk, William
    Suter, our marshal, Dale Bosley, our budget and personnel
    officer Tony Donnelly.
        And I wish to thank the members of your staff for their
    cooperation and the assistance they have given to ours. This is
    always an important way for me to learn more about the
    budgeting process.
        Our budget this year, Senator, does ask for an increase of
    $3.318 million. Part of that is buildings and grounds, which is
    presented by the Architect of the Capitol. When that is
    presented, we do endorse, of course, the Architect's
    suggestions.
        That building of ours was built for under $9 million,
    beginning in 1934. I think it was occupied in 1935. The
    estimate for upgrading the electricity and the plumbing--the
    innards of the building--is something like $20 million. Maybe
    you can understand that. I can't quite understand that.
        But that's what the Architect is studying, and that's what
    he's working toward, so in the next few years we are going to
    be asking for a very substantial appropriation for this
    building. But it has come to the point where very, very
    substantial facilities renovations are going to be necessary.
        Part of the increase the Architect asked for this year is
    for studies for that. He also is going to recommend in the
    coming years, I think, additional installations to protect the
    perimeter of the building for security concerns.
        Our own portion of the budget includes, again, an increase
    of $2.121 million; $1.5 million of this is for adjustment to
    base; and $617,000 is for an increase in program. This is all
    security. The amount of $217,000 is for six police positions,
    and $400,000 is to enhance the police radio system.
        There is a dedicated channel that the police think they
    should have on a new radio system. The one they have now does
    not work well.
        The graphs in the court's budget submission show the work
    of the court remains constant, with some increase in unpaid
    petitions, which are generally criminal cases, and habeas cases
    filed by prisoners. The court is abreast of this work, and is
    well staffed, and, we think, very well managed by our
    administrative people.

                               prepared statement

        And we appreciate, Senator, the opportunity to be here. We
    recognize that we are a very small part of the courts' budget,
    and the courts' budget is a very small part of the Federal
    budget. But we do think that this is important, for us to meet
    with you and to report to you on the condition of our
    institution. And I have no further statements by way of
    supplementing the written statement that we have given to you
    and your staff.
        [The statement follows:]

                Prepared Statement of Justice Anthony M. Kennedy

        Mr. Chairman and Members of the Committee, Justice Souter
    and I appreciate this opportunity to appear before your
    Committee to address the budget requirements and requests of
    the Supreme Court for the fiscal year 1998.
        We have with us today James Duff, Administrative Assistant
    to the Chief Justice; Dale Bosley, Marshal of the Court; Bill
    Suter, Clerk of the Court; and Tony Donnelly, Director of
    Budget and Personnel.
        As is customary, the Supreme Court's budget request is
    divided between the ``Salaries and Expenses of the Court'' and
    ``Care of the Building and Grounds''. For the ``Care of the
    Building and Grounds'' the total fiscal year 1998 budget
    request is $3,997,000. Mr. Alan M. Hantman, Architect of the
    Capitol, will submit a separate statement to the Subcommittee
    regarding that portion of the total budget. I would like first
    to point out, however, that the proposed study of building
    improvements and utility systems upgrade is of particular
    importance in the Court's total budget request. Due to the age
    of the Court building, the Architect anticipates the need for
    substantial spending over several years to upgrade the
    electrical, plumbing and heating, ventilating and air-
    conditioning systems. We ask for your approval of this effort
    to modernize the building support systems. The Architect of the
    Capitol will address this matter in more detail.
        With regard to the ``Salaries and Expenses'' portion of the
    Court's budget, our total fiscal year 1998 budget estimate is
    $29,278,000. This is an increase of $2,121,000, or 7.8 percent,
    over the budget authority for 1997. Most of the increase
    represents base adjustments--that is, required increases in
    salary and benefits costs and inflationary increases in fixed
    costs. Specifically, $1,269,000 of the adjustment represents
    required increases in salary and benefit costs. And $235,000 is
    the amount requested for inflationary increases in fixed costs,
    allowing us to keep up with rising costs in all of our
    necessary operations.
        Although we are requesting slightly more of an increase in
    our budget for 1998, (last year's budget request was for a 5.1
    percent increase,) last year our request included only
    inflationary increases to the Court's budget base and nothing
    for new programs. As we mentioned in last year's request, we
    anticipated seeking additional funds in the 1998 budget for
    increased security. Based upon our initial review of our
    security needs, we are therefore seeking $617,000 over base
    adjustments to fund two increases in the Court's security
    program. These are: the hiring of six additional Police
    Officers, and the installation of an enhanced Police radio
    system.
        $217,000 of this request is to fund the addition of six
    Police Officers in order to strengthen the Court's overall
    security. Our intent is to add two officers to each of the
    three Police shifts that provide exterior security for the
    Supreme Court over a full twenty four hour period seven days
    per week. The Marshal recommends that we augment security by
    adding manpower to each shift in order to create a stronger,
    full-time security presence at the Supreme Court building. The
    U.S. Secret Service has recently completed a review of the
    Court's overall security program, and they have indicated
    support for this strengthening of security. Subsequent budget
    requests may propose further increases and security
    improvements consistent with recommendations of the U.S. Secret
    Service and the study funded this fiscal year. Adding new
    positions will also reduce over-time now often required of
    officers.
        $400,000 of the request for security programs is a non-
    recurring increase to fund an evaluation of the remote
    communications needs of the Supreme Court Police and the
    purchase and installation of an enhanced Police radio system.
    The Court's Police radio system that is used to communicate
    with our Police Officers has become out of date and unreliable.
    We find that security is seriously compromised when
    communications between the Police Office and the Officers
    performing security details are delayed, unclear and
    unreliable.
        We continue our efforts to make the most efficient use of
    the Court's existing resources and to minimize the need to
    request additional funding or personnel. During this Court
    Term, we will redevelop the Court's opinion writing system and
    all other personal computer applications to take advantage of
    the most up-to-date computer software technology. Implementing
    these changes and training Court users in the new software and
    applications will require substantial effort by the Court's
    Office of Data Systems. While we intend to accomplish these
    changes working within the existing budget base, we anticipate
    the need to increase the Court's budget over the next few years
    to enable the replacement of aging computer hardware and
    technology infrastructure such as the local area network,
    cabling and telecommunications. Also, we anticipate that
    modifications to software and updates to hardware will be
    necessary to accommodate changes to computer systems that must
    take place by the year 2000. Although it is not always easy to
    define specific savings that stem from spending on automation,
    we are confident that the Court's spending in this area and its
    attempt to make the most of emerging technology has increased
    the efficiency with which we address our caseload.
        This concludes a brief summary of our request. We will be
    pleased to respond to any questions that the members of the
    Committee may have.

        Justice Kennedy. Perhaps Justice Souter has something to
    add.
        Justice Souter. Thank you. But I don't think there are any
    untouched bases, and I will stick to carrying the bags until
    somebody has a question for me.
        Senator Gregg. I have one question. The $20 million for
    building renovation, do you expect that in next year's budget,
    or the year after?
        Justice Kennedy. I think in the next 3 years. The sum has
    not been requested here, but this is just a warning that we
    hear that kind of figure being brooded about for the structural
    installations which are necessary. Electricity, for instance,
    has to be completely redone.

                              Ninth circuit split

        Senator Gregg. There's been some proposals that we split
    the ninth circuit. In fact, on the floor of the Senate last
    year there was significant discussion about this. What are your
    thoughts on that?
        Justice Kennedy. I was on the ninth circuit from 1975 to
    1987, and when I first came to the Senate for my confirmation
    hearing as a circuit judge, that question was being asked,
    because there was a report by a commission headed by Senator
    Hruska, Roman Hruska. And at that time I said I didn't know
    enough about it to make a judgment.
        When I got on the court, I felt that it should not be
    split, that perhaps there was a place in the system for a very
    major circuit, and that there would be certain costs savings by
    having a very large circuit.
        And so I was a defender of trying the experiment, and the
    experiment has now gone to the extent where we have 28 active
    judges. The ninth circuit has--oh, I would suppose 22 percent
    of the Nation's population and 22 percent of its judicial
    business.
        I have increasing doubts and increasing reservations about
    the wisdom of retaining the ninth circuit in its historic size
    and with its historic jurisdiction. We have very dedicated
    judges on that circuit, very scholarly judges. They are working
    with tremendous expedition to dispose of the caseload. But I
    think institutionally, and from the collegial standpoint, that
    it is too large to have the discipline and control that's
    necessary for an effective circuit. I am willing to think
    further about it.
        I had hoped that there would be a commission report so that
    we could study the commission report. But I understand that
    there is no commission authorized as of this time, and I think
    the Congress ought very seriously and at once to address this
    problem and make up--and come to some resolution one way or the
    other as to the size of the ninth circuit.
        The Hruska report is good reading. Actually the division
    that it recommends makes considerable sense. One problem is the
    State of California has about 30 million people. That's as many
    people as were in the United States in 1860. It's a huge
    population. That's just the State of California.
        So as you talk about splitting the ninth circuit, what are
    you going to do with the State of California? That probably
    requires, oh, 15 circuit judges. You would have a big circuit
    with just one State.
        One answer, and that was the answer of the Hruska report,
    was to split California. And that requires a special mechanism
    in the event there is a split between the northern and the
    southern circuits which affects the State of California, and
    that that should be studied.
        Senator Gregg. Thank you. Do you have any thoughts on that,
    Justice Souter?
        Justice Souter. I really don't. Please don't split the
    first circuit, but the ninth--[Laughter.]
        The ninth is not a subject of my expertise.
        Senator Gregg. Well, we thank you for your time, and we
    won't take any more of it. We appreciate your submission, and
    we'll try to assist you with these facilities issues.
        Justice Kennedy. Thank you very much, Senator.
        Justice Souter. Thank you.
        Senator Gregg. We will take a brief recess. So we shall
    reconvene here.
        [A brief recess was taken.]
                                  U.S. Courts

    STATEMENT OF HON. JOHN G. HEYBURN II, CHAIRMAN,
                COMMITTEE ON THE BUDGET, JUDICIAL
                CONFERENCE OF THE UNITED STATES

                         remarks of senator mc connell

        Senator Gregg. We are joined by the Senator from Kentucky.
        Senator McConnell. Mr. Chairman, I am just here to
    introduce to the committee a good friend of mine, of over one-
    quarter of century duration, who is a Federal district judge
    for the Western District of Kentucky, and who chairs the Budget
    Committee of the judiciary.
        John's wife Martha who is an ophthalmologist, an
    outstanding physician. John has had a very distinguished career
    in the law. In my previous incarnation as the county executive
    of Jefferson County, John was one of the lawyers who
    represented me and my office in country government.
        He's a Harvard graduate, and a graduate of the University
    of Kentucky College of Law, which is a lot more important in
    Kentucky.
        And John is not only, as I said, a long time personal
    friend, but an extremely outstanding jurist. Periodically the
    lawyers in our State do their ratings, which they get to do
    anonymously, and John invariably has outstanding scores from
    those who come before him. So he performs his duties in an
    evenhanded and fair way.
        I'd also like to ask that his biography appear in the
    record at this point.
        Senator Gregg. Without objection.
        [The information follows:]

                 Biographical Sketch of John Gilpin Heyburn II

        John Gilpin Heyburn II was born November 12, 1948, the son
    of Henry R. Heyburn and Frances Starks Heyburn. Both his
    grandfather and father were attorneys and civic leaders in
    Louisville, Kentucky.
        Judge Heyburn received his early education in the
    Louisville public schools and graduated from Milton Academy,
    Milton, Massachusetts. In 1970 he received his A.B. degree from
    Harvard College, Cambridge, Massachusetts, where he majored in
    history, received seven varsity letters for participation in
    cross country and track and was named to the All-Ivy League
    cross country team.
        Prior to entering law school, Judge Heyburn worked for a
    number of public service and research institutions, including
    the Park Duvalle Neighborhood Health Center, the Louisville and
    Jefferson County Youth Commission and the University of
    Louisville Urban Study Center. During that time Judge Heyburn
    also served as an officer in the United States Army Reserves.
    In 1976, Judge Heyburn received his J.D. degree from the
    University of Kentucky College of Law, where he was a member of
    the school's National Moot Court Team.
        From 1976 until his appointment to the bench, Judge Heyburn
    was associated with the law firm of Brown, Todd and Heyburn,
    which at the time of his departure numbered approximately 120
    attorneys. He was a partner at the firm from 1982 through 1992.
    Judge Heyburn's practice focused on commercial litigation, with
    a particular interest in construction contract litigation, a
    subject upon which he wrote and spoke extensively. Judge
    Heyburn also served as special counsel to County Judge
    Executive Mitch McConnell and as counsel for two citizen
    commissions established to draft a new governmental charter for
    Louisville and Jefferson County.
        Judge Heyburn served as a director of the Louisville Bar
    Foundation and as chairman of the continuing legal education
    programs for the 1991 Kentucky Bar Association Annual
    Convention. He also served as President of the University of
    Kentucky College of Law Alumni Association and as a member of
    the College of Law's Visiting Committee. As a director of
    Kentucky Citizens for Judicial Improvement, Judge Heyburn was
    active in the effort to reform Kentucky's judicial system by
    way of constitutional amendment in 1976.
        Judge Heyburn was active in civil and political affairs in
    Kentucky. Among other things, he was Chair of the Jefferson
    County Republican Party, Chair of the 1988 Republican Kentucky
    State Convention, delegate to the 1984 and 1988 Republican
    National Conventions and a candidate for Jefferson County Judge
    Executive in 1989. In civic affairs, Judge Heyburn served as a
    director of numerous charitable and public service institutions
    and served as Chair of the Louisville and Jefferson County
    Crime Commission.
        On March 20, 1992, President Bush nominated Judge Heyburn
    to the United States District Court for the Western District of
    Kentucky to succeed the Honorable Thomas A. Ballantine, Jr. His
    nomination was confirmed by the United States Senate on August
    14, 1992, and he took the oath of office on August 28, 1992.
        In 1994, Judge Heyburn was appointed to serve on the Budget
    Committee of the Judicial Conference of the United States. In
    January 1997, Judge Heyburn was appointed by Chief Justice
    Rehnquist to serve as Chairman of the Budget Committee.
        Judge Heyburn is married to the former Martha Blackledge
    Keeney, who is an ophthalmologist and eye surgeon. They have
    two sons born in 1988 and 1991.

        Senator McConnell. I hope that the Senator from New
    Hampshire will not be too rough on my old friend, Judge
    Heyburn.
        Senator Gregg. Thank you very much. We appreciate your
    coming by, Senator. And with that strong endorsement and
    introduction, Judge, we'll turn it over to you.

                               opening statement

        Judge Heyburn. Thank you very much, Mr. Chairman. If it is
    all right, I would like to make a brief statement in the
    beginning, in addition to the written statement that we are
    submitting.
        It is a real honor for me to appear before your committee
    for the first time, and in doing so, to represent the many fine
    men and women of the Federal judiciary who do so much to assure
    equal justice to all of our law abiding citizens and swift
    punishment for those who do not abide by the laws.
        Thank you, first of all, for the appropriation that we
    received last year. While we didn't get everything we asked
    for, we did get enough after fee collections and carryover,
    and, I believe, also with the aid of sound, conservative
    management of our resources, to adequately cover all of our
    essential services.
        More important, I'm pleased to say that we've set our
    requests for fiscal year 1998 at a 7.8-percent increase over
    those estimated fiscal year 1997 obligated funds. And that's
    our lowest requested increase in 12 years.
        We have accomplished this by carefully balancing the dual
    responsibilities that we have as an independent constitutional
    branch. That first responsibility is to perform our essential
    duties in law enforcement. And that second responsibility,
    which is equally important, is to spend the taxpayer's dollars
    wisely.
        The first among the responsibilities that we have is that
    of law enforcement, and those responsibilities are continuing
    to increase. The Justice Department continues to bring to bear
    substantial new crime fighting resources that tend to increase
    the workload that we have.
        There are more people under supervision and under probation
    now than ever before. And that all contributes to an increase
    in our workload. Make no mistake about it: we are part of the
    justice system, and because of that, to fund law enforcement
    and prosecutors without giving the judiciary sufficient
    resources--if you did that--would only create a bottleneck that
    would really jam up the entire system. And none of us want
    that. And our request, I believe it's conservative, but it also
    recognizes that important reality.
        Equally important in our view is our continuing
    judiciarywide effort to be more efficient. We recognize this as
    a responsibility, and the Budget Committee and our Economy
    Subcommittee are leading the effort to sensitize the judiciary
    to new budgetary constraints.
        We are serious about it. We have worked hard at it. We
    recognize that our efforts are only beginning, but we believe
    they've already borne fruit, and I pledge to you to continue
    our effort to find efficiencies in every area that commonsense
    dictates.
        I would be remiss if I didn't say that there's probably a
    limit to what we can do in terms of efficiencies without
    diminishing in some way a system of justice which, even with
    all its faults, is the most accessible and the fairest in the
    world.
        Although we are a coequal branch within the constitutional
    government, the powers of the judiciary are circumscribed. But
    in a nation that's built on the rule of law, the limited powers
    we do have are essential to the stability of society.
        I have no doubt, Mr. Chairman, that you appreciate and
    understand those relationships, and in my view that's all the
    more reason why the judiciary needs to receive whatever funds
    you believe are necessary to accomplish our role.
        And we look at the budgetary process as a way that we can
    engage in a dialog with you to determine what those appropriate
    resources are.
        One other thing I would like to mention just briefly, is
    the matter of judicial compensation. I always feel a little
    funny asking for money, particularly when it's for myself, in
    essence. And it would be a lot easier, I suppose, for me not to
    bring up the subject at all. But I bring up the subject without
    hesitation because I believe it's important. We don't become
    judges for the money. But it is important to have, in my view--
    and I can elaborate on this later if you would like me to--
    cost-of-living increases to maintain the stature and the
    excellence of the Federal judiciary.
        I believe it's vital, and I'm putting in a word for that.
    It's not really a budgetary matter. The cost is minor. It is a
    fundamental matter of the continuing excellence of the Federal
    judiciary that's served us so well.
        In closing I would like to make a couple of comments about
    two relatively small accounts in funding terms, but big in
    terms of what they do for the judiciary. And that's the
    Administrative Office of the Courts and the Federal Judicial
    Center.
        The Federal Judicial Center's funding has remained about
    the same for the last 5 years, but it does a lot of work that's
    very vital for the judiciary. It's worked hard to enhance its
    record of alternatives to travel-based education, providing the
    kind of education to our administrative staff and to judges in
    a less expensive way. And we believe it deserves additional
    funding.
        And together with the Administrative Office, it has
    developed a number of new automation technologies, such as
    satellite communication and videoconferencing, which has
    enabled both of them to do their work in a better and more
    efficient way.
        The Federal Judicial Center and the Administrative Office--
    the Administrative Office is the backbone of everything we do,
    and is critical to our efficiency and cost-savings efforts.
    They spearhead at a staff level all the efforts that we have
    been making. So appropriate funding for these agencies is
    essential.

                              prepared statements

        I would like to submit my own written testimony for the
    record, as well as that of Judge Zobel and Director Mecham. In
    addition, I submit on behalf of the U.S. Court of Appeals for
    the Federal Circuit the testimony of Chief Judge Glenn Archer,
    and on behalf of the U.S. Court of International Trade, both of
    which have their separate budget line items--I'm sure there is
    a historical reason for that, somewhere along the line--the
    statement of Judge Gregory Carmen for the International Trade
    Court.
        And having said that, I'd be delighted to answer any
    questions that you might have.
        [The statements follow:]
                 Prepared Statement of Hon. John G. Heyburn II
                                  introduction
        Mr. Chairman and Members of the Subcommittee, thank you for the
    opportunity to testify today on the judiciary's fiscal year 1998 budget
    request. It is indeed a pleasure to appear before you for the first
    time as Chairman of the Judicial Conference Committee on the Budget. I
    look forward to working with you, the Members of the Subcommittee, and
    the staff and continuing the excellent working relationship that my
    predecessor Chief Judge Richard S. Arnold enjoyed with all of you.
        With me today are Judge William G. Young of the United States
    District Court for the District of Massachusetts who is also a member
    of the Budget Committee and is Co-Chairman of our Economy Subcommittee,
    and Leonidas Ralph Mecham, Director of the Administrative Office of the
    United States Courts and member of the Judicial Conference Executive
    Committee.
        On behalf of the entire Judiciary, I want to thank you, Mr.
    Chairman, Senator Hollings, and all the Members of the Subcommittee for
    your extraordinary efforts in providing the courts with our fiscal year
    1997 appropriation. With the budget constraints under which you worked,
    we greatly appreciate your support for the judiciary. While you did not
    provide our full appropriations request, the funds available to the
    judiciary in 1997 (appropriations, normal fee collections, and
    carryover amounts) represent a 13.8 percent increase over 1996
    obligations, allowing the courts to handle our known workload
    increases. Your willingness to work with us and provide this funding
    will ensure the effective functioning of the court system. I also want
    to recognize the committee staff for the excellent work they do and
    express my appreciation for their high level of professionalism.
                                    overview
        I would like to make three key points in my presentation today,
    which I will highlight now, and elaborate on later. First, the
    judiciary performs an essential role in our society, especially in law
    enforcement. The judiciary is a key link in our system of justice and
    must have the resources to do its job so that law enforcement efforts
    are successful. Our streets are made safer when those accused of crimes
    have a fair and speedy hearing in our courts and, if found guilty, are
    appropriately sentenced. The judiciary also helps to assure the safety
    of our communities by supervising those accused prior to trial and
    those convicted upon their release from prison. Law enforcement has
    been a high priority of the Congress and the citizens of this country.
    Since 1994 the Congress has increased funding for the U.S. Attorneys by
    20 percent, the FBI by 30 percent, the DEA by 32 percent, and the INS
    by 101 percent, an average increase of 52 percent. All of the new
    investigators and prosecutors hired with these funds are creating
    additional work for the courts. This Committee has recognized the
    judiciary's law enforcement role in the past by providing the Judiciary
    with a 29 percent increase over the same time period. We ask that you
    continue to do so in fiscal year 1998 by providing the resources needed
    to handle our growing workload.
        Second, the judiciary's workload continues to increase. Congress
    gives us more responsibility and more citizens ask the courts to
    resolve their disputes and problems. In fiscal year 1996, appeals,
    civil and criminal filings in U.S. district courts, and bankruptcy
    petitions all rose. Although there may be momentary fluctuations, we
    expect this growth to continue.
        Third, while the judiciary cannot control its workload, it has made
    significant strides to work more efficiently, thus limiting the
    resources required to handle the increasing workload. Our report on
    Optimal Utilization of Judicial Resources, recently sent at your
    request, identifies numerous initiatives to enhance efficiency and
    productivity. These include an analysis of and reduction in space
    utilization, improved use of personnel resources including contracting
    when appropriate, effective use of automation, and technological
    innovations such as videoconferencing for training and some courtroom
    proceedings. These efforts and many more have allowed us to handle
    increasing workloads while exercising fiscal constraint.
                           restrained budget request
        In the face of increasing workloads, and recognizing the budget
    constraints of Congress, the judiciary is making every effort to
    minimize its budget request. Over the last several years the judiciary
    has worked to refine and improve its budget formulation and financial
    management processes. Also, under the leadership of our previous
    chairman, Chief Judge Richard S. Arnold, the judiciary has made great
    strides in becoming more efficient. This has allowed us to develop a
    fiscal year 1998 budget that grows by only 7.8 percent over fiscal year
    1997 obligations. This results in the lowest appropriations increase
    requested by the judiciary in 12 years. By comparison, the Department
    of Justice, our primary litigant, continues to grow. For fiscal year
    1998, the President is requesting an increase of between 7 percent and
    13 percent for those Justice activities--U.S. Attorneys, FBI, DEA and
    INS--that affect the judiciary's workload.
        The judiciary's 1998 appropriations request of $3.6 billion
    includes only those funds necessary to continue our current workload
    (offset by efficiency and other savings), and to handle the additional
    responsibilities Congress has given us and the accompanying workload
    increase. We are requesting a 7.8 percent increase in overall spending
    in fiscal year 1998, which requires an 11.6 percent increase in
    appropriations. The 7.8 percent increase breaks down to 4.6 percent for
    current services (maintaining staffing, and funding for inflation, pay
    adjustments, and other costs related to existing workload), 2.8 percent
    to maintain a current level of service for uncontrollable workload
    increases, and .4 percent for our highest priority program needs. The
    latter two categories include: increases in juror days; confirmation of
    additional judicial officers; growing bankruptcy filings which require
    additional deputy clerks; increases in the number of individuals under
    supervised release which require additional pretrial and probation
    officers; and increases in the number of court security officers. We
    believe this is a very restrained request when compared with the
    resources provided to the Justice Department by Congress, and the
    uncontrollable workload increases created by Congress which we continue
    to face. A detailed explanation of our fiscal year 1998 request is
    included as an Appendix.
                          judiciary's role in society
        The judiciary performs a critical and unique role in our society.
    It is an independent and separate branch of government that touches the
    lives of all citizens. The judiciary serves this country and its people
    in a wide variety of ways.
        Most citizens take their federal juror duty seriously. I have
    always been impressed that citizens are proud to serve and proud of the
    service and protection which our country's justice system provides
    them. In many instances it is the only personal contact that citizens
    have with their federal government. More importantly, it provides an
    opportunity for these individuals to be actively involved in the
    operation of their government. Almost 600,000 people a year enter our
    federal courthouses to participate in the jury process and to ensure
    the constitutional rights of individuals.
        Most people never see and are probably unaware of the judiciary's
    law enforcement component that provides public safety throughout the
    nation's communities. Probation and pretrial services officers monitor
    the activities of individuals accused of crimes and awaiting trial or
    convicted of crimes and sentenced to terms of probation or supervised
    release. Criminals who have been incarcerated in federal prisons for
    years must now serve a term of supervised release upon their return to
    society. Probation officers monitor the activities of these convicted
    criminals, including drug testing and treatment, to make our streets
    safer and take action to return them to prison should they engage in
    forbidden activities. The number of individuals supervised by the
    judiciary (120,000) exceeds those people incarcerated in federal prison
    facilities (105,000). In fact, the judiciary is saving the federal
    government between $31 and $62 million annually by placing individuals
    in more cost effective monitored home confinement, rather than
    detaining them in prisons or jails.
        Through our bankruptcy system, the judiciary plays a fundamental
    role in our economy. Bankruptcy courts provide a mechanism for debtors
    and creditors to resolve financial problems in a way that they can
    continue with their businesses and their lives. About $30 billion in
    debt is discharged in our bankruptcy system annually. The projected
    bankruptcy filings of approximately 1.3 million in 1997 (a 43 percent
    increase over fiscal year 1995), equates to one bankruptcy for every 75
    households in the United States. The timely resolution of these
    financial difficulties helps to keep this nation's economy running
    smoothly.
        Two million victims of crime receive benefits each year from the
    Crime Victims Fund. Over the last four years the judiciary deposited
    over $1 billion in criminal fines into the Fund.
                             judicial compensation
        To be effective, the judiciary and its presiding judicial officers
    must be adequately compensated. The funding provided to the courts and
    the compensation given to judicial officers is a recognition of the
    value our society places upon the institution and the individuals
    responsible for carrying out justice in our nation. Unfortunately,
    federal judges salaries are falling behind the level of pay of other
    legal professionals, including most lawyers arguing cases before them.
    Federal judges have not received a pay adjustment since 1993 and
    increases in the cost of living have eroded their salaries. The
    judiciary is seeking an ECI salary adjustment for judges and staff
    comparable to that being recommended for general schedule employees for
    1998.
        Over the last four years, judges have been the only career federal
    employees who have not received an ECI salary adjustment. Further,
    judges are not eligible for the locality pay increases that other
    career employees receive. Therefore, the Judicial Conference submitted,
    and legislation was introduced to provide a catch-up ECI adjustment for
    the previous four years in which judges were denied an adjustment. If
    judges had received the annual ECI salary adjustments provided by
    statute and received by all other career employees, then compensation
    would be 9.6 percent higher than present. In real terms, relative to
    inflation, judges' compensation has been effectively reduced by 12.2
    percent over the past four years.
                            uncontrollable workload
        The judiciary is unique among other government entities. One of the
    ways in which we are unique is that we do not control our workload; it
    is determined by the Constitution and statutes. Among its many other
    responsibilities, the courts must: handle every case filed by the
    government, businesses, and individuals; supervise every defendant who
    is released pending prosecution; monitor every convicted criminal
    sentenced to a term of supervised release; pay jurors in every civil
    and criminal trial; and provide and compensate counsel for every
    financially eligible defendant. The workload is driven by the laws
    enacted by Congress, the citizens of our country who come to us to
    resolve their disputes and financial problems, and to a great extent
    the prosecutorial policies of, and resources provided to, the
    Department of Justice.
        Over the years, our funding and staffing increases have not kept
    pace with workload increases. Case filings increased almost 67 percent
    from 1985 to 1995, but, just as important, so has the workload
    associated with the cases. For example, the proportion of more complex
    cases has grown, and the number of multi-defendant cases has increased.
    Also, imposition of Sentencing Guidelines has resulted in substantial
    workload not only on the courts, but also on probation officers and
    public defenders. All of these factors have resulted in increased
    workload above the absolute increase in cases. Staff and judge
    increases have not kept pace with this workload.
        From 1985 to 1995 there has been a large growth in the probation
    and pretrial services area. The imposition of supervised release,
    tremendous growth in individuals requiring drug treatment, and the use
    of labor intensive home confinement (which results in significant
    savings for prisons) all contribute to an ever-expanding workload.
                 capital cases increase defender services costs
        The Defender Services account requires $354 million to meet
    projected 1998 workload. As discussed in our recent report to Congress,
    the growth in this activity over the past two years is primarily
    attributed to an increase in the overall number of capital cases and in
    particular high profile capital trials that are very costly. The
    remaining activities in the account have not experienced any real
    growth other than inflationary increases. Justice Department decisions
    about whether and how to prosecute a case and what the charges will be,
    directly impact Defender Services resource requirements. Dramatic
    increases in workload and cost have been experienced in recent years,
    primarily attributable to the Justice Department's additional death
    penalty prosecutions and charging policies.
        The judiciary is concerned about and recognizes the need to contain
    the cost of providing constitutionally mandated counsel to financially
    eligible defendants. Several initiatives are being pursued to control
    representation costs in ways that will not compromise the
    constitutional right of a defendant to a fair trial. These initiatives
    include improved case management techniques, attorney training, voucher
    review enhancements, and data collection and analysis improvements.
    Further, we are applying flat-fee concepts in a variety of contexts as
    part of our overall effort to manage habeas costs.
                            legislative initiatives
        The judiciary's workload is affected greatly by laws that have been
    and will be enacted. For example, the Antiterrorism and Effective Death
    Penalty Act of 1996 (Public Law 104-131, 110 Stat. 1214) is expected to
    dramatically increase the number of victim restitution proceedings
    while imposing considerable financial accounting and tracking
    responsibilities on court clerks and probation officers. An intent of
    the Prison Litigation Reform Act (Public Law 104-134, 110 Stat. 1321)
    was to reduce the overall number of prisoner petitions. While this may
    ultimately occur, additional review of those that are filed is more
    complex, requiring substantial new administrative procedures. Increased
    judiciary expenses associated with special master appointments and
    administrative record keeping are also expected. Legislation proposed
    so far by the 105th Congress (such as juvenile crime control measures,
    victims rights constitutional amendment, property rights protections,
    and child support enforcement) is expected to continue this trend of
    creating additional cases and costly new administrative requirements
    for the federal courts.
        A legislative initiative that the judiciary is seeking that would
    be beneficial to the judicial system is to classify as mandatory those
    activities of the judiciary that are constitutionally entitled and
    uncontrollable. Both the fees paid to jurors and compensation paid to
    court appointed counsel should be categorized as mandatory. The
    Constitution mandates the right to a trial by jury, both in criminal
    (Sixth Amendment) and in civil (Seventh Amendment) cases, and the daily
    rate is set by statute. The right to counsel in criminal prosecutions
    is also provided for in the Constitution (Sixth Amendment). The
    judiciary has no discretion in whether to provide these constitutional
    rights, so the funding to support them should not be discretionary.
                            working more efficiently
        While the judiciary cannot control its workload, we are endeavoring
    to better manage how efficiently we process our workload and are proud
    of our accomplishments in this area.
                                    staffing
        The largest dollar savings come from doing more work with fewer
    people. As you know, the judiciary uses formulas to determine how many
    people should be devoted to doing the job. In recent years we have
    requested funding for only 84 percent of the people we believe are
    needed to run the judicial system as indicated by the formulas. This
    enabled us to achieve immediate economies and stimulate creative
    solutions to doing more work with fewer people. Each court determines
    how best to use its limited resources to accomplish its work. At the
    national level, we help the courts through systems development and
    other initiatives. One of these is the Methods Analysis Program, which
    identifies suggested business practices with the potential to result in
    more efficient and effective operations and to foster implementation of
    these practices in the courts. We are also able to handle our workload
    at 84 percent of formula through the use of automation and technology
    in lieu of manual processes. It is because of our extensive economy and
    efficiency efforts that we are able to staff the courts at only 84
    percent of the workload formula and still maintain the level of service
    that our system of justice deserves.
                                     space
        Another resource that we have studied carefully is the utilization
    of space. As you know, because of increases in the number of judgeships
    and support staff over the past 15 years, and especially because of
    enhanced security requirements, the judiciary was severely short of
    adequate courthouse facilities. Congress responded to our needs and
    initiated an extensive, long term courthouse construction program. GSA
    is building, renovating and expanding court facilities nationwide which
    will provide the secure space we require. Unfortunately, for this
    subcommittee and our budget, this will result in a significant increase
    in our rental costs over the next three years and into the future.
        To moderate this budgetary pressure, the judiciary undertook an
    extraordinary effort to identify ways to reduce rent costs. The bottom
    line is that we have succeeded in trimming our future rent costs by
    about $12 million per year. Courthouses, unavoidably, remain a
    significant and growing cost of doing business. We are continuing to
    look for ways to achieve further savings. These efforts will enable us
    to control our future needs to some degree. However, it will be
    difficult to achieve significant additional savings.
                           automation and technology
        The use of automation and technology has been critical to allowing
    the judiciary to handle a continuously growing workload while staffing
    the courts at a level below that determined to be necessary by our
    workload formulas. This has allowed us to minimize overall spending
    increases while maintaining a high level of service to the public. For
    example, initiatives such as processing millions of bankruptcy notices
    through the Bankruptcy Noticing Center are producing significant
    savings. A follow-on initiative that may be considered is having
    bankruptcy docket information automatically updated to reflect notices
    distributed by the Bankruptcy Noticing Center.
        Other automation initiatives which offer the potential for reduced
    cost and improvements in the quality of support for case processing are
    at very preliminary stages of development or being pilot tested. The
    judiciary currently is exploring a number of new major technology-based
    initiatives to improve communications, make information more accessible
    to the public and the judiciary, and improve courtroom proceedings.
    This includes the use of electronic filing, electronic courtroom
    technology, and the electronic dissemination of information as well as
    technologies to improve the quality and efficiency of courtroom
    proceedings.
        In addition, the following automation initiatives which have been
    initiated or are being considered by the judiciary, are indicative of
    the emphasis being placed on improving the way the judiciary operates,
    and, where possible, reducing costs.
      --Using numerous new approaches to the operations and maintenance of
            the automation program saving over $10 million annually.
      --Using and exploring the future potential of video and computer-
            based training as a means to conduct training more cost
            effectively.
      --Exploring opportunities to realize savings and efficiencies by
            reducing the production and handling of paper documents through
            use of electronic case files.
      --Experimenting with electronic filing to eliminate repetitive, time-
            consuming manual tasks involved in docketing.
      --Using and exploring the future potential of electronic public
            access systems to save court staff resources in responding to
            public needs for information and to permit the public to gain
            direct, rapid, and easy access to official court records.
      --Implementing about 100 automated systems to improve operating
            efficiency and effectiveness for routine, administrative-type
            tasks by automating manual business processes or updating
            outmoded systems and practices.
      --Designing an electronic bankruptcy noticing system to transmit
            electronically bankruptcy notices to large creditors rather
            than through the more expensive printing and mailing system
            currently used.
      --Exploring expanded use of Internet and Intranet technologies to
            distribute judiciary publications and other information at
            lower cost.
      --Exploring opportunities to realize efficiencies through the use of
            document imaging, retrieval, and display technologies in the
            courtroom.
      --Conducting experiments in process innovation to examine how courts
            can reengineer business processes to make better use of
            automation and technology and identify efficiencies.
      --Deploying and enhancing automated case management systems, which
            facilitates speedy resolution of pending cases by providing
            critical information needed to manage caseload.
                               videoconferencing
        We know of your interest in videoconferencing and wanted to
    elaborate on some of the efforts we are pursuing. Videoconferencing can
    be used for the handling of routine and case-related administrative
    responsibilities, training, and courtroom proceedings.
        The Prisoner Civil Rights Videoconferencing Project is being
    implemented in twenty-one district courts, which have qualified for
    participation. The district courts receive funding and program support
    to use videoconferencing in prisoner civil pretrial proceedings. This
    project has the potential to result in personnel and travel cost
    savings in the federal courts, the federal Bureau of Prisons and state
    and local governments. Because prisoners are not being transported, it
    eliminates the associated security risks to judicial officers, court
    staff, other federal, state and local officials, and the public. For
    example, some pre-trial hearings in the Unabomber case were held by
    televideo in New Jersey while the defendant and his attorney remained
    in California.
        Courts are also experimenting with the use of videoconferencing in
    other judicial proceedings. A few bankruptcy courts are using
    videoconferencing to conduct evidentiary and nonevidentiary proceedings
    between remote locations, reducing non-productive travel time, saving
    the judiciary, the bar, and the public travel costs, and allowing the
    more frequent and prompt scheduling of hearings in court locations
    without resident bankruptcy judges. On a very limited basis, one court
    of appeals circuit is experimenting with using videoconferencing to
    hear oral arguments where counsel or parties prefer not to travel to
    the main courthouse.
        The judiciary has used videoconferencing for administrative
    meetings and is taking steps to use it for distance learning. The
    Administrative Office, the Federal Judicial Center and the courts are
    working together to install satellite capabilities to establish a
    permanent capability for supporting long distance training and
    conferences. In fiscal year 1996, a total of $2 million was earmarked
    in the Judiciary Information Technology Fund to procure satellite
    downlinks at selected courts to initiate the program. As the cost of
    videoconferencing systems declines and systems become more widely
    available in the courts, usage should increase.
        Because of the limited resources available to the judiciary to
    support videoconferencing, we have coordinated closely with other
    federal government entities and state and local governments to share
    the use of and, in some instances, the cost of videoconferencing.
                   administrative office staff contributions
        I would be remiss if I did not point out the pivotal role of
    Administrative Office staff in these efficiency efforts in addition to
    all of their other extensive support of the courts and the Judicial
    Conference. The satellite downlink capability for videoconferencing and
    development of the staffing formulas which I previously mentioned, the
    efforts to utilize staff resources more efficiently, the extensive
    analysis of rental costs, the development of technology, and the report
    on Optimal Utilization of Judicial Resources, to name a few, were all
    spearheaded by Administrative Office staff. The courts cannot do this
    work on their own.
        The Administrative Office also provides daily support to the courts
    and the Judicial Conference in a variety of other ways. Some of these
    are:
      --Research and analyze hundreds of matters each year for
            consideration by Judicial Conference committees.
      --Develop new ways for handling court business and provide training
            and assistance to judges and court employees to help them
            implement programs, improve operations, and manage the courts.
      --Support the planning efforts of the Judicial Conference by
            conducting strategic studies and providing technical
            assistance, research, and analysis related to planning issues
            and topics.
      --Provide centralized core administrative functions such as payroll,
            personnel, budget, and accounting services.
      --Prepare manuals and a variety of other publications that include
            essential information regarding judicial business.
        A $5 million (6.6 percent) increase is requested for the
    Administrative Office in 1998, yet through the rental cost study alone,
    they have helped reduce rent costs by $12 million in all future years.
    Small investments in AO staff produce significant overall savings.
    Unfortunately, while total judiciary FTE have increased by 13 percent
    from 1995 to 1997, Administrative Office staffing has declined by three
    percent. Lower AO staffing has delayed efforts to provide some basic
    support services to the judiciary, such as uniform national automated
    accounting and financial systems and a replacement for the outdated
    Criminal Justice Act Payment system. It has also hindered their efforts
    in other areas, which could over time lead to a deterioration in
    support for our judicial system. The fiscal year 1998 request will
    simply allow the Administrative Office to begin to restore staffing
    back to the level authorized for fiscal year 1995.
                        federal judicial center support
        I would also like to comment briefly on the Federal Judicial
    Center's importance and urge full funding of its request of
    $18,425,000, a 5.3 percent increase over its current level. Even with
    this modest increase the FJC's funding remains about the same as it was
    5 years ago.
        Judges' work changes constantly due to new statutes, new appellate
    case law, new procedural rules, and developments in related fields,
    such as the impact of science on the kinds of evidence in litigation.
    We turn to the Center, be it for help on managing a capital case or a
    mass tort case, or to understand last April's prison litigation and
    habeas reform acts, or for techniques for more efficient juror
    selection. The Center teaches our probation and pretrial officers how
    to supervise defendants, efficiently and appropriately, before trial
    and after incarceration, as well as to help judges determine criminal
    sentences. The Center's management training programs teach court staff
    the tools used in the private sector to reduce costs, streamline
    operations, and better serve the public.
        Over 80 percent of court participants in Center training programs
    attend training in their home cities. For in-court training, the Center
    provides the courts self-contained curriculum packages, on-line
    computer conferencing, videotapes, manuals, diskette, and CD-ROM's. It
    also plans eight satellite broadcasts this year.
                             looking to the future
        The judiciary is not only looking at ways to improve and work
    better now, but is continually planning for the future. In December
    1995, the Judicial Conference adopted its first comprehensive Long
    Range Plan for the Federal Courts, which sets forth specific
    recommendations for conserving core values while preserving flexibility
    to respond to new challenges. There are numerous recommendations aimed
    at optimal use of judiciary financial, human, physical, and
    technological resources.
        Other planning efforts include a strategic business plan for the
    judiciary produced in September 1996. This plan provides a foundation
    for more specific plans and planning processes. The Long Range Plan for
    Automation in the Federal Judiciary supports the Long Range Plan for
    the courts as well as the strategic business plan.
        The judiciary's workload continues to grow. As workload grows, so
    does our need for additional personnel and related space. Together,
    personnel and rent represent most of the courts' operating budget. The
    efficiency efforts underway will help to offset these increases, but
    they cannot be relied upon exclusively to replace needed appropriations
    in the future. If our budget requests are not funded, staffing will
    have to be further reduced. Ultimately, this will affect our ability to
    provide the services required by the Constitution, expected by the
    Congress, and relied upon by the citizens.
                                   conclusion
        Let me conclude by saying the judiciary performs a critical service
    for our society and affects the lives of all of its citizens. As an
    integral component of the war on crime, the judiciary must have the
    resources to process the cases generated by the ever increasing number
    of law enforcement officers and federal prosecutors.
        We recognize the budget constraints you have and will continue to
    face. We want to work with you as we have done in the past to ensure
    that the judiciary receives adequate funding within those constraints.
    We have and will continue to use those resources wisely and
    efficiently.
        I want to thank you for this opportunity to testify before you
    today and we are available to provide any additional information you
    may need.
                                     ______

                                    Appendix
                                    summary
        The fiscal year 1998 budget request for the Courts of Appeals,
    District Courts and Other Judicial Services totals $3,461,324,000, an
    increase of $363,324,000 over our fiscal year 1997 appropriation level.
    However, to get a true picture of the financial requirements of the
    judiciary, it is important to point out that in addition to
    appropriated funds, the judiciary requires the use of other funding
    sources to supplement our appropriations. Included in these sources of
    funding are fee collections, carryover of fee balances from a prior
    year, and the use of no-year funds. When all sources of funds are
    considered, the increase in obligations for fiscal year 1998 is only,
    $266,254,000.
        Of the $266 million increase in obligations over 57 percent ($153
    million) is necessary to provide for inflation and other uncontrollable
    adjustments for existing judges and staff in order to continue current
    operations. The remaining 43 percent ($113 million) is primarily needed
    to respond to increasing workload. The request for the principal
    programs are summarized below.
                             salaries and expenses
        The salaries and expenses of the circuit, district, and bankruptcy
    courts, and probation and pretrial services offices account for most of
    our request. A total of $3,067,449,000 is required for this activity,
    $212.2 million over fiscal year 1997 estimated obligations. Other
    sources of funding totaling $225.6 million are expected to be available
    to offset the S&E requirements leaving an appropriation need of
    $2,842,840,000. Included in these other sources of funding are $74
    million in funds expected to carry forward from fiscal year 1997;
    $126.9 million in fee collections; $22.2 million from the Violent Crime
    Reduction Trust Fund (VCRTF); and $2.5 million from the Vaccine Injury
    Trust Fund.
        Over 58 percent of the $212 million increase ($124 million) is
    needed to fund uncontrollable costs such as inflation and the
    annualized costs of additional personnel and space brought on in fiscal
    year 1997. The current services portion of the request also includes
    rent and related costs associated with new space that the General
    Services Administration (GSA) will deliver in fiscal year 1998. The
    total rent bill from GSA is estimated to be $574 million for 1998, a
    5.2 percent increase over fiscal year 1997, and a 175 percent increase
    over fiscal year 1988.
        The remaining increase ($88 million) will primarily fund the
    personnel needed to address increases in our uncontrollable workload,
    and modest enhancements in our automation program. The increases fund
    the following:
        Additional Court Support Personnel.--Workload continues to increase
    in our district, appeals and bankruptcy courts. We anticipate that
    bankruptcy filings will increase over 20 percent and district and
    appellate filings will also increase. In probation, the number of
    offenders received for supervision will continue to increase, but more
    significant is the shift from relatively low-risk probation cases to
    high-risk violent offenders on supervised release. Consequently, an
    increase of $47.9 million would fund 979 new court support employees
    and related expenses (exclusive of judges' staff) in appellate,
    district and bankruptcy courts and $21 million for 349 new probation
    and pretrial services officers and supporting personnel.
        It is important to note that even with these increases the courts
    will have to continue to operate with only 84 percent of the staff that
    should be on-board to meet projected workload as identified by our work
    measurement formulae. This is the same staffing level as is provided in
    fiscal year 1996 and fiscal year 1997.
        Judges.--An increase of $8.9 million is requested for 13 new
    magistrate judge positions and 50 support staff positions. This
    increase is needed to provide an effective, yet less costly, way of
    providing help for Article III judges to handle the large volume of
    civil and criminal cases facing the courts.
        Probation and Pretrial Services Programs.--An increase of $8.8
    million is needed for the Drug-Dependent Offender Program. Of the
    requested increase, $5.1 million will be used to place high-risk
    substance abusers in structured, in-patient programs. The remaining
    $3.7 million is requested to implement the mandatory drug testing
    provision of the Violent Crime Control and Law Enforcement Act of 1994.
    An increase of $1.3 million is requested for contract in-patient mental
    treatment necessary to supervise and properly control an additional 100
    persons found incompetent to stand trial or not guilty by reason of
    insanity.
        Automation.--The 1998 request includes enhancements in the area of
    automation which include fundamental improvements to the courts
    business processes of accounting and financial systems, personnel
    management, court appointed attorney payment processing, and library
    inventory management. These automation projects will strengthen the
    judiciary's information management capabilities and enable more
    effective and efficient program management and resources. Overall,
    however, less funding will be required in fiscal year 1998 in the area
    of automation because of program reductions.
                               defender services
        A total of $354,482,000 is requested for the Defender Services
    program, which provides representation for indigent criminal
    defendants. Of this amount, $329,529,000 is requested in direct
    appropriations and $24,953,000 is requested as a reimbursement from the
    Violent Crime Reduction Trust Fund. The total requirements in fiscal
    year 1998 are $21,284,000 over the fiscal year 1997 projected
    requirements of $333,198,000.
        Most of the increase ($20,684,000) is needed for uncontrollable
    costs, such as pay and benefit cost adjustments, inflation and a
    projected increase in caseload. Included in these costs are funds for
    an additional 67 FTE to handle a projected caseload of 85,300 CJA
    representations. An increase from the anticipated fiscal year 1997
    level of 84,400. Also included is a $5 per in-court and out-of-court
    hour rate adjustment for private panel attorneys in those districts
    which do not currently receive a $75 per hour compensation rate. Panel
    attorney rates in 77 of the 94 districts, while raised in 1996 for the
    first time since 1984, are still an impediment to our ability to
    attract qualified attorneys to serve as court-appointed counsel.
        The remaining increase ($600,000) would fund two new federal and
    community defender organizations. The Congress urged us to establish
    more defender organizations as an alternative to using panel attorneys
    in districts where this would be appropriate. With these funds, we
    would have defender organizations which serve 66 districts in fiscal
    year 1998, up from 64 districts in fiscal year 1997.
                 fees and expenses of jurors and commissioners
        For the Fees of Jurors program, a total of $71,707,000 is required,
    $3.3 million over fiscal year 1997 estimated obligations. This amount
    funds inflationary adjustments, and a projected increase in the number
    of juror days.
                                 court security
        For the Court Security program, a total of $170,973,000 is
    required, $29.5 million over fiscal year 1997 estimated obligations.
    The request provides funding for inflation, including costs associated
    with a wage labor rate increase for court security officers, and other
    uncontrollable costs ($7 million).
        The remaining increase of $22.5 million would provide for
    additional court security officers, security equipment and
    administrative support to meet the courts' most urgent requirements for
    security coverage at new facilities coming on line in fiscal year 1998,
    and to bring security at existing facilities up to the minimal level
    deemed necessary by the Marshals Service.
                       violent crime reduction trust fund
        The Violent Crime Control and Law Enforcement Act of 1994 (Crime
    Bill) created the Violent Crime Reduction Trust Fund. The amounts in
    the trust fund are to be appropriated to finance expenses authorized by
    the Crime Bill and the Antiterrorism and Effective Death Penalty Act of
    1996. The judiciary was authorized $50 million in fiscal year 1998 to
    help meet the increased demands for judicial activities in the federal
    courts. Of the amount authorized for the judiciary in the trust fund:
    (1) $27.9 million provides funds to handle additional workload
    associated with the hiring of new Assistant U.S. Attorneys; (2) $17.2
    million will fund the Judiciary's workload increases in support of the
    Safety Valve, Three Strikes, Death Penalty, and Reimposition of
    Supervised Release provisions; and (3) $4.9 million will fund Mandatory
    Drug Testing, Criminal Aliens and Immigration Enforcement, Changes in
    Federal Rules of Evidence, and Notification of Changes of Address
    provisions that impact on our workload and resources.
                                     ______

     Prepared Statement of Leonidas Ralph Mecham, Director, Administrative
                           Office of the U.S. Courts
        Mr. Chairman and Members of the Subcommittee, thank you for
    inviting me to testify on the Administrative Office's (AO) fiscal year
    1998 budget request. Knowing the overall budget constraints under which
    you worked, the Subcommittee was very supportive and fair to the AO
    last year. I want to thank you, Chairman Gregg, and the Members of the
    Subcommittee for providing an increase in funding for fiscal year 1997.
    The level of funding provided the AO in fiscal year 1997 is sufficient
    to halt the decline in staffing levels which we have been experiencing
    since 1995. The AO and the courts are partners in administering justice
    and we appreciate your recognition of our role. Thanks also to the
    Committee staff for their continued professionalism and cooperation. We
    look forward to working with you all during this budget cycle.
                             ao plays a unique role
        The AO plays a unique role within the federal government. In his
    statement to this subcommittee, Judge John Heyburn, Chairman of the
    Committee on the Budget of the Judicial Conference, discusses the role
    of the judiciary in society and the fact that, in some way, the
    judiciary impacts the lives of all American citizens. Many citizens use
    the courts to resolve disputes, others benefit from interpretations
    made by the courts, many serve on juries, businesses and consumers
    settle debts in bankruptcy court, and safety for all is enhanced by
    pretrial services and probation officers who supervise individuals
    considered a safety risk to their community. Because the AO is actively
    involved in each of these court activities, the AO indirectly touches
    the lives of all citizens, exerting a much larger force than its budget
    and staff size would indicate.
        The judicial branch is organized differently from the executive
    branch. Most executive agencies have several administrative layers,
    including departmental, bureau, district, and field offices. The
    Administrative Office provides administrative and operational support
    directly to the federal courts so they can focus on their primary
    mission of adjudicating cases. Unlike other federal entities the
    judiciary has one-stop shopping for all its administrative needs
    because the AO provides such a broad range of services to the courts.
    The AO handles not only centralized administrative functions like
    budgeting and accounting, but directly supports court activities, such
    as developing computer applications, designing financial and personnel
    systems, and providing training. This unique administrative structure
    creates economies of scale that individual courts could not achieve and
    gives one office insight into all court matters, so cross-cutting
    improvements are easier to generate. Therefore, funding for the AO
    enhances the efficiency of all the courts.
    Justice Department Administration Receives 60 percent More
            Proportionately than the AO
        If pressed to find a government entity somewhat comparable to the
    AO, I would point to the general administration accounts at the
    Department of Justice. Both play an important role in law enforcement.
    Both are responsible for supporting the nation's battle against crime.
    However, appropriations for the Department of Justice general
    administration accounts increased 17.8 percent between fiscal years
    1995 and 1997, while AO appropriations increased by less than 5
    percent. Between 1995 and 1997, staffing associated with management and
    administration at DOJ has increased from 6,554 FTE to 7,461 FTE. During
    that period total AO FTE declined from 953 FTE to 923 FTE. Viewed
    another way, the AO's share of the federal judiciary budget in fiscal
    year 1997 was 2.6 percent (including the reimbursables from the
    courts), compared to 4.3 percent for the general administration
    accounts in the Department of Justice. In spite of the similarity of
    their missions, the AO receives proportionately less resources to
    support the judiciary than the general administration accounts receive
    to support the Department of Justice.
        You might ask, ``How has this low funding level impacted on the
    AO's ability to adequately support the courts?'' The primary area
    impacted by the hiring freeze is our ability to maintain an aggressive
    pace in improving our national financial systems. A cornerstone of our
    financial management process is decentralized decision making. We have
    an ambitious plan to pursue new initiatives and upgrade aging systems.
    Limited staffing has slowed our efforts to upgrade the CJA payment
    system, adopt national accounting and payroll systems and implement
    more efficient ways of administering court funding allotments.
    Chief Justice Rehnquist Stresses Value of the AO
        In his fiscal year 1996 annual report on the courts, Chief Justice
    Rehnquist discussed the important and unique role of the AO. He
    emphasized the AO's ``central role in the judiciary's efforts to
    economize'' and highlighted many AO accomplishments such as ``analyzed
    program and operating costs, conducted studies and evaluations, and
    identified opportunities for improvement or savings.'' The Chief
    Justice expressed concern about the discrepancy in the growth rates of
    the AO's budget and the judiciary's budget. He noted that the AO's
    budget ``has been growing at a much slower rate than the judiciary's as
    a whole.'' Despite a shrinking proportion of funds, the AO expanded its
    service to the judiciary in the last twenty years, but I am here to
    tell you that we have probably reached the limit of what we can take on
    without additional staff.
                                   ao funding
        The fiscal year 1998 funding request for the AO is modest. It
    allows for no new initiatives or programs. We are requesting total
    funding of $90,712,000, a 6 percent increase over expected fiscal year
    1997 obligations. This total includes all sources of funds--
    appropriations, the court reimbursable program, fiscal year 1998 fee
    collections, prior year carryover and independent counsel
    reimbursements.
        The AO sincerely appreciates the 4 percent increase in
    appropriations provided for fiscal year 1997 after essentially level
    funding over the last four years. The funds are sufficient to provide a
    current services level of activity. However, the 1997 funding does not
    allow the AO to lift the limited hiring freeze it has been operating
    under since 1993. The result of the freeze is that fiscal year 1997
    staffing will be the same as fiscal year 1996, but still well below the
    level authorized for fiscal year 1995.
        About half of the increase requested for fiscal year 1998 is for
    pay and benefit cost adjustments. Nearly 90 percent of the AO budget
    funds personnel, so pay and benefit adjustments represent a significant
    cost for us. The other half of the requested increase is for an
    additional 23 FTE which would restore staffing and services to 1995
    authorized levels. Restoration of the 1995 staffing levels is critical
    to the ability of the AO to provide necessary support to the whole
    judiciary. Without adequate staffing, the AO's efforts to improve the
    economy and efficiency of the judiciary will be delayed and in some
    cases halted.
                                ao achievements
    Support for Supervision of 120,000 Individuals
        The AO is proud of its service to the courts, especially its
    oversight and management support of the law enforcement functions of
    the judiciary. The AO is vitally involved in the work conducted by the
    nation's approximately 7,000 probation and pretrial services personnel.
    These people are on the front lines of the war on crime, monitoring the
    activities of 120,000 individuals, 15,000 more than are in federal
    penitentiaries. The AO manages a national contract for the home
    confinement program, a significant tool for monitoring those awaiting
    trial or convicted of crimes. Home confinement provides an alternative
    to more costly incarceration, saving the federal prisons between $31
    and $62 million a year.
    Drug Testing--720,000 Specimens
        Another area in which the AO provides central program support at a
    reduced cost is drug testing of those under supervision. The AO
    oversees the national drug-testing contract for the analysis of over
    720,000 urine specimens a year and is working with the Department of
    Justice on implementing a universal drug testing project in selected
    courts, which will allow the judiciary to detect and treat additional
    drug abusers.
        The AO commissioned a study on non-instrumented drug testing
    devices (hand-held urine test kits) that will result in probation and
    pretrial services officers using the most proficient and cost
    beneficial urine test devices for detecting illicit drug use. In
    addition, the AO is also studying additional drug testing technology
    that will reduce testing expenditures without impacting the ability to
    detect drug use.
        The court security program provides protection to the judges, the
    court staff, and visitors to the courts, with operational control by
    the U.S. Marshals Service and program oversight by the AO. This program
    involves about 2,600 court security officers and security equipment in
    over 400 facilities.
    Efficiencies from Decentralization
        A major initiative for the AO over the past few years is
    decentralizing budget, management and personnel functions to local
    managers. Decentralizing gives the courts increased flexibility to meet
    their individual needs in the most cost-effective way possible. To
    complement the decentralized budget and management system, the AO
    developed a decentralized personnel system for the courts that provides
    the courts the flexibility to allocate dollars for personnel needs
    rather than a set number of positions. Courts have the choice of hiring
    staff, hiring contractors, or automating their work. To further improve
    financial management, the AO is simplifying its system of allotting
    funds so that the number of categories of funding for the courts is
    reduced from 57 to 3.
    Efficiency Through Automated Systems
        Because of this streamlining and decentralization, the AO places a
    high priority on program management and oversight. The AO conducts
    quarterly financial reviews, which allow us to provide the Congress
    with periodic updates of savings or program adjustments that affect our
    need for appropriations. The AO is also working with court financial
    and technical experts to determine the best software for the
    judiciary's financial and budgetary requirements. The goal is to
    implement a standardized, automated accounting system in the courts
    which will ensure more auditable, accurate, and timely financial
    reports. The AO is also acquiring a new personnel and payroll system
    that automates and integrates the personnel and payroll functions and
    enables data entry and retrieval at local court sites.
    AO Staffs 24 Judicial Conference Committees
        A basic function of the AO is to provide support services to the
    policy making body that governs the judiciary, the Judicial Conference
    of the United States. The Judicial Conference has 24 committees that
    consider hundreds of issues each year with the help of subject matter
    experts on the AO staff. AO staff work with the committees on
    developing and implementing policies, developing long range planning,
    and coordinating economy and efficiency efforts.
    AO Support for 2,000 Judges
        A key priority for the AO is support of Article III, bankruptcy and
    magistrate judges. The AO provides the judges with legal counsel,
    orientation and training programs, payroll and other human resources
    services, statistical reports, program management advice, and chambers
    and courtroom automation capabilities. Similarly, the AO assists court
    administrators through court management reviews and on-site technical
    visits to monitor compliance with guidelines and assess program
    effectiveness.
                       applying technology in the courts
        The AO has an excellent track record in assisting the courts with
    technological advances, helping them to absorb some of the growth in
    workload over the last several years when they were not provided 100
    percent of the staffing authorized by our workload formulae. The AO has
    a Technology Enhancement Office devoted to identifying and analyzing
    court business problems and opportunities for service enhancements that
    might result from the innovative application of information technology.
    Videoconferencing
        A major initiative of this office is to expand the use of
    videoconferencing in court proceedings. Between 1991 and 1994, the
    judiciary conducted pilot programs for videoconferencing certain civil
    hearings. Based on an evaluation of the pilot programs, the Judicial
    Conference endorsed videoconferencing as a viable case management tool
    in civil prisoner pretrial proceedings and authorized funding to expand
    videoconferencing to additional courts and to cost-share with state or
    federal prison authorities. Currently, 21 district courts have met the
    criteria to participate in the project and 7 district courts have
    implemented the use of videoconferencing.
        In addition, the AO is working with the courts to establish what
    other types of proceedings are appropriate for videoconferencing. The
    AO and the FJC are also establishing a joint videoconferencing and long
    distance learning facility. Some AO training and seminars are already
    provided through videoconferencing and we are working to add more.
        In various other ways, the AO is applying technology to the work of
    the courts. The AO spearheads automation initiatives which offer the
    potential for reduced cost and improvements in the quality of support
    for case processing. The AO is supporting a number of new major
    technology-based initiatives to improve communications, make
    information more accessible to the public and the judiciary, and
    improve courtroom proceedings. This includes the use of electronic
    filing, electronic courtroom technology, and the electronic
    dissemination of information as well as technologies to improve the
    quality and efficiency of courtroom proceedings.
    AO Automation and Technology Initiatives
        As detailed in the November 1996 ``Report to Congress on the
    Optimal Utilization of Judicial Resources'' that was prepared at your
    request, the following automation initiatives are indicative of the
    support provided by the AO to improve the way the judiciary operates,
    and, where possible, reduce costs.
        Implementing the Jury Modernization Project will assist courts in
    empaneling juries by creating jury wheels of eligible citizens,
    processing summons for prospective jurors, processing questionnaires,
    and paying jurors.
        Exploring the use of mobile computing for probation and pretrial
    services officers so that they can spend more time out in the community
    and less time in the office.
        Using and exploring the future potential of video and computer-
    based training as a means to conduct training more cost effectively.
        Exploring opportunities to realize savings and efficiencies by
    reducing the production and handling of paper documents through use of
    electronic case files.
        Experimenting with electronic filing to eliminate repetitive, time-
    consuming manual tasks involved in docketing.
        Using and exploring the future potential of electronic public
    access systems to save court staff resources in responding to public
    needs for information and to permit the public to gain direct, rapid,
    and easy access to official court records.
        Designing an electronic bankruptcy noticing system to transmit
    electronically bankruptcy notices to large creditors rather than
    through the more expensive printing and mailing system currently used.
        Exploring expanded use of Internet and Intranet technologies to
    distribute judiciary publications and other information at lower cost.
        Exploring opportunities to realize efficiencies through the use of
    document imaging, retrieval, and display technologies in the courtroom.
        Deploying and enhancing automated case management systems, which
    facilitates speedy resolution of pending cases by providing critical
    information needed to manage caseload.
                  ao support of economy and efficiency efforts
        The judiciary is committed to improving the overall fiscal
    responsibility, accountability, and efficiency of its operations. The
    Economy Subcommittee of the Judicial Conference's Budget Committee
    coordinates the efforts of the various program committees of the
    conference in developing and implementing economy and efficiency
    initiatives. The Economy Subcommittee receives staff support from
    throughout the AO and together they perform a function within the
    judiciary similar to the Office of Management and Budget's role in the
    Executive Branch. The impact of this team effort is showcased in the
    ``Report to Congress on the Optimal Utilization of Judicial
    Resources.'' The Economy Subcommittee and the AO not only spearheaded
    the production of the report, but were responsible for many of the
    efficiencies it tallies.
    Millions of Dollars Saved
        I am very proud of the accomplishments identified in the Optimal
    Utilization report. They have saved the federal government millions of
    dollars and improved the judiciary's service to the public. Good
    examples of the economy measures implemented by the judiciary with the
    help of the AO are: assigning visiting judges to provide short-term
    assistance as needed; developing and updating staffing formulas for
    distributing court staff resources in a way that is consistent with the
    workload; developing criteria for consideration by the Judicial
    Conference for the release of visiting courtroom facilities and other
    types of space; providing increased flexibility in personnel and budget
    systems that enables the courts to maximize use of scarce resources by
    contracting out for goods and services when it is cost-effective;
    identifying and promoting use of additional contract opportunities by
    the courts; establishing centralized, automated paperwork processing
    systems for the courts such as the Bankruptcy Noticing Center and the
    Central Violations Bureau; improving the terms of the judiciary's
    computerized legal research contract; and facilitating the Methods
    Analysis program which scrutinizes the courts' work processes in order
    to make recommendations on improvements.
    Future Economies Planned by the AO
        But the AO is not going to rest on its laurels. As the Optimal
    Utilization report indicates, the AO continues to plan for future
    economies. Some of the most exciting efforts have already been
    mentioned, such as expanding the use of videoconferencing and
    implementing the electronic courtroom. Other promising areas are:
    developing criteria for consideration by the Judicial Conference for
    not filling vacant judgeships or even eliminating judgeships in
    district courts; developing a national incentive program to encourage
    the courts to manage space costs more effectively; containing the cost
    of death penalty representations by encouraging courts to maintain
    minimum average caseload-per-attorney ratios, improving record-keeping,
    and applying case management techniques used in complex civil
    litigation; and assessing the recommendations of the National Academy
    of Public Administration on possible ways to make court administrative
    functions more efficient.
        The AO looks forward to working with Congress and the courts on
    streamlining operations and saving money as the overall federal budget
    continues to shrink and the courts' workload continues to expand. That
    is the AO's mission and we are excited about the challenge.
                                    summary
        Mr. Chairman and members of the subcommittee, you have been very
    generous in your funding for the courts in the past and very patient in
    listening to our needs for fiscal year 1998. Although I know you face
    competing demands from many worthy programs, I ask for careful
    consideration of the judiciary's needs and those of the Administrative
    Office. Few government functions are as basic to individual rights or
    as important to society in total as the federal courts. The nation
    relies on the federal courts to administer equal justice under the law.
    The courts, in turn, rely on the AO for support in carrying out their
    mission in the best, most efficient way possible.
        That concludes my prepared statement. I would be pleased to answer
    any questions you may have.
                                     ______

      Prepared Statement of Hon. Rya W. Zobel, Director, Federal Judicial
                                     Center
        Mr. Chairman and members of the subcommittee: My name is Rya Zobel.
    I am a U.S. district judge and have been the director of the Federal
    Judicial Center since 1995.
        The Center is the federal courts' agency for education of judges
    and supporting staff and for analysis and evaluation of judicial
    procedures and case management. This appropriations request has been
    endorsed by the Center's Board--the Chief Justice as chairman, two
    circuit, three district, one bankruptcy and one magistrate judge, and
    the director of the Administrative Office as an ex officio member. It
    has been coordinated with the Administrative Office and the U.S.
    Sentencing Commission and with the Judicial Conference's Budget
    Committee, whose chairman, Judge Heyburn, will speak for the Center
    today. I am available to answer any questions you may have of me.
        For 1998, the Center respectfully requests an appropriation of
    $18,425,000, 5.3 percent over our current appropriation. The amount
    requested is about the same as our 1994 appropriation and $500,000 less
    than was available to us in 1992.
        The requested increase covers two things. First is $630,000 for
    adjustments to our base for inflation and increased pay and benefits
    costs. Second is $300,000 in program growth for recurring costs of
    equipment to enhance our distance education capability and for two
    video producers and one multimedia specialist. This will help us keep
    pace with the demand for videotapes for initial orientation and local
    training programs while producing more satellite broadcasts and
    computer-based training. Of this requested program growth, $100,000 is
    for equipment in our research and development budget activity, but, as
    our budget request explains, this equipment is for distance education
    technology in direct support of our training mission.
        Even if we add these three positions, the Center's staffing
    strength will be almost 10 percent below what it was in 1995, when I
    became director.
        I hope you will consider this information as you assess our
    request.
        Reducing travel costs.--More than 80 percent of participants in
    Center training programs attend in their home cities using Center-
    produced curriculum packages, on-line computer conferences, satellite
    broadcasts, and videoconferences. There are also many individual users
    of Center videotapes, manuals, diskettes, and CD-ROM's. We have reduced
    our travel expenditures since 1995 by more than 22 percent ($1.2
    million). We intend to reduce them an additional $200,000 in fiscal
    1998 and have calculated those reductions into our estimate of overall
    increased program needs.
        Teletraining.--We plan eight satellite broadcasts in 1997. In 1996
    we presented two national satellite broadcasts--one for judges and
    others on the 1996 Habeas Reform Act, another for appellate staff
    attorneys--and a two-way videoconference for appellate deputy clerks.
    Two 1996 developments will increase use of satellite technology over
    the next few years.
      --Equipping federal courts with satellite downlinks.--Without
            downlinks in the courts, we must rent sites across the country
            and even then cannot reach many court locations. Last summer we
            assessed the feasibility of, and the courts' receptivity to,
            placing downlinks in courthouses. I am grateful that the
            Judicial Conference's Executive Committee, on the
            recommendation of the Administrative Office, set aside funds to
            place downlinks in sufficient courts to reach most judiciary
            personnel. That installation will begin soon.
      --Adding a second broadcast studio.--We adjusted our fiscal 1996
            spending to begin construction of a second video studio, this
            one dedicated to satellite and two-way video programs. We
            received financial support from the Sentencing Commission and
            we are working with the Administrative Office on building
            renovations. This second studio will augment our ability to
            broadcast educational programs and to assist the Administrative
            Office and the Sentencing Commission in similar efforts. As the
            Chief Justice recently said, ``Center expertise in
            videoproduction and curriculum design will enable the entire
            third branch to make good use of this form of communication and
            education.''
        Results-oriented education and analysis.--Over 98 percent of our
    appropriated funds for judicial education are devoted to orientation of
    new judges and basic continuing legal education for all judges,
    including updates on legislation and case law, techniques for court and
    case management, and basic substantive knowledge and skills that all
    judges need to process cases more efficiently and avoid costly delays
    and reversals.
        For example, to help implement last April's Prisoner Litigation
    Reform Act and Habeas Reform Act, the Center provided judges and staff
    not only two satellite seminars but also a Resource Guide for Managing
    Prisoner Civil Rights Litigation and a newsletter Habeas & Prisoner
    Litigation Case Law Update, which reports cases under the statutes.
    These products came from our pro se litigation and capital-case
    management projects already in place. The Center's most popular
    publication with judges is the ``Manual on Recurring Problems in
    Criminal Trials,'' now in its fourth edition (the Justice Department
    also makes this publication available electronically to its attorneys,
    and numerous defense counsels have sought it either in hard copy or
    from our Internet site).
        The outcomes of our programs are more efficient and more effective
    courts. The sums cited in the following examples are fairly small but
    amount to real savings when aggregated. As important, they demonstrate
    a commitment to use new knowledge to promote efficiency in court
    operations.
      --Since 1995, the Center's ``Maximizing Productivity Project'' has
            helped managers in 60 court units to make more effective use of
            staff, refine work processes, and expand the use of automation.
            For example, a bankruptcy clerk's office credited the project
            with enabling it to use savings from staff salaries to
            refurbish key equipment and automation hardware, and, over
            three years, to release $600,000 for use by other courts.
            (However, not all bankruptcy courts have this court's high
            proportion of Chapter 7 cases, which are more amenable to
            automation and thus allow these savings.) A probation-pretrial
            services office reorganized its staff to reduce clerical
            personnel and increase by 16 percent the number of officers for
            presentence investigation and supervision of offenders.
      --A before-and-after comparison of juror utilization in the five
            districts that participated in our most recent utilization
            workshop shows a savings of $360,000 in juror fees and a
            reduction of 5,615 in the number of jurors called into the
            courthouse unnecessarily.
      --Our ``Leadership Development Project'' is a three-year course of
            mainly in-district training, workplace analysis, and
            implementation of management improvements. In one district, a
            probation officer instituted a program by which offenders help
            pay for costs of their counseling, drug tests, and related
            services, at an expected savings of $68,700 in the first year
            in which this plan is fully operational.
      --Probation officers will use the Center's ``risk prediction index''
            to identify offenders who need less supervision than others.
            Based on the index, one large district will be able to shift
            enough offenders to non-reporting/administrative status to
            allow up to fifteen officers to concentrate on more dangerous
            offenders.
      --Selected probation and pretrial services officers participate in
            FJC ``System Impact Seminars,'' selecting tracks such as
            substance abuse or financial investigation, to learn techniques
            that they in turn adapt for particular problems in their
            districts--a ``system impact.''
        Clarification of Center's mission.--The Center's Board has launched
    a strategic planning process to assess whether we are assigning the
    right priorities to our many statutory missions in this era of tightly
    restricted funding. This process has involved consultation with the
    users of our services and will make for a stronger agency. The
    committee, comprising the judges on the Center Board and a member of
    the Judicial Conference Executive Committee, will report to the
    Center's full Board later this year.
        I thank the subcommittee again for its support. I will be glad to
    answer any questions you might have about our fiscal 1998 request or
    about the Center and its missions.
                                     ______

      Prepared Statement of Gregory W. Carman, Chief Judge, U.S. Court of
                              International Trade
        Mr. Chairman, Members of the Committee: The Court's budget request
    for fiscal year 1998 is $11,478,000, which is $364,000 or approximately
    three percent more than the $11,114,000 provided for in fiscal year
    1997.
        The overall increase of $364,000 consists of ``Mandatory
    Adjustments to Base and Built-in-Changes'' as follows: $302,000 is
    requested for pay and benefit cost adjustments for judicial officers
    and court personnel; $12,000 is requested for other mandatory changes,
    including increases in postage and printing; $20,000 is requested for
    inflationary adjustments for lawbooks; and $30,000 is requested for GSA
    space rental increases.
        I would like to emphasize that the Court will continue, as it has
    in the past, to conserve its financial resources through sound and
    prudent personnel and fiscal management practices.
        The Court's ``General Statement and Information'' and
    ``Justification of Changes'', which provide more detailed descriptions
    of each line item adjustment, have been submitted previously. If the
    Committee requires any additional information, we will be pleased to
    submit it.
                                     ______

    Prepared Statement of Glenn L. Archer, Jr., Chief Judge, U.S. Court of
                        Appeals for the Federal Circuit
        Mr. Chairman, I am pleased to submit my statement to the Committee
    for the fiscal year 1998 budget estimate.
        The amount of our 1998 budget request totals $16,156,000. This is
    an increase of $1,143,000 over the 1997 appropriation of $15,013,000.
    $599,000 of the increase is for mandatory, uncontrollable increases in
    costs. The remaining increase of $544,000 is for funding for additional
    positions.
        Partial funding for third in-chambers law clerk.--The court is
    requesting the additional positions to begin providing third law clerks
    to the judges. The Judges of this court now have two permanent in-
    chambers law clerks (compared to three or four for all other circuit
    judges). The third law clerk is needed because of the complexity of the
    court's caseload and because all merits decisions are handled in
    chambers without assistance from a central legal staff. Although the
    court has asked for 10 full-time-equivalent positions in prior years,
    this funding request is for five full-time-equivalent law clerk
    positions. We have reduced our request this year to five positions
    because of the current budget restraints and the desire of Congress to
    reduce the deficit. I ask the Committee to approve this court's long-
    standing need by authorizing the reduced funding requested.
        Funding for information technology positions.--Also included in
    this requested increase of $544,000 is funding for staff positions
    which are needed because of the increasing use of computers and
    computer-related services. The increasing use of computer technology by
    the Judges and the central staff contributes to the efficiency of the
    court's operations, but a trained staff is needed to install and
    maintain the more sophisticated and productive computers and related
    equipment and systems, as well as to keep up with changes in
    technology, and offer long range planning for the court's future
    technology needs. Thus, I request funding for these staff positions,
    the full time equivalent of three positions in the clerk's office, and
    one position in the administrative services office.
    Mandatory Increases
        As stated above, our fiscal year 1998 increases in mandatory items,
    over which the court has no control, total $599,000. As described in
    our budget materials, these mandatory increases result primarily from
    inflation and pay increases.
    Program Changes and Requests
                Personnel Requests--Additional Law Clerks
        The sum of $360,000 is requested for the third law clerk positions.
    This would cover an increase of five full time equivalent law clerk
    positions. This does not provide a third law clerk for each of the
    twelve active Judges. However, it would allow the court to hire five
    additional law clerks on a permanent basis. The base budget of this
    circuit currently provides for two law clerks and one secretary in each
    chambers, which is one law clerk and one secretary (or additional law
    clerk) less than the Judicial Conference of the United States has
    authorized for active judges in all of the other circuits.
        The third law clerk positions for all twelve Judges of this court
    have previously been included in our budget requests for a 1993
    supplemental appropriation and in the court's appropriation requests in
    1994, 1995, 1996 and 1997. This long-standing need, however, has been
    denied by Congress without explanation.
        One additional in-chambers law clerk for each active Judge of this
    court has become a necessity because of the increased complexity of our
    cases, such as patent infringement cases which often have a large
    number of difficult issues and because of the additional subject
    jurisdiction which the Congress has given to this court, such as review
    of Veterans' cases and the appellate jurisdiction under the recently
    enacted Congressional Accountability Act of 1995 and the Presidential
    and Executive Office Accountability Act of 1996. During the past few
    years, the court has hired temporary third law clerks for Judges by
    using lapsed funds from a vacant judgeship and from vacant staff
    positions which we decided were not as urgently needed as the
    additional in-chambers law clerks. As to the latter, we have, for
    example, delayed implementing our settlement program and deferred
    hiring three non-legal support staff. The additional, though temporary,
    help of the in-chambers law clerks has enabled the court to moderate
    the rise in median disposition time for cases, which is now about eight
    months, and to prevent a serious backlog of undecided cases.
        The court has a great need to have the temporary third law clerk
    positions made permanent and funded. We anticipate the appointment of a
    Judge to fill the current vacancy before the end of fiscal year 1997.
    Once the court has a full complement of Judges, the lapsed funds from a
    judicial vacancy will no longer be available to hire such clerks on a
    temporary basis. Further, with only temporary positions we are unable
    to make a job offer to a potential law clerk at the normal time or to
    guarantee any employment beyond the end of the fiscal year. These
    hiring obstacles make it difficult for Judges to hire the best
    qualified law clerks.
                Personnel Requests--Administrative Staff Positions
        Clerk's Office.--The court requests funding for the equivalent of
    three additional clerical positions for the Clerk's Office at a cost of
    $131,000. There is now only one secretary in the Clerk's Office.
    Another Secretary position is needed to assist the chief deputy clerk
    and the operations manager and to insure that the secretarial functions
    for the entire office, now exclusively provided by the secretary to the
    Clerk, are available whenever required. A Systems Manager position is
    needed because the complexity of the Clerk's database management system
    has grown beyond the competence of the nontechnical staff to maintain
    as extra duties. Two Deputy Clerk positions are needed, one position
    for a calendar/deputy clerk to alleviate the calendar functions now
    performed by the chief deputy clerk as an extra duty, and one position
    for a records manager to develop a records management system now
    required to keep pace with the large increase in the permanent records
    which the court has accumulated since its creation in 1982 and which
    must be maintained and preserved.
        Administrative Services Office.--The Administrative Services Office
    is responsible for the operations of the court, such as personnel,
    payroll, coordinating and monitoring of the court's budget, printing
    and distribution of opinions, maintenance of computers and all other
    equipment, all purchasing for the court, coordination of building
    maintenance with GSA, and the like. Because of the increased use of
    computers by the Judges and staff of the court and the development of
    e-mail communication, as well as a public bulletin board for
    distribution of opinions, we find it necessary to request a Systems
    Manager position at a cost of $53,000. We are currently provided with
    only one systems staff member on a permanent basis and it is not
    possible for this person to keep up with the daily requests and
    problems throughout the court. With the demands for, and growing use
    of, computers and computer-related services, we feel this request is
    fully justified.
        I will be glad, Mr. Chairman, to answer any questions the committee
    may have or meet with Committee members or staff about our budget
    requests.

                               Defender services

        Senator Gregg. Thank you, Judge, and I appreciate your time
    in coming here today. I know it's quite a trip.
        I want to talk a little bit about the Public Defender
    Program, because this is the place where we've seen the most
    explosive increase in cost.
        In fact, I was just looking at this chart that my staff
    gave me which shows me that in 1986 we spent $59 million for
    the Public Defender Program. By 1996, we had spent $305
    million. Next year we're talking about going to $333 million.
        And I think I saw a report, or maybe it was an anecdotal
    statement made to me by somebody, that the attorneys for
    McVeigh are expecting to charge the Government somewhere in the
    vicinity of $50 million to defend that case, which I found
    incomprehensible and outrageous.
        I recall when I was a lawyer, which was a while ago, I had
    a public defender case assigned to me by the Federal court, and
    it was a fairly controversial, high-visibility public case in
    New Hampshire involving a political issue and a criminal trial.
    I defended this fellow as aggressively as I could, and ended up
    reaching an agreement where there was no further prosecution.
    And we used, as I recall at the time, about 22,000 dollars'
    worth of billable time from my office. I ran a small country
    practice.
        I went to the Federal judge, and I asked for my $22,000
    billable time. He gave me what was the going rate at that time,
    which I think ended up being $1,000 or something, and simply
    ignored my request for further funds on the basis of time.
        It does appear, however, that the reimbursement process
    here has gotten a bit out of control. I notice, for example, on
    capital offenses, that the average cost for a capital offense--
    granted, a capital offense is a major item and deserves to have
    maybe more attention given, although I don't know if that is
    defendable, but I guess it is perceived that way, anyway--the
    average cost for a capital offense is $81,000. My entry
    question is, Do you see any way of controlling these costs? Are
    judges aggressively limiting public defender costs in a fair
    way, obviously recognizing there has to be a Public Defender
    Program, but recognizing also that this should not be a jar of
    money into which a group of attorneys decide to stick their
    hands.
        What is the present structure now, and could it be
    conceivable that the McVeigh case would generate that type of a
    legal fee which the people of this country would have to pay?
        Judge Heyburn. No. 1, you ask a number of excellent
    questions, some of which I have excellent answers to, and some
    of which I don't have answers to. And I'll try to be responsive
    across the board, and then if there is something that you would
    like to go into further, or you think I've missed, please tell
    me, because it's not my intention to pass over something. It's
    just a big subject, a subject I'm very interested in, and I
    know you are as well. And we could spend a lot of time talking
    about it, and I know we don't have a lot of time.
        Let me respond by saying a couple of things. First of all,
    the history of defender services is in part a success story of
    management. We recognized some time ago, and I say we, the
    judiciary, that defender services costs were increasing, and
    traditionally these were supplied almost solely by panel
    attorneys.
        The costs of defender services from 1990 to 1991 and from
    1991 to 1992 went up 35 and 38 percent respectively each year.
    That's a lot. At about that time the decision was made that
    defender services could be better provided and more efficiently
    through public defender organizations.
        The process of evolution started at that time. Since that
    time, for the last 5 years, the cost of defender services
    overall has increased approximately 7 to 8 percent per year.
        We can see that the cost of defender services as a whole is
    not going through the roof. We'd maybe like it to be less, but
    it's not what it used to be.
        I think, in part, that is because of the transition from
    the provision of those services from panel attorneys to
    defender organizations. Ten years ago, 60 to 70 percent of
    defender services may have been provided by panel attorneys.
    Now the percentage has almost flipped.
        So we've made that transition. You make these decisions.
    You never know what the impact is going to be. In retrospect
    it's been a good one, because the per representation cost of
    public defenders has been going up over the last 5 years about
    2 or 3 percent--basically at the inflationary rate.

                                 Capital cases

        If you look at the numbers overall, where is the
    significant increase, and you've highlighted it exactly. It is
    in the capital cases. And the costs of panel attorney
    representation over all has been going up 9 to 10 percent per
    year, starkly different from that of the defender services.
        The reason for that, again, relates to the capital cases.
    What is happening is that the panel attorneys are no longer
    getting the easy cases. The only time a panel attorney in those
    districts where we have a defender organization, the only time
    they get a case is when it's a multidefendant case, and the
    defender organization can't, because of a conflict, represent
    two defendants or three defendants. So the panel attorneys get
    the more complicated cases, and they usually get the capital
    cases. So it's not surprising that their per cost of
    representation is increasing.
        What is driving that is the point that you made, and that
    is that the per cost of representation of capital cases has
    sort of gone through the roof. Part of that is related to some
    major cases, such as the Oklahoma City case. I'll discuss that
    in a minute.
        We have done an extensive study of trying to figure out why
    the costs of capital cases are increasing so much more than any
    other area. And if you look at defender services generally, if
    you take out capital cases, the defender budget would basically
    not be increasing a whole lot more than inflation.
        So we've pretty much identified from the research I've
    seen, and I've spent a lot of time on it, the reason why it's
    increasing. And we've tried to determine, well, why is the cost
    of the capital cases increasing so much.
        And as best we can tell these are the possible answers, and
    I can't tell you which is the greater influence. But you've got
    a number of things going on here. You've got a whole lot of
    people involved in the process who are inexperienced at what
    they're doing.
        The U.S. attorneys haven't, heretofore, been bringing a lot
    of capital cases, so they devote an incredible amount of
    resources to them, and they are inexperienced at doing it,
    because up until 3 or 4 years ago they weren't bringing any.
        The people who are defending may be inexperienced, and they
    try to match in some equivalent form--although probably not
    completely--whatever resources they perceive are being put into
    the prosecution, which are tremendous.
        The other part of the troika is the judges. And we have
    tremendous Federal judges, but the fact of the matter is, we
    have, unless you've been a State judge, no experience in a
    capital case. And we can't discount that as a factor in the
    management of the cases. We are not experienced at it.
        And so you have three groups of inexperienced people trying
    these very complicated and high stakes cases and part of the
    result is inefficiencies. Time and expense because of
    inexperience that wouldn't result otherwise in your every day
    drug case, where we all know what the rules of evidence are,
    and we've done it a lot of times.
        So that drives up the cost. The total cost on capital cases
    is being driven up by two factors. In pure numbers, several
    years ago there were one or two capital cases. Now, this year,
    there are about 150 defendants. So by sheer numbers the cost of
    defense of capital cases is going up. That's something we
    absolutely can't control.
        The other factor that is driving up the per cost of
    representation is that the cases that exist now as a matrix
    tend to be more mature. There are more of them going to trial
    this year than there were last year. And, of course, this is
    definitely true of the Oklahoma City case. When you get to
    trial the intensity and the expense is going to be greater. So
    if you factor that into the average, it's going to go up. So
    all those factors are going to contribute to the increase in
    costs, the increase in per representation cost.
        What can we do about it? Part of it we can't control,
    because the judges are not likely to get experience in doing
    this. It's unlikely that many judges will ever try more than
    one of these kinds of cases. The same may be true of the
    prosecutors and the defense counsel.

                                Cost containment

        From our point of view, what we can do, and what we are
    trying to do is to make the judges aware, those who have these
    kinds of cases, that there are resources--other judges who have
    tried these kinds of cases, put them in contact with these
    judges so that they can take steps to run the cases more
    efficiently, and reduce expenses.
        Quite frankly, another part of the problem is sometimes how
    these cases are brought. There might be a multidefendant
    indictment, and only one of the defendants has the death
    penalty possibility. But if they are all tried together, then
    all of the counsel who are representing the other defendants
    are dragged into this lengthy and very complicated case.
        So one possibility from a trial strategy point of view
    would be thinking about severing a case like that, where you
    normally wouldn't, in a normal drug case, but in this kind of
    case, you wouldn't lose anything in terms of justice. It would
    save a tremendous amount of expense for those who weren't
    subject to the ultimate penalty.
        So there are a number of different things that people have
    thought up, most of them by judges after they made the mistake,
    or after the fact, because they didn't have the experience to
    deal with it ahead of time. So we're trying to bring that
    experience to bear among the judges who are having these cases.
    And, of course, we don't know what impact that will have.
        Oklahoma City may be the case of the century and it may be
    an aberration. Whether or not the defense costs are $50
    million, I have no idea, and I really wouldn't want to comment
    about those costs until we can see what they really are.
        But there are tremendous resources being brought to bear in
    the prosecution of that case, and one can only expect that
    those defending would try to match it in some way, shape, or
    form, although I'm sure they won't.
        And we all have a concern about that, but I think it's best
    that we wait until it's over, and then we can assess it, see if
    we can learn anything from it. It may be like the O.J. Simpson
    trial, that there's not necessarily anything that we can learn
    from it, because we hope a similar case will never happen
    again. It really is an aberration.
        Senator Gregg. The difference, of course, is that in the
    O.J. Simpson trial it wasn't the American taxpayer who was
    footing the bill for defense.
        Judge Heyburn. That's true.
        Senator Gregg. And I think it's very hard to explain to the
    taxpayer how those types of dollars--let's say it's one-tenth
    of that, let's say it's $5 million--and I have no idea what the
    number is. But I guess my concern is that there doesn't appear
    to be restraints in place that would make it clear to an
    attorney in that type of a case that they don't have a
    bottomless pit, that they don't have a blank check from the
    taxpayers of this country in this area.
        I don't see where there's a loss of a person's right to
    adequate defense if he has an inexperienced attorney who
    charges $500 an hour versus a public defender who knows how to
    try a case who charges public defense fees. And why shouldn't
    the attorneys charging $500 an hour in the private sector be
    required to be reimbursed at the public defender rate?
        Judge Heyburn. I don't think those lawyers are charging
    $500 an hour.
        Senator Gregg. To what extent do we limit their
    reimbursement?
        Judge Heyburn. Those reimbursements are limited in a number
    of ways. The hourly rate is limited by statute to $125 an hour.
    So if Congress in its wisdom would choose to reduce that----
        Senator Gregg. Is there an upper limit on the amount of
    hours that could be charged?
        Judge Heyburn. No; the way that is limited is that every
    request for payment or reimbursement is reviewed by the judge
    in the case. And, indeed, sometimes prior to any particular
    action taking place there may be a review. And that is a
    process that most judges take seriously, and it's obviously a
    process which varies, depending on the case and the
    circumstances.
        The only way we can look at a particular situation and make
    a judgment about whether the expenses were appropriate or not
    is, unfortunately, or fortunately, after the fact.
        And this is a very unusual case. I would urge everyone to
    resist the temptation to speculate about whether the funds
    being used are appropriate or inappropriate until the case is
    over and we know what the result is, and can fully look at how
    the moneys were spent. There may be some things which have been
    in the press which are true, and some which are untrue.

                         Capital case cost information

        Senator Gregg. Well, I think what would be helpful is if
    $81,000 is the average cost of a criminal capital prosecution,
    and there were 83 cases in 1996-97, if you could give this
    committee, or if your crack staff, which we know is very
    effective, could get this committee those cases which exceeded
    the average, how much was spent, so we could get a sense of
    whether or not there are some cases where they are running up
    huge bills.
        And then we would be interested in ideas on if there is
    action that needs to be taken legislatively in this area, to
    try to control this explosive cost in capital case prosecution
    area, what they are, what your recommendations are that the
    legislation should do.
        Judge Heyburn. We would be glad to do that. I think we are
    on the same side of this issue, because we have a lot of judges
    out there who are required to make very difficult judgments.
    They approve all of these payments, and having done it myself
    we have a process of approving all these. I know how difficult
    it can be when you are attempting to be fair and at the same
    time trying to avoid a waste of time and money in a trial. But
    we'd be glad to get you that information, and maybe there are
    some conclusions we can draw from it.
        [The information follows:]

        As of March 31, 1997, there have been nine cases with 13
    defendants in which the defendant was tried, convicted, and
    sentenced to death in federal court. Of these 13 defendants,
    defense counsel was provided by government-paid private (panel)
    attorneys in eight instances. Counsel for four defendants was
    provided by either a federal defender or a retained attorney.
    One defendant's counsel was provided by both a panel attorney
    and a federal defender. The amount the federal government paid
    for the legal defense in the trial of each of the eight
    defendants using panel attorneys, including attorney's fees,
    experts, and related expenses, ranged from $144,013 to
    $426,114, with the average costs totaling $284,123. Costs
    exceeded the average for three of these eight defendants.
        The Judiciary has undertaken several initiatives to try to
    control costs in federal capital prosecutions. We believe
    administrative, rather than legislative approaches are the more
    appropriate way to address this issue.
        The Defender Services Committee of the Judicial Conference
    of the United States has initiated, and is continuing to
    examine, ways to contain the cost of defense representation in
    capital cases, such as: case budgeting; enhanced training of
    judges and attorneys; employment of case-management techniques
    currently used in complex civil litigation; and improvements in
    panel attorney voucher reviews. In addition, shortly after the
    hearing, the Committee established a Subcommittee on Federal
    Death Penalty Cases to examine the availability, quality, and
    compensation of appointed counsel in federal capital
    prosecutions. The Subcommittee, chaired by Judge James R.
    Spencer of the Eastern District of Virginia, will submit a
    written report, including recommendations for providing cost-
    effective representation in this area, to the Defender Services
    Committee in May 1998.

        Senator Gregg. Well, I would think there would be. It would
    just seem to me that there has to be some upper limit here.
    Attorneys who are defending these cases should understand that
    this is not a carte blanche, that there is an upper limit.
    Maybe it's four times the average, or something. But there has
    got to be some sort of limit, so that we just simply don't
    spend a dramatic amount of money on specific cases. You can
    still get justice. It's not an issue, I think, of justice.

                               Videoconferencing

        What about the electronics area? I know you're always
    taking a look at this. Are there areas of videoconferencing, or
    utilizing the explosion in electronic capability to
    communicate, that could reduce the cost of operating the court
    system, such as reducing the access to courts of TV and things
    like that?
        Judge Heyburn. The greatest savings we've seen so far are
    in the educational programs, and educational programs by
    videoconferencing, where we're able to draw a number of judges,
    but particularly staff and clerical people into educational
    programs without travel.
        But a number of the other courts under the leadership of
    the Administrative Office are experimenting with
    videoconferencing. A number of bankruptcy courts are doing
    this. In prisoner litigation, it's proved to be very effective
    in certain circumstances, where you can have a videoconference
    from a prison, or for a pretrial conference with judges and
    lawyers.
        And this has proved not only economical from the judges and
    the defense counsel's point of view--often you have State
    lawyers representing the prison--but also from a security point
    of view where you don't have to move the prisoners around, or
    you don't have to have judges traveling into prisons.
        We also have had a number--the second circuit court of
    appeals, as a matter of fact, is experimenting with
    videoconferencing of appellate arguments. So there's a lot of
    experimentation going on, and where appropriate we are trying
    to implement those technologies.
        The difficulty is that unless you have a sufficient volume
    of a particular kind of proceeding from particular places to
    another stated place, then the expense of the equipment and
    everything doesn't justify whatever savings there are.
        So we're trying to find where it can be appropriately and
    efficiently used. And we're working at it hard, and we've found
    some areas where it seems to be very effective.

                           Cost-of-living adjustment

        Senator Gregg. Well, on the pay raise issue, as you know, I
    agree with your concerns. I think keeping quality people in the
    judiciary is critical and you've got to pay them a fair salary,
    especially people who have children, who are raising families.
    But, unfortunately, you're linked to the Congress on this
    issue, so I don't have a resolution of it. I sympathize with
    your position.
        Judge Heyburn. Well, I'm glad to have your sympathy, and
    you have mine, I suppose. But, of course, one solution is the
    delinking of the two. There are some reasons why it would be
    appropriate to delink. We are an independent branch. Congress
    naturally has political concerns and other concerns that don't
    necessarily apply to the judiciary.
        My immediate suggestion would be the possibility of
    delinking the two. We think Congress needs a pay raise, too,
    and we would like to have both of us get a pay raise. Because
    to a certain extent it's getting to the point where the failure
    to give a pay raise to the judiciary is holding down career
    employees of the entire Government. If it's not already, it
    will shortly.
        This is not something new. I was just reading the
    Federalist Papers, concerning arguments about whether the
    President's salary should be capped, or the judiciary salary
    should be capped, and Alexander Hamilton very aptly said the
    control over a man's substance amounts to the control over his
    will.
        We've not quite gotten to that point with regard to the
    judiciary's salaries. But the point is well made, and they were
    discussing whether or not the Constitution should have a cap on
    judicial or executive salaries. And Hamilton made the point
    that the judiciary is different from the executive branch, and
    that from time to time it will appear that a salary which was
    previously adequate would at a point in time appear to be
    inadequate.
        I believe that all the evidence--there's a broader
    philosophical----
        Senator Gregg. Well, I think the point is that if we're
    going to get good people in the judiciary, we're in competition
    with the marketplace that pays 2, 3, 4, 5, 10 times what they
    are being paid.
        You can get people in the judiciary--we're getting good
    people, still--but you can also get people who maybe couldn't
    make as much out in the private sector, and those aren't the
    folks you want. You want the people who could make two or three
    times, but they've got to have a livable wage. And they have to
    have something that doesn't make the sacrifice too great.
        Judge Heyburn. You're exactly right. If you're in it for
    the money, the judiciary, of course, is the wrong place to be.
        But another telling comparison, and, of course, every
    locality is difficult--it may not be quite true in Washington
    yet--but you go to California, Chicago, LA and you will find
    fourth or fifth year associates--these are people who are 27,
    28 years old--making as much as or more than U.S. district
    judges and court of appeals judges.
        And that is a sobering fact, indeed, for those of us who
    are on the judiciary. We love our jobs, and I'm not at this
    point prepared to trade places with a fourth or fifth year
    associate. But the comparison is something.
        Senator Gregg. I think the concern is very legitimate, and
    we'll see what we can do about it. It's an issue that is beyond
    this capacity to probably address dramatically.
        Thank you very much. We appreciate your time.

                              subcommittee recess

        Judge Heyburn. Thank you. We very much appreciate the
    capable and expert assistance of your staff. And our staff has
    worked well with them, to answer a number of questions that
    came up prior to this hearing, and we really appreciate their
    efforts.
        Senator Gregg. The same is true of yours.
        Judge Heyburn. Thank you, sir.
        Senator Gregg. Thank you. The hearing is concluded.
        [Whereupon, at 2:21 p.m., Thursday, April 17, the
    subcommittee was recessed, to reconvene subject to the call of
    the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                            THURSDAY, APRIL 24, 1997

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.
        The subcommittee met at 1:59 p.m., in room S-146, the
    Capitol, Hon. Judd Gregg (chairman) presiding.
        Present: Senators Gregg, Stevens, Campbell, Hollings,
    Bumpers, Lautenberg, and Mikulski.
        Also present: Senator Faircloth.

                             DEPARTMENT OF COMMERCE

                National Oceanic and Atmospheric Administration

    STATEMENT OF D. JAMES BAKER, UNDER SECRETARY, OCEANS
                AND ATMOSPHERE
    ACCOMPANIED BY ANDREW MOXAM, DEPUTY CHIEF FINANCIAL OFFICER, CHIEF
                ADMINISTRATIVE OFFICER

                                opening remarks

        Senator Gregg. We will get started then and does anybody
    have any opening statements they wish to make?
        [No response.]
        Senator Gregg. If not, then we will proceed right to
    testimony. We thank you very much, Dr. Baker, for being here
    today and obviously are interested in knowing what is going on
    in NOAA and your giving us your thoughts and inputs on how we
    should approach the budget.

                      fiscal year 1998 NOAA budget review

        Dr. Baker. Thank you, Mr. Chairman and members of the
    subcommittee. We appreciate the opportunity to testify on the
    NOAA 1998 request. NOAA's budget requests the resources
    necessary to maintain essential services, to facilitate
    continuing progress in some critical investment areas, and to
    address its statutory obligations.
        NOAA provides the United States with the most advanced
    weather and climate prediction system in the world and provides
    the scientific base for managing natural resources and solving
    environmental problems. Its comprehensive system for acquiring
    observations from satellites to ships to radars provides the
    quality data and information that are critical to the safe
    conduct of daily life and basic functioning of a modern
    competitive economy.
        The total 1998 NOAA request is $2.1 billion in new budget
    authority. The request is a net increase of about $78 million
    over the 1997 enacted level. Of this total, $1.5 billion are in
    the ``Operations, research and facilities'' account and about
    $500 million are in the new ``Capital assets acquisitions''
    account and $7 million are for fisheries funds and other
    special accounts.
        NOAA's budget is allocated according to strategic plan
    elements. The first of these is advancing short-term warnings
    and forecasts. During this past year, the Nation continued to
    experience the benefits of Weather Service modernization. NOAA
    installed an additional 19 Nexrad radars, 28 automated surface
    observing stations, and 13 automated weather interactive
    processing systems, while four new weather forecast office
    facilities were built or leased.
        The NESDIS launch of NOAA's satellite, GOES-K, which will
    be designated GOES-10 once it is in orbit, was delayed from
    this morning until tomorrow morning. Once it is launched, it
    will provide an on-orbit spare so that we can prevent the one
    GOES situation that NOAA had a few years ago. All of these
    improvements in the Weather Service can be directly attributed
    to saving lives and reducing the effects of natural disasters.
        With these new technologies, NOAA issued numerous warnings
    this past year with lead times of tornadoes in excess of 15
    minutes. The spring outlook issued by the Weather Service for
    North Dakota forecast recordbreaking floods for the Red River.
    The fact is that even the Weather Service predictions for flood
    levels have been shown to be low only emphasizes the severity
    of this event. There was no data available that could have
    predicted this 1,000-year flood event.
        The losses suffered in these States would have been much
    worse without the technologies and the people behind them. The
    data provided by the Weather Service and its cooperative
    efforts with FEMA, the U.S. Geological Survey, and the Army
    Corps of Engineers highlight the continuing need for NOAA to
    maintain the necessary level for Weather Service base
    operations, which is reflected in its $10.8 million request for
    a base restoration for this effort.
        NOAA was required in 1997 to reduce Weather Service
    staffing and of the 272 incumbered positions required to be
    reduced on October 1 only 132 remain. Taking into account the
    reprogramming recently submitted by the Secretary, 12 of these
    encumbered positions will not be affected this year. The
    remaining 120 will be eliminated by the use of a RIF, 41
    reassignments and 57 buyouts and 10 retirements.
        NOAA requested about $1.2 billion to address this strategic
    element, an increase of about $40 million over the 1997
    enacted. This element represents the largest portion of NOAA,
    more than one-half of its activity. The satellite estimates
    within this request will be updated shortly and the revised
    numbers will be provided.
        There is a good news story in that the polar satellites
    continue to far exceed their expected lifetimes. We have been
    recently informed by NASA that they are reducing their internal
    requirement for forward funding. After reviewing the NASA
    requirements in the context of our programs, NOAA believes that
    the proper level of forward funding should be 2 months rather
    than 3 months and this saves some funding for all of us.
        The second of NOAA's strategic plan elements is
    implementing the El Nino forecasts. NOAA's goal here is to
    introduce an operational program for systematic production of
    regionally accurate climate forecasts, critically important for
    agriculture. In 1996, NOAA developed and implemented an
    improved version of the coupled forecast model resulting in
    skill improvements for the entire record. NOAA requested about
    $115 million to address this strategic goal.
        Our third strategic element under assessment is predicting
    and assessing decadal to centennial change, and long-term
    global change. NOAA's goal is to provide accurate measurements
    of the changing environment and to develop the science and
    science-based options that are necessary for policy decisions.
    To accomplish this effort NOAA is requesting a total of about
    $91 million.
        The final element of our plan under the environmental
    assessment and prediction goal is to promote safe navigation.
    NOAA appreciates that over the past several years this
    committee has been very supportive of its nautical charting
    capabilities. As you know, 90 percent of the cargo that comes
    into the country comes through the Nation's ports. NOAA
    requests $85 million to address this strategic element, a net
    decrease of $7 million from 1997, which represents its proposal
    to transfer aeronautical charting over to the Department of
    Transportation. It does represent an increase of about $7
    million in the base mapping and charting functions that we
    have.
        The NOAA ship, Ronald H. Brown, will be commissioned on
    July 19 at its home port in Charleston. With its advanced
    meteorological and scientific systems, it is a unique vessel in
    the U.S. oceanographic fleet in its ability to conduct both
    atmospheric and oceanographic research in support of NOAA's
    environmental assessment and prediction goal. NOAA will be
    offering part of this ship for use by the university community.
        The first of the strategic elements under NOAA's
    environmental stewardship goal is to build sustainable
    fisheries. NOAA continues to make progress toward rebuilding
    and maintaining the health of U.S. fisheries. Successful
    efforts in this element will add billions of dollars to the
    economy over the next 10 years. NOAA requests $332 million to
    address this element, a net increase of about $5 million over
    1997.
        The second of NOAA's stewardship plan elements is to
    recover protected species which is concerned with the
    conservation of the Nation's living marine resources. We
    request about $70 million to address this strategic element.
        The third strategic element under stewardship is sustained
    healthy coasts, which focuses on improving our understanding of
    the way coastal ecosystems function, coupled with an ability to
    predict responses of ecosystems to human activities and to take
    appropriate action. In August 1996, President Clinton announced
    a bold new initiative challenging the Federal Government and
    the States and the Congress to protect all communities from
    toxic pollution. NOAA has a key role in this interagency
    initiative that is designed to make coastal waters safe and
    clean for all Americans by the year 2000. NOAA is an important
    participant in the President's clean water initiative designed
    to protect all communities from pollution that is threatening
    their waters. Building on existing programs within the National
    Ocean Service, the initiative will utilize the coastal zone
    management program, will expand our coastal monitoring
    activities, as well as develop state-of-the-art monitoring
    technologies at the University of New Hampshire program. This
    past year we have increased the pace of coastal habitat
    restoration with 50 projects benefiting 40,000 acres in
    partnership with Federal, State, and local agencies. We request
    about $212 million to address this strategic goal.
        Mr. Chairman, before I conclude, I would like to state that
    NOAA recognizes that we have had problems in the past with
    responding to congressional inquiries, report requests, and
    providing written answers to questions in a prompt manner. I
    want to assure you that I take this problem very seriously and
    we have instigated several steps to assure that you receive
    requested material as quickly as we can provide it.

                               prepared statement

        In conclusion, Mr. Chairman, may I say that every day in
    some way every person in the United States uses the services
    that are provided by NOAA. We welcome the coming discussion on
    our goals, priorities, and operations with Congress, our
    constituents, and the public.
        Thank you.
        [The statement follows:]
                    Prepared Statement of Dr. D. James Baker
                                  introduction
        Thank you, Mr. Chairman, and members of the Subcommittee, for this
    opportunity to testify on the President's fiscal year 1998 Budget
    Request of the National Oceanic and Atmospheric Administration (NOAA).
    As America moves into the 21st century, our domestic security and
    global competitiveness will depend on the types of capabilities,
    services and products delivered by NOAA. I would like to address how
    this proposed budget maintains an appropriate balance among the
    environmental assessment and prediction, and environmental stewardship,
    needs of the nation. I am accompanied today by Terry Garcia, Acting
    Assistant Secretary for Oceans and Atmosphere; Diana H. Josephson,
    Deputy Under Secretary; and Joseph Kammerer, Chief Financial Officer/
    Chief Administrative Officer. Also, NOAA's Assistant Administrators and
    Office Directors are present.
                         noaa role: doing what's needed
        NOAA's fiscal year 1998 budget continues to reflect this
    Administration's commitment to meeting the challenges facing America by
    putting to good and efficient use technology and information, to insure
    the continued security, prosperity, and vitality of our Nation. NOAA
    has applied cutting-edge technologies and innovations to provide the
    U.S. with the most advanced weather and climate prediction systems in
    the world. NOAA conducts research to improve operations, develop new
    technologies, and supply the scientific basis for managing natural
    resources and solving environmental problems. NOAA's comprehensive
    system for acquiring observations--from satellites to ships to radars--
    provides the quality data and information critical to the safe conduct
    of daily life and basic functioning of a modern economy.
        The fiscal year 1998 NOAA budget represents the right level of
    investment to protect the environment and assure economic growth.
    Investment in our Nation's and the world's environmental health is an
    investment in economic well-being. NOAA plays a key role in a
    Department whose structure encourages the integration of economic,
    statistical and environmental information and technology development to
    assure a future of economic opportunity and prosperity for all
    Americans.
        The mission of the National Oceanic and Atmospheric Administration
    (NOAA) is to describe and predict changes in the Earth's environment,
    and conserve and manage the Nation's coastal and marine resources to
    ensure sustainable economic opportunities. This mission involves basic
    responsibilities of government for ensuring general public safety,
    national security and environmental well-being, and promoting economic
    growth. The successful execution of this mission depends on adequate
    funding for, and synergy among component activities of NOAA. Common end
    products and services include weather warnings and forecasts,
    environmental technologies, marine fisheries statistics and
    regulations, nautical charts, assessments of environmental changes, and
    hazardous materials response information. These capabilities, products
    and services support the domestic security and global competitiveness
    of the United States, and affect the lives of nearly every citizen
    every day.
        In a period of strongly competing government priorities, the
    President's fiscal year 1998 Budget Request for NOAA affirms the
    agency's role by providing the resources to maintain essential
    services, facilitate continuing progress in critical investment areas,
    and address statutory obligations. This proposed budget ensures an
    appropriate balance among the environmental assessment, prediction and
    stewardship needs of the Nation.
        NOAA's services typically require highly concentrated investments
    but yield widely dispersed benefits. These services affect the lives of
    nearly every citizen every day, thus NOAA's work represents a wise and
    appropriate investment by the taxpayer.
        NOAA's strategic planning process defines and validates its
    business activities, guides the development of operating plans, and
    forms the basis for management decisions. The Strategic Plan provides
    the framework for articulating and organizing the agency's goals and
    work objectives. NOAA's goals for the future will enhance opportunities
    for our citizens, the health of the U.S. economy, the protection of our
    environment, and the sustainable use of our national resources.
        The challenge of investing strategically in the Nations future is
    accompanied by the requirement to be more effective, to identify and
    realize opportunities for savings and to focus the efforts of
    Government on what matters to people. Performance is what counts, and
    the fiscal year 1998 budget includes measures which track results to
    the level of investment. Success in this changing world increasingly
    will depend on partnerships with business and industry, universities,
    state and local governments, and international parties. NOAA will
    continue to develop partnerships to leverage resources and talent, and
    provide the means for meeting program requirements more effectively.
        NOAA has made the Government Performance and Results Act (GPRA)
    operational following strong participation as a pilot agency. During
    the pilot period, NOAA was selected by the Office of Management and
    Budget as one of ten exemplars and was commended by the GPRA review
    panel of the National Association of Public Administration (NAPA).
    Currently, NOAA is working with the General Accounting Office to
    identify best practices for Federal agencies to follow, contributing to
    National Performance Review (NPR) performance measurement benchmarking
    studies, and assisting the Department of Commerce with developing a DOC
    Strategic Plan for submission to OMB by September, 1997. NOAA views the
    GPRA as a management tool to facilitate decision-making. NOAA has
    integrated performance measures into its planning, budgeting, and
    management review cycles, and is designing a program evaluation process
    to measure agency-wide progress toward meeting goals.
                   highlights of the fiscal year 1998 budget
        The total fiscal year 1998 NOAA request is $2.1 billion in new
    budget authority. The request is a net increase of $78.5 million over
    the fiscal year 1997 enacted level. Of this total, $1,540.8 million are
    in the Operations, Research and Facilities (ORF) account, $503.5
    million are in a new Capital Assets Acquisition account, and $6.9
    million are for fisheries funds and other special accounts.
        NOAA's budget is predicated on the need to ensure the continued
    delivery of essential science, technology and services to the Nation.
    Highlights of the request are presented, as follows, in the context of
    the NOAA Strategic Plan and with an emphasis on the major operational
    units and programs contributing to the strategic goals. The Strategic
    Plan establishes the seven major goals of the agency, and guides the
    most effective combined application of the entire suite of agency
    assets for attaining these goals, which are grouped into two missions,
    Environmental Stewardship, and Environmental Assessment and Prediction.
    Resources for program administration, acquisition of data, aircraft
    services, and supporting infrastructure are included in the total
    request for each strategic goal.
                           account structure changes
        The fiscal year 1998 President's Budget contains a number of
    proposed changes to the NOAA account structure. First, is the
    establishment of a Capital Assets Acquisition account which will seek
    multi-year appropriations for capital projects contained formerly in
    the Operations Research and Facilities account, Construction account
    and Fleet Modernization, Shipbuilding and Conversion account. In
    addition, NOAA proposes to eliminate the Fleet Modernization,
    Shipbuilding and Conversion and Construction accounts and incorporate
    the projects not requested in the Capital Assets Acquisition account
    into two new activities: Facilities and Fleet Maintenance and Planning
    within the Operation, Research and Facilities account.
        The NOAA budget request includes transfers of $66.4 million from
    the Department of Agriculture to the Promote and Develop Fishery
    Products and Research Pertaining to American Fisheries account and $5.2
    million from the Department of Interior to the Damage Assessment and
    Restoration Revolving Fund.
        NOAA also proposes to change the Fishing Vessel Obligation
    Guarantee account to the Fisheries Finance, Program account. This
    proposed change is the result of a recent amendment to the Magnuson-
    Stevens Fishery Conservation and Management Act that changed the
    program from a loan guarantee program to a direct loan program. This
    program includes accounts for loans previously awarded as loan
    guarantees and the new direct loans.
        The budget also proposes an increase in the financing from the
    deobligation of prior year recoveries to $24 million to reflect
    anticipated one time major contract savings of $10 million. The fiscal
    year 1998 request reflects scoring of the spending authority for the
    Coastal Zone Management Fund (CZMF) as discretionary budget authority.
                    environmental assessment and prediction
        Advancing Short-Term Warning and Forecast Services to provide
    significantly improved short-term warning and forecast products and
    services that enhance public safety and the economic productivity of
    the Nation.
        NOAA requests $1,178.4 million to address this strategic goal, a
    net increase of $39 million over fiscal year 1997. The objectives are
    to: complete weather service modernization; maintain operational
    satellite coverage; strengthen observing and prediction systems; and
    improve customer service to the public.
        These objectives will be accomplished primarily through the efforts
    of the National Weather Service (NWS), the National Environmental
    Satellite, Data and Information Service (NESDIS) and the Office of
    Oceanic and Atmospheric Research (OAR).
        For the NWS, the request includes: $438 million, a net decrease of
    $8.1 million from 1997, to support the current operational and research
    infrastructure and continue planned streamlining activities under the
    modernization, including the critical restoration of funding for NWS
    base operations of $10.8 million; and $191.6 million for major systems
    acquisition supporting the modernization, a net increase of $14.4
    million. Within the total amount for systems acquisition, the request
    includes $116.9 million for continued deployment of the Advanced
    Weather Interactive Processing System (AWIPS), an increase of $16.9
    million over 1997.
        For NESDIS, $372.1 million is needed to ensure continuous GOES and
    Polar-orbiting satellite coverage. Of this amount, $51.5 million is
    required to meet NOAA's commitment to share development costs with the
    Department of Defense for the National Polar-orbiting Operational
    Environmental Satellite System. While this represents an increase of
    $22.5 million over the 1997 enacted, this program continues to account
    for government-wide savings in excess of $1 billion over the life of
    the program and remains a major success story of the National
    Performance Review. In addition, $51.4 million is requested for the
    continuation of Environmental Observing Services and the portion of
    Data and Information Services included within this goal.
        For OAR, a total of $49.6 million is requested to advance the
    science of weather forecasting over land, sea and space, and to improve
    weather-related observing technologies, a decrease of $2.4 million from
    1997.
        The scientific and capital investment required for the
    modernization of weather services including radars and satellites,
    advanced computer models and communications systems, and field
    restructuring is paying off with lives saved, property damages avoided,
    and impacts mitigated for weather-sensitive sectors of the economy.
    During 1996, NWS forecasters issued numerous tornado warnings with lead
    times in excess of 15 minutes, reducing the loss of life. During
    Hurricane Fran, warnings were issued 31 hours before the storm made
    landfall; flood potential statements were issued two to three days in
    advance as the storm headed north; and six hours of advance notice were
    provided for flash flooding. In January of 1996, the NWS issued three-
    to five-day advance forecasts of the east coast blizzard, prompting
    emergency authorities to significantly enhance response preparations
    and airlines to move their air fleets from affected regions. These
    results show that improved warning and forecast services are enhancing
    public safety and the economic productivity of the Nation. Once
    modernization is completed, the Nation should realize annual benefits
    to the economy of some $7 billion.
        Implementing Seasonal to Interannual Climate Forecasts to increase
    society's ability to mitigate economic losses and social disruption by
    working together with academic and multinational partners, in order to
    issue monthly and seasonal probability outlooks for temperature and
    rainfall for up to a year in advance.
        NOAA requests $115.3 million to address this strategic goal, a net
    increase of $3.1 million over fiscal year 1997. The objectives are to:
    deliver useful climate forecasts and information; enhance observing and
    data systems providing input to model predictions; invest in process
    and modeling research leading to improved predictions; and assess the
    impacts of climate variability on human activity and economic
    potential.
        These objectives will be accomplished primarily through the efforts
    of the NOAA Climate and Global Change Program, the OAR Environmental
    Research Laboratories (ERL's), NESDIS, and the NWS National Centers for
    Environmental Prediction.
        For OAR, the request provides $66.8 million to: develop operational
    El Nino-Southern Oscillation (ENSO) observations, including an increase
    of $4.9 million over 1997 to ensure an operating base for the Tropical
    Oceans-Global Atmosphere (TOGA) system and reflect the maintenance
    responsibilities from NOAA's Climate and Global Change program. Funding
    will also be used to improve dynamical seasonal prediction activities
    at the National Centers for Environmental Prediction, including
    automating the production of climate forecasts and delivering forecast
    and monitoring products; support the International Research Institute
    for climate prediction; improve climate modeling over North America;
    and assess socio-economic impacts.
        For NESDIS, $37.2 million is needed for observing and data systems
    and data management requirements including the National Climatic Data
    Center, for improvements to the satellite active archive, and for
    linking NESDIS data centers and other NOAA centers of data via a
    virtual data system. In addition, $2.8 million is requested for the
    National Ocean Service (NOS) to maintain and improve observing and data
    delivery systems that support climate forecasting requirements, and
    $4.7 million is requested for the NWS to provide operational climate
    predictions and analyses under central forecast guidance, and update
    products on delivery systems.
        Emerging capabilities to forecast climate are the result of federal
    investments in basic research, development and deployment of global
    observing and data systems, and the transition of research findings to
    operational needs. Climate services will be as important to 21st
    century economies and societies as weather forecasting is today, and
    the future capacity to deliver uniform climate information will
    continue to depend strongly on federal support for process and modeling
    research, and for the collection of global data needed to initialize
    and validate climate models. For example, the insurance industry has
    become increasingly vocal in its support of the essential science
    underlying climate prediction, due to the tremendous economic impact of
    weather related natural disasters. According to the Worldwatch
    Institute's 1996 State of the World report, since 1990, insurance
    providers worldwide have paid out $48 billion for weather-related
    losses, compared with losses of $14 billion for the entire decade of
    the 1980's.
        Predict and Assess Decadal to Centennial Changes in the global
    environment, specifically for: climate change and greenhouse warming;
    ozone layer depletion; and air quality improvement.
        NOAA requests $90.6 million to address this strategic goal, a net
    increase of $3.2 million over fiscal year 1997. The objectives are to:
    characterize the agents and processes that force climate change;
    examine the role of the ocean in influencing change; ensure a long-term
    climate record; guide the rehabilitation of the ozone layer; provide
    the scientific basis for improved air quality by understanding and
    monitoring surface ozone; and develop predictive models scientific
    assessments, and human impacts information related to long-term change.
        These objectives will be accomplished largely through the efforts
    of the NOAA Climate and Global Change Program and OAR. In OAR, the
    request includes: $28.7 million for climate and global change research
    an increase of $1.9 million; $7 million for the Global Learning and
    Observations to Benefit the Environment (GLOBE) Program, an increase of
    $1 million over 1997; $25.9 million for long-term climate and air
    quality research, including an increase of $1 million for NOAA's health
    of the atmosphere initiative in preparation for the Nation's first
    scientific air quality assessment; $1.5 million for advanced computing
    support; and $7.7 million for improving our understanding of the role
    of oceans in influencing climate change. In addition, $3.2 million is
    requested in NESDIS for data and information services supporting the
    long-term climate record; and $8.2 million is needed in the NWS to
    continue to provide temperature, precipitation, evaporation and river
    stage data for climatic and hydrologic monitoring and services.
        In collaboration with university, government and international
    partners, NOAA provides the measurements, research, models, predictions
    and assessments that form the scientific basis for understanding global
    change phenomena. For over three decades of long-term monitoring, NOAA
    has produced incontestable evidence that carbon dioxide is increasing
    in the atmosphere. NOAA also has documented a decrease in tropospheric
    levels of ozone-depleting chemicals, a first-time observation that
    demonstrates the emerging effectiveness of the Montreal Protocol. Late
    in 1995, the U.N. Intergovernmental Panel on Climate Change (IPCC)
    released findings indicating that temperature may increase 1 to 3.5
    degrees Celsius, and sea level may rise 15 to 95 centimeters, by the
    year 2100. These global trends will affect both natural processes and
    human systems, including agriculture, energy, and the worldwide
    transmission of diseases. NOAA played a lead role in developing the
    scientific assessments upon which the IPCC report was based. Decisions
    on actions to mitigate anticipated changes on the order of decades to
    centuries will never receive domestic and international backing unless
    they are supported by sound science. NOAA continues to work to provide
    leadership and science-based information for these types of decisions,
    focusing on climate change and greenhouse warming, ozone layer
    depletion, and air quality improvement.
        Promote Safe Navigation by building, maintaining, and delivering a
    digital nautical charting database which integrates satellite
    positioning, tidal heights and currents, radars and sonars, and
    navigational aids.
        NOAA requests $84.7 million to address this strategic goal, a net
    decrease of $7.2 million from fiscal year 1997. The objectives are to:
    deliver a digital nautical charting database to underpin new electronic
    navigational systems; update nautical surveys using full-bottom
    coverage technologies; install systems to provide mariners with real-
    time observations and forecasts of water levels, tides and currents,
    and weather conditions in major ports; transform the obsolete geodetic
    reference frame into a Global Positioning System-based system; and
    provide for the two-year transition of aeronautical charting to the
    Federal Aviation Administration (FAA).
        These objectives will be accomplished largely through NOS's
    mapping, charting and geodesy, and observation and prediction
    subactivities. NOS is requesting $25 million to deliver digital
    nautical charting databases, including the production of raster
    nautical charts; $11.8 million to update nautical surveys; $23.2
    million to acquire oceanographic and hydrographic data and to make
    available marine predictions and advanced oceanographic observations
    important to pilots and port authorities and; $19.2 million to provide
    a national spatial reference system that utilizes the Global
    Positioning System (GPS) for navigation and positioning.
        This request also reflects a $14.5 million decrease for the first
    stage of a two-year transfer of the aeronautical charting program to
    the Department of Transportation. In fiscal year 1998, the funds will
    be transferred but the program's employees will remain in NOAA and
    would continue the processing and delivery of aeronautical information
    on a reimbursable basis. In fiscal year 1999, the employees will also
    be transferred and NOAA's involvement with the program will end.
        Finally, NOAA is requesting $12.6 million to replace funds formerly
    received from the National Imaging and Mapping Agency (NIMA, formerly
    the Defense Mapping Agency, DMA). This increase will result in the
    entire compilation cost of the nautical charts being included in NOAA's
    budget.
        Sea-going commerce has tripled in the last 50 years, and 98 percent
    of our international trade by weight moves through U.S. ports. Fifty
    percent of the total tonnage is oil or other hazardous material.
    Despite the risk that accompanies increasing traffic, and the
    competitive advantage of modern observations and systems, much of the
    Nation's charting and geodetic infrastructure is not up to world
    standards. Accurate charts and modern navigation systems are required
    for safe and efficient maritime transport. NOAA collects, processes and
    distributes such information in support of national, commercial and
    individual needs. NOAA is working to modernize U.S. marine and air
    navigation, mapping and surveying, and to provide a precise satellite-
    derived reference system as the basis for the Nation's 21st century
    positioning needs. For example, during 1996, NOAA's NOS produced 235
    new editions of nautical charts and 14,682 new aeronautical charts and
    associated products; acquired and processed data from 50 hydrographic
    surveys and two airborne laser surveys; reduced the data-to-chart time
    from years to six months by implementing a ``just-in-time'' delivery
    system for applying new hydrographic data to nautical chart editions;
    and installed 153 Federal Base Network stations, and 47 continuously
    operating reference stations, that will form the basic positional
    framework for the Nation's future spatial data infrastructure.
                           environmental stewardship
        Build Sustainable Fisheries to greatly increase, over the next
    decade, the Nation's wealth and quality of life through sustainable
    fisheries that support fishing industry jobs, safe and wholesome foods,
    and recreational opportunities.
        NOAA requests $332 million to address this strategic goal, a net
    increase of $5.1 million over fiscal year 1997. The objectives are to:
    assess the status of fishery resources; advance fishery predictions;
    manage for economic growth by developing plans for reducing excessive
    fishing and capital investment; ensure adequate compliance with fishery
    regulations; and provide research and services for fishery-dependent
    industries to maximize benefits from marine resources.
        These objectives will be accomplished primarily through the efforts
    of the National Marine Fisheries Service (NMFS), OAR and NOAA's Coastal
    Ocean Program (COP). For NMFS, the request is $256.3 million (this
    includes $19.4 million for Acquisition of Data previously funded in the
    Marine Services subactivity), a net increase of $7.6 million over 1997
    to: collect, evaluate and disseminate fisheries data including
    developing strategies for bycatch reduction; conduct conservation and
    management operations including funding of Regional Fishery Management
    Councils for developing and amending fishery management plans; execute
    provisions of the recently-passed Magnuson-Stevens Fishery Conservation
    and Management Act including providing for new national standards and
    implementing essential fish habitat requirements; improve at-sea and
    shoreside compliance; and provide grants and other assistance for
    fisheries development programs. NOAA also requests an increase of $23
    million to address new facilities needs, including the replacement of
    the Tiburon, California fisheries laboratory at Santa Cruz, and to
    maintain existing laboratories. For OAR, funding of $23.5 million in
    the Sea Grant Program, National Undersea Research Program (NURP), and
    marine prediction research subactivities is needed to: improve
    technologies for tracking and estimating aquatic biomass; advance
    aquaculture and economic growth initiatives; apply new computing
    techniques; and provide for other research activities including in-situ
    undersea research. For COP, $7.4 million is requested to strengthen
    abilities to assess and predict natural and human-induced changes and
    their impact on fisheries health.
        There is a strong consensus among lawmakers, fishery managers, the
    fishing industry and the public, that depleted fishery resources must
    be restored and healthy fisheries must be maintained and managed for
    greater efficiency. Of the fishery stock groups under the purview of
    NOAA for which population status is known, 36 percent are overutilized.
    Even fisheries that are producing a large catch are doing so with
    unnecessary cost and waste. Well-managed fisheries produce significant
    and continuous benefits, such as the $1 billion Alaskan groundfish
    fishery. Controlled access measures implemented in the $180 million
    Alaskan halibut/sablefish fishery have resulted in reduced accidents
    and property loss, increased economic value of the resource, and
    reduced bycatch. Since 1994, NOAA has increased the number of fishery
    management plans with access controls implemented by 41 percent. NOAA
    estimates that restoring fisheries will have a potential $25 billion
    total positive impact on the national economy.
        NOAA is providing the federal leadership and support to make this
    happen. Accurate and timely resource assessments are being used to
    guide management decisions. NMFS, the Coastal Ocean Program, the
    National Sea Grant College Program, OAR's Environmental Technology
    Laboratory, and other parts of NOAA, are conducting research to advance
    fishery predictions, reduce costs of conventional stock assessments,
    develop advanced remote sensing techniques, improve fishery habitat and
    mitigate harmful algal blooms. The recently reauthorized Magnuson-
    Stevens Fishery Conservation and Management Act (MSFCMA) strengthens
    the ability of NMFS and the eight Regional Fisheries Management
    Councils to apply the results of research in adopting management
    measures that will ensure sustainable fisheries for the Nation.
    Enforcement is carried out to ensure compliance with regulations, and
    NOAA is working with state and international partners to develop
    policies for managing fisheries that occupy multiple geo-political
    zones. In addition, NOAA continues to design and implement harvest
    capacity reduction programs, and programs to provide fishermen with
    economic and technical support during stock rebuilding efforts.
        Recover Protected Species to conserve marine species and to recover
    those in danger of extinction. By 2005, NOAA will be on the road to
    recovering every marine species at risk and maintaining the healthy
    marine ecosystems upon which they depend.
        NOAA requests $69.7 million to address this strategic goal, a net
    increase of $7 million over fiscal year 1997.
        The objectives are to: assess the status of, and impacts to,
    protected species; and develop and implement conservation and recovery
    plans for depleted marine mammals and endangered and threatened
    species.
        These objectives will be accomplished primarily through the efforts
    of NMFS. The request includes: $37.8 million for status reviews and
    stock assessments; and $25.8 million, an increase of $7.6 million over
    1997, for developing recovery, conservation and take reduction plans
    for the management of protected and depleted species. The majority of
    the requested increase will ensure that NMFS can address major
    responsibilities for responding to currently listed and proposed for
    listing West Coast salmon and steelhead species under the Endangered
    Species Act (ESA). Increases are also requested to expand recovery
    actions for endangered Kemp's ridley turtles, strengthen Atlantic right
    whale recovery efforts, and establish cooperative conservation program
    agreements under the ESA with additional states, including Alaska,
    California and Washington.
        The existence of the Marine Mammal Protection Act, the Endangered
    Species Act and other legislation provide a clear indication of public
    support for strong efforts to conserve living marine resources. The
    desired outcome of this effort is to recover species in danger of
    extinction in a manner compatible with the sustainable use of marine
    resources. During 1996, NMFS initiated four marine mammal take
    reduction plans and updated fifty marine mammal stock assessments,
    strengthened turtle excluder device requirements and increased
    cooperation with Mexico to maximize hatchling production of turtles,
    and conducted hundreds of ESA Sec. 7 and Sec. 10 consultations. These
    and other accomplishments have improved the status of species while
    minimizing the impact of conservation measures on economic and social
    activities.
        Sustain Healthy Coasts in order to maintain the health,
    productivity, and biodiversity of the Nation's coastal ecosystems.
        NOAA requests $212.2 million to address this strategic goal, a net
    increase of $18.7 million over fiscal year 1997. The objectives are to:
    protect, conserve and restore coastal habitats and their biodiversity;
    promote clean coastal waters to sustain living marine resources and
    ensure safe recreation, healthy seafood and economic vitality; and
    foster well-planned and revitalized coastal communities that sustain
    coastal economies, are compatible with the natural environment, and
    minimize the risks from natural hazards.
        These objectives will be accomplished primarily through the efforts
    of NOS, COP, OAR, NMFS and NESDIS. For NOS, the request includes $128.4
    million, an increase of $26.5 million over 1997 for: pollution
    response, damage assessment and restoration needs; estuarine and
    coastal monitoring and assessment activities; support for estuarine
    reserves and marine sanctuaries; conduct of NOAA's Coastal Zone
    Management program; and NOAA's continuing work in interagency
    environmental initiatives, including the President's Clean Water
    Initiative and continued restoration of the South Florida ecosystem.
    NOAA is an important participant in the President's Clean Water
    Initiative which is designed to protect all communities from pollution
    threatening their waters. Building on existing programs in Coastal and
    Great Lakes, the initiative will utilize the Coastal Zone Management
    Program; expand NOAA's Coastal Monitoring activities, as well as
    develop new state of the monitoring technologies at the University of
    New Hampshire program. For COP, $7.7 million is needed to support
    regional-scale modeling and prediction of cumulative impacts of
    multiple stressors on habitats and living marine resources.
        For OAR, $37.7 million, a decrease of $7.1 million from 1997, is
    requested for research, outreach and technology development through Sea
    Grant, NURP and the ERL's on coastal issues such as: control and
    prevention of nonindigenous species; monitoring, assessment and
    restoration of degraded habitat and water quality; reduction of non-
    point source pollution; fate of toxic chemicals; impacts of harmful
    algal blooms; and community preparedness for coastal hazards including
    hurricanes and oil spills.
        For NMFS, the request includes $19.7 million for fisheries habitat
    protection and restoration activities including providing technical
    support for improving wetlands, and conducting permit reviews for
    projects affecting living marine resources including licensing of dams.
    Of the increase requested for NMFS in fiscal year 1998, much of the
    effort in fiscal year 1998 will be focused on actions that contribute
    to the recovery of endangered West Coast salmon and steelhead species.
    In addition, $4.9 million is required in NESDIS for data and
    information services related to improving the understanding of coastal
    functions and for ocean remote sensing.
        Maintaining the health, productivity and biodiversity of coastal
    ecosystems is essential to the sustainable development of coastal
    economies and the future welfare of the Nation. This goal addresses the
    practical needs and concerns of resource managers, as well as
    strengthening the watershed and regional management frameworks provided
    by state Coastal Zone Management programs. This is an enormous
    challenge considering that well over half of the U.S. population lives
    on the 10 percent of land defined as coastal. Coastal concerns require
    integrated solutions because problems transcend state and natural
    boundaries. Successful management of these biologically, geographically
    and economically complex areas depends strongly on federal guidance and
    collaboration, such as with the unveiling of the final management plan
    for the Florida Keys National Marine Sanctuary and the conditional
    approval of 27 of 29 states coastal non-point pollution programs,
    during 1996.
        In addition to activities stressing planning, prevention and
    sustainable use, NOAA provides monitoring and rapid response
    capabilities to limit harm to ecosystems affected by human
    intervention. During 1996, NOAA completed the first Nationwide
    assessment of the spatial extent of toxic contaminants in sediments and
    bivalves in coastal waters, documented the magnitude and extent of
    contaminants in heavily contaminated Boston Harbor, and provided
    technical and scientific assistance to the Coast Guard at 70 oil and
    chemical spills.
                   reducing costs and improving effectiveness
        In an environment of tightening dollars and increasingly complex
    challenges, NOAA is reducing costs and improving program effectiveness.
    NOAA is saving money through streamlining personnel and processes,
    outsourcing where appropriate, and leveraging external resources and
    talent. NOAA holds managers accountable for results, and for using
    performance measures to validate progress. The highest priority
    continues to be to ensure that critical services are provided well.
                 committee on environment and natural resources
        Through the National Science and Technology Council's (NSTC)
    Committee on Environment and Natural Resources (CENR), NOAA works with
    other federal agencies and non-governmental experts to design and
    prioritize the government's environment and natural resources research
    and development agenda. This interagency planning and coordination
    ensures the effective application of available resources.
        The NSTC has identified Improving Environmental Quality as one of
    its six goals. Improving environmental quality requires supporting a
    broad and comprehensive research agenda, including: (1) observing,
    documenting, understanding, assessing and predicting environmental
    change and its consequences; (2) using natural resources in a
    sustainable manner; (3) understanding and preserving biodiversity; and
    (4) developing analytical tools that integrate social, economic and
    natural sciences to support policy formulation. NOAA's fisheries and
    protected species programs are embodied in this priority area of
    concern.
        Agencies are expected to continue strong support of a number of
    ongoing interagency programs and initiatives that are priorities for
    fiscal year 1998, and in which NOAA will participate. These include:
    The U.S. Global Change Research Program, with increased emphasis on
    consequences of changes on humans and ecosystems, particularly at
    regional levels; The North American Research Strategy for Tropospheric
    Ozone; National Environmental Monitoring and Research Initiatives;
    Natural disaster reduction (including the Hazard Information and Loss
    Reduction Initiative), with enhanced international cooperation in
    science and technology to reduce the damage to communities caused by
    natural disasters through improved monitoring, mitigation and response;
    Environmental technologies, with an emphasis on energy efficiency R&D
    and lowering carbon dioxide emissions; Endocrine disrupter research,
    focusing on understanding how low concentrations of chemicals can
    affect the growth and reproduction of living marine mammals; and NOAA
    R&D as the systematic study to gain knowledge or understanding
    necessary to determine the means by which a recognized and specific
    need may be met.
                ``national performance review'' and streamlining
        In an effort to create a government that works better and costs
    less, NOAA is reinventing itself by achieving the goals outlined in the
    National Performance Review (NPR). Weather Service modernization, begun
    well before the NPR, is re-invention in the making. Owing to the range
    and effectiveness of new technologies, the NWS is realigning its field
    structure to reduce the number of offices from over 300 to 119. A
    National Institute of Standards and Technology study shows that every
    dollar spent on weather service modernization buys eight dollars in
    benefits for the taxpayers. The scientific and technological basis for
    this modernization has been provided by NOAA's own research and
    development capabilities, which now are being applied to maximize the
    benefits from the new systems. As a result, the U.S. now enjoys the
    most modern and efficient weather service in the world. A brief status
    of other NOAA NPR initiatives follows:
        Streamlining personnel and processes.--By 1999, NOAA plans to have
    reduced its workforce by 14 percent from 1993 levels. This will require
    the elimination of 2,061 full-time equivalents (FTE's) through phased
    annual reductions in the NOAA Streamlining Plan. NOAA proposes in
    fiscal year 1998 to begin to transfer to the Department of
    Transportation (DOT) the production of aeronautical charts. In fiscal
    year 1998, NOAA would operate the aeronautical charting program on a
    fully reimbursable basis, with the entire program, including FTE's,
    being fully transferred to DOT in fiscal year 1999. NOAA has simplified
    administrative processes, delegated authorities downward, and made
    progress toward implementing the Commerce Administrative Management
    System, which will greatly improve financial management and
    accountability.
        Converging satellites.--NOAA is working with the Department of
    Defense to merge civilian and defense weather satellites. NOAA and DOD
    recently agreed to defer the need for the first satellite in the
    system. A comprehensive program evaluation, which will include a
    thorough review of current cost estimates, program content, and
    acquisition status, will be conducted in the spring of 1997.
        Disestablishing the NOAA Corps.--The fiscal year 1998 budget
    request calls for the disestablishment of the NOAA Corps. The Corps,
    which is a uniformed service, has been downsized significantly in the
    last two years and pursuant to the Department's fiscal year 1997
    appropriations act, will be reduced in size to not more than 299
    officers by September 30, 1997. The disestablishment legislation is
    expected to propose that essential NOAA functions be continued through
    the use of civilian employees. The fiscal year 1998 budget includes an
    increase of $6 million over 1997 to fund costs associated with the
    proposed disestabishment.
        Closing NWS field offices.--The NWS expects the Secretary of
    Commerce to be in a position to certify ``no degradation of service''
    in order to automate and/or close over 100 weather service offices in
    fiscal year 1997, under the current provisions of Public Law 102-567,
    the law governing weather service modernization. In order to expedite
    closure of about 200 NWS field offices, NOAA continues to propose
    amending Public Law 102-567. The proposed amendments will streamline
    certification provisions related to the restructuring and closure of
    weather service offices without compromising the quality of the review.
    The fiscal year 1998 budget includes $3.1 million in savings from
    streamlining activities.
        Privatizing specialized weather services.--NOAA continues to
    encourage development of the private weather industry. NOAA has
    privatized specialized weather services including agriculture, fruit
    frost, fire weather for non-Federal non-wildfire land management, and
    specialized event forecasts. The on-going NWS modernization, resulting
    in new and expanded data sets, will support continuing opportunities
    for private companies to provide weather services.
        Expanding private sector ship support.--NOAA is expanding the use
    of private contractors and cooperative arrangements with universities
    for ship support, and collecting information to assess private sector
    interest, capability and costs for meeting requirements. NOAA has
    completed contracts for hydrographic surveys, and will continue this
    effort during fiscal year 1997 with $6 million in dedicated funding.
    The National Ocean Service plans to award contracts in fiscal year 1997
    for surveys in the Gulf of Mexico to acquire hydrographic data for area
    approaches to Texas and Louisiana ports. These contracts should include
    a second year option. Additional smaller contracts are also planned.
    NOAA is also expanding the use of private sector contractors for data
    compilation and management services to improve the capability to
    prepare survey data for application to nautical charts.
        Transforming seafood inspection.--The National Performance Review
    and the Administration's fiscal year 1998 budget request identifies the
    Seafood Inspection Program as one of nine organizations government-wide
    which, through legislation, will be converted into a performance-based
    organization (PBO). PBO's are discrete units of a department that will
    operate in a more business-like manner to better serve the needs of its
    customers while retaining its status as a Federal entity. Once
    designated, the PBO would be headed by a competitively hired Chief
    Operating Officer whose continued service would depend on successful
    achievement of performance goals. The PBO would remain a Federal
    entity.
        Improving fisheries management.--In cooperation with the fishing
    industry, NOAA will implement access controls for 25 of 39 Fishery
    Management Plans by the end of fiscal year 1997. Under new legislative
    authorities in the Magnuson-Stevens Act, NOAA will work with
    stakeholders to establish user fees for individual fishing quotas in
    certain Alaskan fisheries.
        Streamlining regulations.--NOAA is revising and streamlining 70
    parts of the Code of Federal Regulations and eliminating 400 pages.
    This will reduce the reporting burden on the public, and reduce by 27
    percent the reporting burden hours of the National Marine Fisheries
    Service.
                            benefits of partnership
        NOAA builds partnerships with universities; international, federal,
    state and local entities; industries and businesses; and groups and
    individuals to address common needs and leverage resources. For
    example, the Fishery Management Councils and the Interstate Marine
    Fishery Commissions are examples of innovative partnerships bringing
    resource managers and fishing interests to the same table to address
    concerns. International leadership and collaboration helps to ensure
    the conservation of living marine resources, especially straddling fish
    stocks and endangered marine species. NOAA continues to work with local
    communities to formulate and oversee policies and programs to address
    fishery resource disasters in the Pacific Northwest, the Northeast, and
    the Gulf of Mexico. Lastly, NOAA provides technical assistance and
    financial support for the development and implementation of state
    coastal zone management plans through a unique state-federal
    partnership with coastal states.
        NOAA depends strongly on universities to help accomplish science
    objectives in its mission areas. NOAA and university scientists
    collaborate on severe weather, climate, and fisheries research via a
    network of Joint and Cooperative Institutes at universities. NOAA also
    funds academic researchers through competitive, peer-reviewed programs,
    including the Climate and Global Change Program, Coastal Ocean Program,
    the National Estuarine Research Reserve System, the National Sea Grant
    College Program, the National Undersea Research Program, the
    Saltonstall-Kennedy grants program, and the Cooperative Program for
    Operational Meteorology Education and Training. NOAA has established a
    NOAA-University partnership to enhance collaboration with universities,
    and will host a series of workshops during 1997 with a broad range of
    both academic and other constituents to provide for constituent input
    and feedback into NOAA's strategic planning and budget formulation
    process.
        Weather and climate services are provided to the public and
    industry through a unique partnership between the NWS and the private
    meteorological sector. The NWS provides forecasts and warnings for
    public safety, and the private sector promotes dissemination of
    forecasts and the tailoring of basic information for business uses.
    NOAA generally is seeking to reduce the costs of environmental data
    collection and to improve access to space-based and other environmental
    monitoring technologies by utilizing existing federal and international
    assets, and planning for the next generation of polar-orbiting
    satellites.
                                   conclusion
        As I have discussed above, NOAA's fiscal year 1998 budget
    represents the most cost effective means to promote the Nation's
    environmental and economic advantage, while maintaining an appropriate
    balance among the environmental assessment and prediction and
    environmental stewardship needs of the Nation. We welcome the coming
    discussions on our goals, priorities, and operations with the Congress,
    our constituents and the public. We believe that our budget will be
    well received by all these groups because our budget represents
    appropriate levels of investment to generate major economic returns.
    Every day, in some way, every person in the U.S. is affected by the
    mission of NOAA. Our budget enables us to continue this service.
        Thank you. If you have any questions, I am prepared to answer them
    at this time.
                                     ______

                     Biographical Sketch of D. James Baker
        Dr. D. James Baker is Administrator of the National Oceanic and
    Atmospheric Administration (NOAA) and Under Secretary for Oceans and
    Atmosphere at the U.S. Department of Commerce. In this position, he is
    responsible for the National Weather Service; the National
    Environmental Satellite, Data, and Information Service; the National
    Marine Fisheries Service; the National Ocean Service; and NOAA's Office
    of Oceanic and Atmospheric Research. He serves as the United States
    Commissioner to the International Whaling Commission.
        He also serves as the Co-Chairman of the Committee on Environment
    and Natural Resources of the National Science and Technology Council
    and as an ex-officio member of the President's Council on Sustainable
    Development. He is Vice Chairman of the Space Committee of the Gore/
    Chernomyrdin Commission and Vice Chairman of the Science and Technology
    Committee of the U.S./South Africa Binational Commission. He is also
    the Chairman of Coastal America, and he served as Acting Chairman of
    the Council on Environmental Quality from November 1993 to February
    1994.
        He was previously President of Joint Oceanographic Institutions
    Incorporated, Dean of the College of Ocean and Fishery Sciences at the
    University of Washington, and on the faculties of Harvard University
    and the University of Rhode Island.
        He is author of the book ``Planet Earth--The View from Space,''
    published by Harvard University Press in 1990, and he has written more
    than 80 articles on climate, oceanography, and space technology issues.
    He is a fellow of the American Meteorological Society and of the
    American Association for the Advancement of Science. He has served on
    numerous advisory committees for the Administration, the National
    Academy of Sciences, and various international bodies.

                East coast flounder and striped bass catch quota

        Senator Gregg. Senator Faircloth has advised me he has an
    opening statement he would like to make.
        Do you wish to make an opening statement?
        Senator Faircloth. Yes, I do, Mr. Chairman.
        Dr. Baker, I have been trading letters back and forth with
    Rollie Schmitten of the National Marine Fisheries Service about
    the treatment of the data that is used to calculate the
    flounder quota for the entire east coast. I do not know whether
    you are familiar with this or not----
        Dr. Baker. Yes, I am, Senator.
        Senator Faircloth [continuing]. Or have worked on it. But,
    Mr. Chairman, I am here today to speak about this because the
    summer flounder spawning stock is at a record high, but the
    quotas are at an all-time low. They caught much of the 1997
    quota in 10 days. There is such a bountiful supply of fish.
    There seems to be no correlation. The summer flounder catch in
    North Carolina averaged 11 million, close to 12 million pounds
    between 1976 and 1988. This was just North Carolina.
        Your fisheries management plan went into effect in 1989.
    You first said 7 million and now you have dropped it to 3
    million pounds per year. Now, they literally catch this quota
    in 10 days, there is such a bountiful supply of fish.
        Of course, North Carolina has a major coastline and is a
    big fishery State. So, just literally hundreds, hundreds of
    fishing boats run out for 8 to 10 days, the season's over, back
    in. I thoroughly believe that the summer flounder stock
    assessment is seriously flawed. Now, Mr. Schmitten has been
    cooperative, and he has met and talked, but nothing has
    happened.
        Also, the striped bass population on the east coast raises
    quota issues in that the population is fully recovered. In
    fact, there is even a question that the population of striped
    bass has reached such a level that they are interfering with
    the reproduction of other species, such as shad. Yet, there is
    a very, very limited taking you are allowing. Of course, an
    increasing amount of the seafood in this country is coming from
    South America.
        The President has requested a $25 million increase, Mr.
    Chairman. This will benefit NMFS.
        Mr. Chairman, I intend to oppose funding at the levels they
    have suggested when the Commerce budget is addressed by the
    Senate Appropriations Committee, unless someone can assure me
    that NMFS has a plan to resolve the enormous gap between the
    stock assessments for the quotas, what those people who are
    supposed to know believe it is, and what your people are saying
    it is.
        I want to ensure that the quotas are reflective of the
    growing stock for both flounder and bass. And in an effort to
    promote this, you will get some technical questions. I would
    like for you to respond to these questions prior to a full
    committee markup. And you will be given them today.
        I expect the markup will be probably in early June, but I
    will get those questions to you and I would look forward to an
    answer and a chance to discuss them with you. Mr. Chairman, I
    thank you.
        Senator Gregg. Thank you, Senator Faircloth.
        Senator Mikulski.

                     prepared statement of Senator Mikulski

        Senator Mikulski. Mr. Chairman, I have a opening statement
    but I ask unanimous consent that it go into the record, please?
        Senator Gregg. Without objection.
        [The statement follows:]

               Prepared Statement of Senator Barbara A. Mikulski

        Thank you Mr. Chairman, I want to welcome Dr. Baker today
    and I look forward to hearing his testimony.
        Mr. Chairman, NOAA is one our most important federal
    agencies. NOAA is responsible for predicting our weather,
    protecting our oceans and coastal areas and promoting critical
    scientific research in atmospheric and environmental science.
        As the recent flooding in North Dakota has shown us,
    accurate, reliable weather prediction is absolutely critical.
    My own State of Maryland has experienced the destruction of
    flooding and our thoughts and prayers are with the people of
    North Dakota and the entire Upper Midwest.
        Thanks in part to accurate weather predictions, there has
    been minimal loss of life--directly related to storm and
    hurricanes despite widespread damage to property. Early
    warnings of hurricanes have minimized loss of life and provide
    a critical window to allow communities time to prepare for
    severe storms.
        It's simple, NOAA saves lives.
        We cannot allow NOAA's infrastructure to deteriorate. NOAA
    and the National Weather Service must have state of the art
    equipment and facilities to meet their mission and give all us
    the best possible weather prediction capability.
        But NOAA also helps understand the dynamics of weather
    through studying the atmosphere. Understanding how our
    atmosphere works is also critical to protecting lives and
    property--the more we know, the better we can prepare. As this
    nation continues to cope with non-stop natural disasters, we
    need to know if this is a short term phenomena or part of a
    long term change in our weather and atmosphere.
        Because of this, I was disturbed when NOAA announced staff
    reductions at the Hurricane and Storm Centers. However, I
    understand NOAA has reconsidered its earlier decision and will
    not cut the Hurricane and Storm centers. While I applaud this
    decision, I am still disturbed about the reductions at NOAA's
    Silver Spring office. I believe any personnel or budget cuts
    must be fully justified, proportional and fair. No single
    office or division should carry the burden for an entire
    agency.
        I note the important role NOAA plays in managing our
    natural resources. In Maryland NOAA is a critical partner in
    the Chesapeake Bay Program through their work on living
    resources such as crabs, oysters and the Coastal Zone
    Management Program.
        Finding ways to bring back our oysters and crabs will help
    bring back the jobs that have been lost. We need answers as to
    why these living resources have been declining and we need a
    plan to bring them back. Our Chesapeake Bay watermen depend on
    it.
        So, as you can see, Mr. Chairman, I am a big NOAA
    supporter. NOAA saves lives, saves property, helps us
    understand the world around us and brings back jobs in our
    fishing and coastal communities. I look forward to working with
    you.

                       National Hurricane Center staffing

        Senator Mikulski. Mr. Chairman, I am delighted about the
    fact that NOAA has its headquarters in the State of Maryland
    and, of course, plays such an important role in our Nation. We
    look forward to working with you on so many of the funding
    issues. But one of the issues that really affects Maryland very
    directly, Dr. Baker, is the proposed cuts to the Hurricane
    Prediction Center. As you know, hurricanes have a devastating
    effect on the Eastern Shore. Our constituents in Maryland,
    Delaware, and Virginia are deeply concerned whether there will
    be adequate hurricane warnings to them. The last 3 years we
    have been hit by more hurricanes than in the previous 10.
        My question to you, Dr. Baker, is what is the status of
    adequate staffing for the Prediction Center; and No. 2, what
    can you tell us will be available for the hurricane season?
        Senator Sarbanes and I, of course, feel very strongly about
    this and would like to work with you on this.
        Dr. Baker. Would you like me to answer at this point?
        Senator Mikulski. Yes.
        Dr. Baker. Thank you, Senator Mikulski.
        We share your concern that the Weather Service continue to
    provide the public adequate warning and forecast services. This
    is at the very top of our priorities. I have made the
    modernization of the Weather Service my No. 1 priority since I
    have been in NOAA which is since the beginning of the
    administration.
        This past year, we had to take a number of cuts, including
    some congressionally mandated cuts, and I asked the Weather
    Service to go back and find ways that they could do this
    without jeopardizing their warning services. They had to take
    some cuts in the Tropical Prediction Center [TPC], which
    includes the hurricane center and some of our other centers.
    None of those cuts were, in fact, involved with the severe
    weather warning system.
        However, there was a lot of public concern about reductions
    to the TPC. We listened to that public concern and I talked to
    Secretary Daley. Thanks to the fact that we were able to change
    our forward-funding stream on satellites, we were able to
    release some money in fiscal year 1997. Due to these available
    funds, we have announced that we will not take those reductions
    in personnel that we had originally proposed at the hurricane
    center. We will not be able to fill some of the vacancies but
    we will not be taking additional reductions in personnel. So,
    the hurricane center will be at exactly the same level of
    staffing this year as it was last year. And we will continue to
    monitor its performance.
        Senator Mikulski. So, we will have adequate staff and they
    will continue to be a priority on the warnings necessary for
    coastal protection and coastal evacuation, if necessary?
        Dr. Baker. Absolutely.

                   Chesapeake Bay blue crab stock assessment

        Senator Mikulski. The other is a question that I would like
    to raise on species. I know our cousin from Carolina has raised
    his concerns about flounder. I will be on the Eastern Shore
    this weekend, actually on a fishing trip with some people I do
    every year. Usually this time it is only blues that are
    available, so, we will, even if I catch a striped bass they
    will toss it back.
        Senator Lautenberg. What size?
        Senator Mikulski. Well, let us just say I hope it is big
    enough for me to----
        Senator Lautenberg. To be a keeper.
        Senator Mikulski [continuing]. Well, small enough for me to
    reel it in, big enough for me to brag about.
        But one of the other species that we are deeply concerned
    about is the Chesapeake Bay blue crab. And, as you know,
    Governor Glendening and us are trying to do really a species
    management plan. Crucial to this is the winter dredge survey
    that NOAA does. We have been advised it is one of the most
    important techniques that we can do about species prediction
    and species management. There is rumor that NOAA intends to cut
    the funding for the winter dredge survey because they do not
    regard it as research. Whatever we call it, the winter dredge
    survey is crucial to us. Could you tell us what your plans are
    for the winter dredge survey and the blue crabs in the bay?
        Dr. Baker. Let me ask the expert on that, Nancy Foster, who
    is our Deputy Director of Fisheries.
        Dr. Foster. I cannot specifically answer the question about
    the winter dredge survey, but I can tell you that we have no
    plans to cut any blue crab work in the bay.
        Senator Mikulski. Well, I might say, Dr. Baker, that the
    work of NOAA on the blue crab has been great. The winter dredge
    survey, the Blue Crab Advisory Commission, and for us--the blue
    crabs here sparked a book called ``Beautiful Swimmer''--but for
    us, this is absolutely crucial to the jobs of the watermen
    industry where those jobs are shrinking and we just do not want
    an endangered species to be both the blue crab and the
    watermen. So, we would like to work with you to make sure that
    that tool is in place and we would like to thank you for it.

                  NOAA facility at Goddard Space Flight Center

        The other question that I have goes to Earth observatory.
    Mr. Chairman, you might be interested to know as the ranking
    member on the committee that looks at NASA that one of the
    crucial interagency cooperative agreements and arrangements has
    been NOAA/NASA. You have talked about forward funding in some
    of the satellites but I understand you want to move a facility
    that you have in Suitland to Goddard. What is that all about?
        Dr. Baker. Well, Senator, we have two very important
    facilities in Suitland and in Camp Springs. One is the
    headquarters of our satellite operations. The other one is our
    National Meteorological Center where we do the basic forecasts,
    the National Center for Environmental Prediction.
        Senator Faircloth. What did you say?
        Dr. Baker. One facility is in Camp Springs, MD, and the
    other facility is in Suitland, MD.
        Senator Faircloth. Thank you.
        Dr. Baker. We have to vacate both of these buildings
    because the lease is running out and the buildings are old.
    They are really not going to be suitable after roughly the year
    2000. So, we looked for a combination of things. The lowest
    cost option for us to house these people and the best possible
    synergy. And interestingly enough, because of the availability
    of Federal land at the Goddard Space Flight Center in
    Greenbelt, MD, we were able to find an arrangement that would
    both be the lowest cost option for us to find a facility, and
    to build synergy with NASA. We have worked very closely with
    NASA on their Earth observing program and our operational
    satellite program. We do a lot of joint things.
        In fact, NASA, NOAA, and the Department of Defense are the
    three partners in the converged meteorological system that is
    saving the country over $1 billion over the life of that
    program. By putting everybody together, we are going to have a
    synergy of activity that will allow us both to do new things
    but to find ways to eliminate waste and duplication. It is
    going to be, I think, a very good way to move forward with the
    Federal program.
        Senator Gregg. So, it is staying in Maryland.
        Senator Mikulski. Well, it is not only to that it is
    staying in Maryland. But, Mr. Chairman, you know, sometimes I
    have not always supported the fact that agencies are built in
    Maryland if we do not think we are going to get value for it.
    And there was some talk about moving EPA to Maryland. We felt
    it should stay in the Nation's Capital.
        Senator Gregg. Well, I think there was talk about moving
    this to New Hampshire.
        Senator Mikulski. For which I would think would have no
    value. [Laughter.]
        Senator Gregg. Nicer weather.
        Senator Mikulski. But I think really what we are trying to
    do, and I think the committee would find this interesting,
    where there is already Federal ownership of land, rather than
    buying land, let us get value for what we need in laboratory or
    management space. FDA, we hope to put on a base that has been
    closed at White Oak. And that, here, I know that the space is
    dated and out of use. And there are many questions that we
    would like to have on fisheries management, satellite and Earth
    observatory, but I know that my colleagues have many questions.
    So, we look forward to working with you. But, Mr. Chairman,
    this agency, whether it is in Vermont or Maryland or New
    Hampshire, is really one of our main interests.
        Senator Gregg. Well, it is not going to be in Vermont. They
    do not even have a sea coast. But many think it is a good
    agency.
        Senator Mikulski. That has not stopped the Senator before.
        Senator Gregg. Senator Faircloth, do you have any questions
    relative to your situation? Did you want Dr. Baker to respond
    to your opening statement in any way?
        Senator Faircloth. No, no; unless he wants to. I would be
    glad to hear it. I was going to ask a few questions but if he
    has got a response I would be delighted to hear it.

                      Fisheries stock assessment accuracy

        Dr. Baker. Well, Senator, I just want to tell you we take
    this problem very seriously. The whole issue of accurate stock
    assessment is one that is very important to us. And I recognize
    your concern there and we will get back to you with answers on
    all of that. And I want you to know that we will work very
    closely with you on this.
        Senator Faircloth. Well, I thank you and I look forward to
    it. You know, Senator Lautenberg, Senator Mikulski, all of
    their fishermen are telling the same thing. We have a 5\1/2\-
    inch opening in the nets and they are catching their quotas,
    literally the year's quotas up in 10 days.
        Senator Gregg. Do you have any other questions?
        Senator Faircloth. No, Mr. Chairman.
        Senator Gregg. Senator Lautenberg.

                            Community right to know

        Senator Lautenberg. Thank you, Mr. Chairman.
        Welcome, Dr. Baker. Your Department of Government, I think,
    is a very important one, and I am going to support the
    President's budget. I am pleased with the overall list of
    priorities. I am co-chairman of The Coastal Coalition and, of
    course, am very interested in your programs. New Jersey has the
    coastline and we have lots of fragility along that coastline.
    And there are all kinds of disruptions in fishing--some are
    caused by pollution, overcrowding, and so forth--but we are
    interested in the reliable assessment of what the stocks are
    and what is happening with the fishermen and their opportunity
    to make a living. And we see that all the way up and down the
    east coast, there are problems of people making investments in
    larger, more efficient craft to catch the fish and then finding
    out that they are sweeping it so clean in such a short time
    that others are going out of business alongside them.
        And we have to continue to invest in research and our
    understanding as to what we have got there. Many of your
    programs are ones that I am very interested in, and Senator
    Mikulski and I share similar interests.
        In the advanced warning programs, notice of violent weather
    not only can save lots of lives but lots of money as well. It
    is very important that it continue. The National Weather
    Service--there is excellent work done there. We hope that we
    continue to do the research there. And thanks for the work done
    by the NOAA lab in Princeton, the work that they are doing on
    global climate change and the ozone. Of course, as former
    chairman, now ranking member of the Superfund Subcommittee, I
    am interested in your assessment on the natural resources
    damage that might ensue from these contaminated sites. I am the
    author of the community right to know law and I was pleased to
    see that the President added a series of chemicals to that.
        But I am interested in knowing about the right to know, for
    swimmers, and what we can do to make sure that the conditions
    are clearly understood. There are diseases that are transmitted
    through exposure in the water and we want to continue those
    programs.
        I am going to submit some questions in writing to you, but
    I am curious that there is constant debate about this beach or
    water quality testing. And, again, I will quote the swimmers
    right to know. Everybody has a right to know whatever they are
    doing. NOAA is requesting funding for a new right to know
    program, for swimmers at our Nation's beaches. And what would
    you be doing under this program?

                               Coastal monitoring

        Dr. Baker. Well, Senator Lautenberg, this is a part of our
    activity that was proposed by the President in his new
    initiative. We call it expand every American's right to know
    about toxic pollution. Our particular part of that was to
    provide an additional $2.9 million to our coastal monitoring
    and environmental assessment program which expands and improves
    our coastal monitoring program. So that is additional funding
    for better coastal monitoring.
        We are going to collect more information on toxins in
    water, sediments, and organisms in coastal areas and then
    provide that information to coastal communities. Our coastal
    centers, we have one in Charleston and one in New Hampshire,
    will also be working on development of state-of-the-art coastal
    pollution monitoring technology.
        It will expand our existing programs of monitoring the
    sediments, toxins, and organisms in coastal waters. The program
    already goes on in Rutgers, which is a very important program
    for us.
        Senator Lautenberg. Very important.
        Mr. Chairman, did you hear that one of those locations is
    in New Hampshire?
        Senator Gregg. I am surprised.

                           status of Stock assessment

        Senator Lautenberg. It is at the top of the mount.
        On April 16, just a short time ago, I wrote to you
    concerning a proposal by Dr. Powell of the Haskin Shellfish
    Research Lab at Rutgers. And I understand that a survey be
    undertaken, dealing with our Atlantic surf clams and quahogs,
    which would provide some significant data which might assist
    you and the Mid-Atlantic Fisheries Management Council, in
    setting reasonable harvest quotas; again, a stock assessment.
    What is the status of that program?
        Dr. Baker. Let me ask the Fisheries Director, Nancy, do you
    have an answer on that?
        Dr. Foster. Yes.
        Dr. Baker. Nancy Foster.
        Dr. Foster. We are doing a stock assessment that should be
    out sometime next summer that will give the latest information.
        Senator Lautenberg. OK, and thank you, Dr. Baker. We have
    some other questions that we will submit and we will look for
    your responses. And, once again, my compliments for having an
    excellent organization, good programs, and I hope that we will
    continue to fund you at levels that we can all get the response
    that we like to get when we have to call on the Weather Service
    to get information in advance of disaster.
        Dr. Baker. Thank you.
        Senator Bumpers. Mr. Chairman, I do not have any questions.
    I just want to say I think NOAA does a great job and they have
    always been very accommodating and I am a Johnny-One-Note with
    regard to the importance of the Fort Smith weather station, and
    I will submit a question in writing on that and not take up the
    committee's time today. And, maybe you can come by the office
    sometime, Dr. Baker, and visit with us.
        Dr. Baker. I would like to do that. The State of Arkansas
    provides lots of tornadoes for us to study.
        Senator Bumpers. We provide plenty of tornadoes. All we
    want you to do is tell us when they are coming.
        Dr. Baker. You gave us tornadoes and you gave us the
    Director of our Weather Service, as you know.
        Senator Bumpers. That is right.
        Dr. Baker. So, the State is very important to us.
        Senator Bumpers. We have really been particularly hard hit
    the last 2 years and it has cost hundreds of millions of
    dollars. Not to compare it with the Grand Forks, but certainly
    on a scale similar to it.
        Senator Gregg. Senator Stevens.

                          NOAA corps disestablishment

        Senator Stevens. Thank you, Mr. Chairman.
        Dr. Baker, I do thank you for taking the steps to release
    that million dollars to help with the research in the Bering
    Sea, including the Russian zone. I am grateful for that. An
    organization called The Military Coalition has suggested that
    no cost savings will be realized from the elimination of the
    NOAA corps.

                                   NOAA corps

        I believe you told us some time ago that some of the
    uniformed corps would be absorbed by NOAA but is there any way
    to refute their claim that there would be no savings if the
    corps is eliminated?
        Dr. Baker. Senator Stevens, that is a very good question.
    There is an initial cost for us to transition those personnel
    who have military retirement and military careers into a
    civilian status. There is an initial cost. We save that cost
    then over the long term. In the long term, but we are talking 5
    to 10 years, we begin to show a savings.
        We also believe that over the course of this process of
    transitioning we will end up with fewer people in those
    positions than we would have had, had the NOAA corps been in
    place. We also save money in that way.
        Senator Stevens. Well, let me do this, Mr. Chairman, if I
    may, I would like to put in the record the letter we received
    at the committee from The Military Coalition. If you have any
    further comments once you see it, I would appreciate it if you
    would put them in the record.
        [The information follows:]
                                        The Military Coalition,
                                  Alexandria, Virginia, April 21, 1997.
    Honorable Ted Stevens,
    Commerce, Justice, State and Judiciary Subcommittee, Senate
            Appropriations Committee, Washington, D.C.
        Dear Senator Stevens: The Military Coalition, a consortium of
    nationally prominent military and veterans organizations, representing
    more than 5 million members of the seven uniformed services plus their
    families and survivors, is writing regarding the Commerce, Justice,
    State and Judiciary Subcommittee's consideration of fiscal year 1998
    appropriations for the National Oceanic and Atmospheric Administration
    (NOAA), scheduled for April 24, 1997. We want to express our strong
    opposition to the administration's expected proposal to disestablish
    the NOAA Corps of Commissioned Officers.
        Elimination of the NOAA Corps must be based either on sound
    economic or programmatic grounds. The reality is that no savings would
    be realized by dissolving the NOAA Corps. Furthermore, elimination of
    the NOAA Corps as a uniformed service may have unintended consequences
    that are not in the national interest.
        The original proposal to eliminate the NOAA Corps--put forth as a
    recommendation in the National Performance Review--was not based on a
    thorough economic analysis. In this regard, the GAO report released in
    October 1996 (GAO-GGD-97-10, ``Federal Personnel Issues: Issues on the
    Need for NOAA's Commissioned Corps'') found that there was only a 2
    percent cost differential between the NOAA Corps and an equivalent
    cadre of civil servants. In making this determination, however, the GAO
    report did not consider moving costs or the cost of overtime that would
    have to be paid to civilian workers. If these costs were to be
    included, the alleged cost savings to be achieved through elimination
    of the NOAA Corps would be non-existent.
        In addition, the ostensible ``cost'' of eliminating the NOAA Corps
    is only $6 million more than would have to be funded for the retired
    pay line item ($8 million in 1997) as included in the NOAA budget. The
    actual cost, however, will be at least $14 million, plus the retired
    pay for current retirees and those who would be forced to retire if the
    Corps is eliminated. This is because the retirement for NOAA Corps
    retirees and those forced to retire is an unfunded liability and does
    not appear in the proposed fiscal year 1998 NOAA budget. As a
    consequence, in addition to the one-time elimination costs, the actual
    cost to the retirement account is estimated to be well in excess of $10
    million annually.
        Since dissolution was first proposed, the NOAA Corps has downsized
    significantly. What will be lost, if the proposal to eliminate the NOAA
    Corps is pursued, is the dedicated uniformed scientists and engineers
    who provide the flexibility, skills and response capability to this
    nation for operating NOAA's ships.
        A recent example is the NOAA Ship Rude, which provided crucial
    survey support in response to the TWA Flight 800 recovery effort. The
    Rude, managed and operated by NOAA Corps officers, located the crash
    debris within days. The NOAA officers were the critical interface,
    providing wreck data to Navy divers and members of the National
    Transportation Safety Board. The NOAA Corps' role in the TWA 800 effort
    was specifically recognized by Secretary Pena at a United States Coast
    Guard Awards Ceremony with a Public Service Commendation and by the
    Department of Commerce, with the Department's highest award--the
    Commerce Medal.
        Other critical capabilities that will be lost are the aircraft
    pilots who penetrate hurricanes at low-altitudes in support of
    hurricane research and the nation's only group of federal
    hydrographers, whose job is to manage the collection of hydrographic
    data for the nation's nautical charts. NOAA's nautical charts are
    highly regarded by the maritime community. The loss of this expertise
    could jeopardize the quality of these charts, which enhance the
    nation's economy and serve to prevent the catastrophic environmental
    damage that could result from the grounding of an oil tanker on an
    uncharted rock. In addition, if the NOAA Corps were to be dissolved,
    there remains the issue of tort liability in the national charting
    program and the associated cost increases, which have not been
    determined.
        The Military Coalition urges you to carefully review all the
    consequences of disestablishing the NOAA Corps. We believe that if you
    objectively review the facts, you will agree that disbanding the NOAA
    Corps is no longer supportable or in the national interest. It will be
    most unfortunate should the nation lose this valuable group of men and
    women who have dedicated their careers to serving our nation.
    Accordingly, we recommend that you give the issues raised here serious
    and careful consideration as the Subcommittee takes up the NOAA
    appropriations bill for fiscal year 1998.
                Sincerely,
                                                The Military Coalition.

                      Nautical charting activity in Alaska

        Senator Stevens. Now, NOAA currently operates eight
    fisheries research vessels. The research vessel Miller Freeman
    operates primarily off my State. The others are operating
    through the rest of the country or the coastline off of the
    rest of the country. One-half the coastline is off our State
    and more than one-half of the fish caught by the United States,
    in terms of volume and value are landed in Alaska. You have
    seven NOAA vessels for fisheries research and none of them are
    off my State. I understand that there are some problems with
    regard to financing, but none of them are stationed in our
    State.
        I understand that the hydrographic vessel Rainer operates
    in Alaska part time. But I have received complaints from our
    maritime industry and the fishing industry that we seem to be
    forgotten as far as the allocation of time from the NOAA
    hydrographic fleet as well.
        Now, you may want to think about that, but it is a serious
    matter for us, particularly with regard to the mapping. Where
    the shoals are located, particularly, is of great concern.
        Is there any reason why there is not an increased tempo off
    of Alaska as compared to the rest of the country?
        Dr. Baker. Well, Senator Stevens, I think I would have to
    get back to you and analyze that, so we could give you a full
    answer. We are very concerned also about having adequate
    mapping and charting, both in terms of doing the work, having
    the equipment and ships to do it. So, we share that concern.
        Senator Stevens. I understand allocations that we suffer as
    far as Alaska is concerned based upon population but the work
    of these vessels has no relationship to the population. And if
    it is really related to the area covered by the vessels, we do
    not understand why there are so many out there in the rest of
    the United States and none in Alaska. I would appreciate your
    response, if you would.
        [The information follows:]

       Lack of Increased Tempo Off of Alaska Compared to the Rest of the
                                    Country

        Currently the National Oceanic and Atmospheric
    Administration's (NOAA's) fisheries research vessels Miller
    Freeman and John N. Cobb spend most of their operating time in
    Alaskan waters. These two ships combined operate around 420
    days per year, or over one-fifth of the total of 2,000 days per
    year for all NOAA's fisheries research vessels. In addition,
    NOAA charters over 500 days per year on fishing vessels in
    Alaskan waters where laboratories and multi-purpose vessel
    support are not required. The ship time NOAA currently uses in
    Alaskan waters for fisheries stock assessment and research is
    well over one-third of the total fisheries related ship time
    NOAA uses for all areas. Even with this amount of ship time
    dedicated to Alaskan waters, to meet the requirements of the
    Magnuson-Stevens Act, NOAA will need additional ship support.
        For hydrography, NOAA's survey vessel Rainier operates in
    Alaskan waters 220 days per year. The Rainier provides one-
    third of the total NOAA ship time dedicated to hydrography and
    is NOAA's most capable and effective survey platform with six
    survey launches. NOAA needs to increase the rate of
    hydrographic surveying in Alaskan waters and is exploring
    options to do so. NOAA also needs the ability to procure modern
    multibeam survey systems. One option being explored is the
    charter back of Rainier's sister ship, the Fairweather, or an
    alternate vessel using a contract crew and NOAA hydrographers.
    This would effectively double NOAA's data acquisition rate in
    Alaskan waters and reduce significantly the time required to
    complete surveys of critical areas.

                Halibut and sable fish individual fishing quotas

        Senator Stevens. I asked you a question at the Commerce
    Committee hearing earlier this year concerning the proposed
    increase in 57 full-time equivalents. We have been told there
    were 24 National Marine Fishery Service enforcement personnel
    in the two new IFQ fisheries in Alaska in 1995 and there are
    only eight now, notwithstanding the fact that there is just a
    staggering increase in workload brought about by the IFQ
    program.
        Your people briefed my staff last week about temporary
    enforcement people from the lower 48 but it does seem there
    ought to be a more permanent plan if we are going to have this
    IFQ program in effect, particularly since there is a test
    period of just 2 years now under the Magnuson-Stevens Act.
        We would like to have some effort made to provide the
    personnel to ensure that the test period is a valid one in
    terms of enforcement and recognition of violations to see
    really how the test program works. I hope you agree that this
    is not unreasonable. This is the major IFQ program we are going
    to test in the 2-year period.
        I would hope you would find some way--in the halibut/
    sablefish IFQ fishery off Alaska--to monitor that so that the
    test period really reflects the type of enforcement and
    administrative review that it should if we are going to use
    that as a judge to see whether we go with IFQ's, not only in
    Alaska but throughout the rest of the country.
        Dr. Baker. Well, the halibut/sablefish IFQ has been, I
    think, one of the very successful tools that we have in
    fisheries management. We are very concerned that we have
    adequate enforcement which is one of the keys to making IFQ's
    work. I was just briefed on this by the staff and I agreed that
    we would find a way to try to alleviate that problem.

                      Facilities maintenance requirements

        Senator Stevens. The last thing is one question I am asking
    all of the agencies. We have no way to adequately determine the
    backlog of maintenance, repair, and modernization. I think it
    is an enormous sword of Damocles hanging over the executive
    branch as a whole. Have you ever ascertained that for NOAA?
        Dr. Baker. Yes, sir; we have been looking into that and it
    is an enormous issue. We had some buildings in fisheries that
    go back to 1880 and right now our estimate is $28 million.
    Twenty-eight million dollar backlog on facilities maintenance
    and repair. But we do have a list we have been looking at.
        Senator Stevens. But that is just facilities.
        Dr. Baker. Yes.
        Senator Stevens. I am talking about ships, vehicles, test
    systems, the equipment in the laboratories. Are we really
    keeping up with new technology as far as your laboratories are
    concerned? I would like to know what is the backlog? If you had
    the money to catch up and say that you have a state-of-the-art
    NOAA, what would it cost you to catch up?
        Dr. Baker. I think in some areas we do but in many areas we
    do not. And we can provide that information for you.
        [The information follows:]

        Ships.--The overall condition of NOAA's ships has improved
    considerably over the past several years due mostly to the funds
    provided through the Fleet Maintenance and Planning account, and
    because some ships that were in poor condition were removed from
    services. Ships such as the Oregon II, Miller Freeman, and David Starr
    Jordan continue to need increased attention and NOAA is planning to
    contract additional repairs to these ships over the next few years.
    Additionally, there are some items remaining on the other vessels which
    should be taken care of to ensure continued vessel reliability.
        Historically, NOAA has requested $6 million for routine maintenance
    of NOAA's fleet. This amount covers fleet maintenance at a minimal
    level and will not cover inflationary costs or emergency repairs in the
    future.
        Excluding the $4.5 million requested in the fiscal year 1998 budget
    for Miller Freeman repairs, there is approximately $13 million in
    backlogged repairs for NOAA ships which should be addressed to ensure
    vessel reliability stays at high levels for the next several years.
        Facilities.--The Capital Improvements Program (CIP) project backlog
    is currently estimated to be approximately $28.4 million (215
    projects). The nature and scope of projects included in the backlog
    vary greatly, from small plumbing or electrical problems, through large
    systems replacements such as roofs, heating and air conditioning, and
    sanitation, to major renovation projects necessary to maintain a
    facility's viability. The cost estimates for the projects vary as well,
    with some costing over $2 million, while some of the smaller projects
    are expected to cost as little as $3,000 to $5,000. Obviously, in order
    to eliminate the CIP project backlog funding would be necessary. In
    addition, funds to cover additional projects as they are identified
    would be needed. This growth is currently estimated around $3.5 million
    per year. Assuming that it would take 4 years, at least, to eliminate
    the backlog, we would expect to discover additional projects with an
    estimated cost of $10 million to $15 million during that time.
        The NOAA staff charged with the responsibility for designing and
    overseeing CIP projects are the real property specialists and
    facilities engineers in the field. These staff are also responsible for
    most major ``special'' facilities projects along with performing a
    significant number of facilities tasks directly for the line offices
    they serve. At present, NOAA devotes roughly 4 to 5 FTE of this field
    staff to the CIP. At this level, it is estimated that staff could
    manage approximately $3 million to $5 million of projects annually,
    with some variance due to size and complexity of the individual
    projects. In order to eliminate the entire backlog in four years,
    including new projects that come about in that time frame, the program
    would need an infusion of some $8 million to $10 million each year and
    8 to 10 new engineering FTE, or 4 to 6 new engineering FTE and
    substantial contract Architecture and Engineering support. This assumes
    that the ``other-than-CIP'' workload of the field staff remains fairly
    constant.

        Senator Stevens. I do not mean to spend a lot of money
    researching it, but I would like to have at least some general
    recognition of how much it is. You do not have jurisdiction
    over any facilities like dams or facilities of that type. We
    are doing a survey of dams and highway bridges and what not.
        Dr. Baker. I do not think we have jurisdiction over dams,
    highways, and bridges. We have lots of laboratories and fishing
    facilities and satellites.
        Senator Stevens. What is the age of your laboratories?
        Dr. Baker. Well, as I say, I think we have one that goes
    all the way to 1880 and we have a lot of our laboratories that
    were built in the 1940's and 1950's. We have a number of
    laboratories, you know, some of which we are looking to
    consolidate and improve. We have the full range I would say.
        Senator Stevens. I just received today what you call the
    ``National Fisheries Laboratory Consolidation Study Report.'' I
    have not seen it before. It was just this minute delivered to
    me. I will look through this, but I would appreciate it if you
    would just give----
        Dr. Baker. There is a lot of that information in there.
        Senator Stevens [continuing]. Give us your guidance about
    what kind of a backlog you have at NOAA.
        Dr. Baker. We will, Senator.
        Senator Stevens. Thank you.

                               Fleet maintenance

        Senator Hollings. Let me get right to the point. Here we
    have in the supplemental, Mr. Chairman, $10 million for salmon
    hatcheries and yet they cut out the ship maintenance. The John
    Cobb, one ship you have up in Alaska, is 47 years old. We have
    paid billions for satellite and weather stations and equipment
    and nothing for the maintenance of the NOAA fleet. How do you
    explain that?
        Dr. Baker. Well, this is not a good situation----
        Senator Hollings. You put $10 million in there just for the
    fish, but nothing to really do your job of studying these fish.
    And then you have a silly inspector general over there who
    tells us to privatize it. Suppose we went over to Maryland and
    said, we have a lot of good pharmaceutical companies, let us
    just privatize NIH, the pharmaceutical companies can do it,
    they have competent people, boom, boom, boom, we can do it much
    cheaper that way. You would be out of your mind.
        Senator Mikulski. Right. [Laughter.]
        Senator Hollings. And that is it exactly. Let us get with
    the program here.
        Senator Stevens. Would you translate that?
        Senator Hollings. Privatization would be much cheaper, that
    is what they all say. They say privatize as if it is some kind
    of rhythm they have or some political call, in 20 second sound
    bites. But that is nonsense. We are here in the real world, and
    we have to provide for this program and do a good job, and we
    do not have to make a profit in NOAA. We can get the ships from
    the Navy, some of them, and beef them up. We can actually do it
    more economically at the governmental level. That is why you
    are not going to save any on doing away with the NOAA corps.
    You have to hedge in your answers and say, well, you know, in
    the out-years, et cetera. That is 10 years from now and you
    will be gone and I will be gone then. [Laughter.]
        I mean come on. We have to get real and start putting the
    money in so this Government can operate efficiently and
    effectively, and we are not operating this way with the NOAA
    fleet.
        Dr. Baker. The NOAA fleet is a real crisis for us, Senator.
    It is a real problem. If we do not get support for the NOAA
    fleet, both in the administration and the Congress, we will not
    have a NOAA. And this is a point I have made many times. I am
    very concerned about it.
        Senator Hollings. You have made this point?
        Dr. Baker. I have.
        Senator Hollings. And they just do not listen?
        This means somebody is making better points on salmon.
    [Laughter.]
        Senator Stevens. Well, that salmon, Senator Hollings, those
    hatcheries on the Columbia River help to meet U.S. treaty
    obligations.
        Senator Hollings. Well, we ought to have a treaty to build
    a NOAA fleet.
        Senator Stevens. We ought to have a treaty to make sure if
    there are 15 ships operating along one-half of the coastline of
    the United States, there ought to be at least one in the other
    one-half.
        Senator Hollings. Well, the entire ocean is off of South
    Carolina's coast. [Laughter.]
        We really are concerned but I appreciate the chairman
    yielding.
        Senator Gregg. Thank you, sir.

                                Oceanic research

        Senator Hollings. Well, thank you very much, Mr. Chairman,
    I apologize for being late. I had to be at another meeting. Dr.
    Baker, we have to do something about the NOAA fleet and not
    listen to this call that really makes you look incompetent and
    makes the Government look incompetent.
        There is not any question about it, not with respect to the
    oceans. You said you were going to emphasize the importance of
    the oceans in taking over, and exactly how are you doing this?
    Tell the committee how you foresee changing some of the
    programs or increasing some of the programs. What do you have
    in mind?

                             National Ocean Service

        Dr. Baker. Well, Senator, we have been looking both
    internal to NOAA and across the Federal Government for ways in
    which we can find some better emphasis on ocean programs in
    general. One of the things we are looking at, at the moment, is
    trying to enhance the effectiveness of our National Ocean
    Service, which is the central oceans function in NOAA. We are
    looking at ways that we can improve the organization and
    capabilities of that part of NOAA. I have also called together
    all of the agencies who are involved in oceans matters, called
    the Oceans Principals Group, for the Federal Government, and we
    had a meeting last week. We agreed that we would start to meet
    quarterly both to address ways to enhance the ocean during the
    Year of the Ocean, which was announced for 1998, and also to
    find ways that we can better work together to have a better
    emphasis on coastal ocean activities, the ocean's role in
    climate, the ocean's role in fisheries--all of these areas. I
    think that it is an opportunity for us to do a better job than
    we have done before.
        Senator Hollings. I think so. I think perhaps we have to
    get the public involved as well as the Members here in Congress
    in reinstituting the Stratton Commission. I have been working
    on it and I would appreciate your help too so we can get the
    business leadership as well as the scientific leadership
    involved.
        Dr. Baker. I think private industry is very interested and
    I think your idea of a Stratton Commission is right on target
    and we are fully supportive of that.

                           Capital assets acquisition

        Senator Hollings. I understand your budget is broken down
    in order to show that there is an increase, but the truth of
    the matter is we are obligated for all of these things. How do
    you feel about this capital budget arrangement under Frank
    Raines?
        Dr. Baker. Well, Senator, we had been concerned, as you
    pointed out to me several years ago, about the cost of big
    systems, satellites, and Weather Service systems and so on. And
    if we did not account for those with long-term agreements we
    had the danger that the costs of the systems would cut into the
    ongoing programs. The point of this ``Capital assets
    acquisition'' account is to get an agreement from OMB that they
    understand about the out-year costs of big systems so that they
    know the satellites will go up and will go down. We do not have
    to have that cost come out of our programs.
        So, the first step is a recognition by OMB that we do, in
    fact, have large fluctuating costs for systems and this must be
    accounted for rather than simply looking at it year to year,
    there is a long-term look.
        This, I think, is a very important point. The second one is
    to aggregate those into one part of our budget which will be a
    fluctuating budget and then have the other part of our budget
    be the program budget. But it is a first step for OMB to
    recognize this. This is something I think Congress has
    recognized for a long time.
        Senator Hollings. Does it take away from your flexibility?
    In other words, like the hurricane center down in Miami, you
    and the chairman had to get together and adjust some moneys and
    everything else in order to keep everybody up and running down
    there in the Miami Hurricane Center. Does this capital budget
    approach take away from your flexibility?
        Dr. Baker. No, sir; we still have transfer authority among
    the accounts. That is the way we had worked it out.

                 Advanced weather interactive processing system

        Senator Hollings. But my point is, sometimes you have to
    transfer from the capital budget. Well, what about AWIPS, the
    advanced weather interactive processing system? Last year, NOAA
    said that the program was in real trouble--that the contractor
    could not produce the software.

                                status on AWIPS

        And since that time, I think it has gone through major
    changes. Can you give the committee an update on AWIPS?
        Dr. Baker. Yes, sir; I have been following this very
    closely and personally because it is both a big software and
    hardware acquisition for NOAA. We did go through some changes
    last year. We were able to replace some of the planned software
    with software which we had built in our own forecast systems
    laboratory. We had started this as a risk-reduction effort and
    we have been able to use that instead of what had been proposed
    by the contractor.
        We have a limited deployment of the AWIPS system now that
    software and hardware is out around the country and it is
    already working very well. In fact, during a big snowstorm last
    year in Kansas City, we found that the AWIPS system brings
    together all of the data from the satellites, radars, and the
    computer systems all on one screen. The forecasters were able
    to forecast the total amount of snow during the time that the
    snowstorm was taking place because of the AWIPS system. We have
    16 of those out there. We are putting out some more in a
    limited deployment system this year.
        I believe that we understand what this program will cost.
    In fact, I have agreed that we will have a total cap on the
    program, $550 million, up through the final build of this
    system.
        Senator Hollings. You are maintaining that $550 million?
        Dr. Baker. Absolutely.
        Senator Gregg. On that point, why do you keep using this
    software company? I mean, they just do not appear to be
    producing very well.
        Dr. Baker. Well, it is hard to find big companies that can
    handle the kind of software development that we have and the
    company that we have, PRC, is one of the companies that is
    competent in doing this.
        What is important, as you work with these systems
    development companies, is that you stay very close to the
    development and that you have a system; whereby, there is a
    build, and there is a test and then there is a build and then
    there is a test. If you try to have everything built and then
    wait until the end, it does not work. There has to be an
    integrated process.
        Senator Gregg. Well, is the software performing adequately
    now?
        Dr. Baker. We believe that it is and we believe that we
    have a handle on how this is working.

                   Aeronautical charting transfer to the FAA

        Senator Hollings. With respect to the aeronautical
    charting, there was an initiative to transfer that to the
    Federal Aviation Administration for a savings, I think, of
    $14.5 million. But then, of all things, you come right back
    around and cancel it out by saying that you are going to pay
    for all the charts you produced for the Department of Defense.
    That is the one fat crowd we have in this town, the Department
    of Defense. You and I can squeeze money but when I get together
    with Senator Stevens and his Defense Subcommittee on the
    Defense appropriations, you ought to hear them talking
    billions, and everybody is rubbing each other's backs and
    everything else. So I just do not get it. Why would you do
    that? The Department of Defense can pay for its own maps.
        Dr. Baker. Well, Senator, this was not our decision. It was
    the decision by the Department of Defense that they did not
    want to continue to pay for this activity. I think in the short
    term we have an----
        Senator Hollings. Well, do not give them any maps. Just do
    not give them any maps.
        Senator Mikulski. Sell it to them.
        Senator Hollings. Yes; you have to. When it comes down to
    it, you have to pay for it. I think we ought to look into that
    carefully. The Department of Defense cannot start that practice
    or all the other departments will come to you asking for the
    same.

                            Turtle excluder devices

        With respect to the TEDS, these turtle excluder using the
    soft TEDS. Now, I supported a study because my local shrimp
    trawler fleet and NOAA found that South Carolina turtle
    strandings have accounted for less than 15 percent of the total
    strandings from Florida to North Carolina in the past 10 years,
    which is the lowest percentage of any Atlantic State. Yet,
    North Carolina shrimpers can use soft TEDS and in South
    Carolina, I am penalized and I cannot. Why?
        Dr. Baker. Let me ask the TEDS expert, Nancy Foster.
        Dr. Foster. I know this has been a growing concern on the
    part of South Carolina and we have asked our scientists in the
    Southeast to give us all of the rationale for the decision to
    put South Carolina in and leave Florida and North Carolina out.
    In fact, we are having a meeting sometime in the next few days
    where we are bringing our scientists together with some of your
    South Carolina fishermen and some of your staff to sit down and
    go over all the information, so, everybody understands where we
    are.
        Senator Hollings. Well, I do not know how you got us under
    the soft TEDS and kept them out of there. All that getting
    together and finding out the accurate information should have
    been done ahead of time rather than simply penalize us for the
    best record of any of those coastal States, according to your
    letter.
        Dr. Foster. I understand.

                      NMFS Charleston laboratory staffing

        Senator Hollings. All right, with respect to the National
    Marine Fisheries Service Research Laboratories, what is your
    current spending in those areas? In other words, I went over to
    the regular institution and I was surprised to find that over
    at Fort Johnson we cut back some 30 personnel. We have cut back
    on the Federal jobs. Now I am wondering if we are putting out
    on contract or what is the personnel plan?
        Dr. Baker. Nancy, can you answer that? We can also get an
    answer for the record.
        [The information follows:]

                         Charleston Laboratory Staffing

        Under the Federal Workforce Restructuring Act of 1994
    (Public Law 103-226), Full Time Equivalent (FTE) Streamlining
    Plans were developed by each operating unit in order to meet
    the reduction target established through fiscal year 1999. For
    the National Marine Fisheries Service (NMFS), the plan called
    for a total reduction of 309 FTE by the end of fiscal year
    1999. This reduction is from the fiscal year 1993 baseline of
    2,818 FTE and would provide for 2,509 FTE at NMFS at the end of
    fiscal year 1999.
        In meeting the FTE reduction target through fiscal year
    1997, NMFS will have reduced 274 FTE's of which 16 FTE's are
    from the Charleston, South Carolina laboratory at Fort Johnson.
    The reductions within NMFS and Charleston have been
    accomplished without running a disruptive reduction-in-force
    accomplished by utilizing earlier buyout programs and reducing
    the use of temporary and term-appointed personnel. Barring any
    specific budget cuts, there are no planned FTE reductions at
    the Charleston facility for fiscal years 1998 and 1999.

        Dr. Foster. It is true that there has been a decrease on
    permanent employees and temporary employees at Charleston. It
    is true for all of our facilities. It is part of the downsizing
    part of the streamlining plan. And we have asked our people,
    whenever possible, to contract out instead of hiring people.
    And we are now looking at how much, if that is more expensive
    and how much more expensive it is to contract out instead of
    hiring.
        Senator Hollings. Generally, from our experience at the
    Government level, it is going to cost you more money. I mean
    that is how they shield everything again back over to defense.
    They just want consultants. Everything is done which you could
    have done in the Department with the expertise there, and now
    we are starting down that road here in NOAA. I would look at it
    very carefully, if you do not mind. I would appreciate it.
        I apologize again for being late, Mr. Chairman, I have some
    other questions I will submit for Dr. Baker. Thank you.

                            Portland, ME, data buoys

        Senator Gregg. Thank you, Senator Hollings. It is always
    nice to have Senator Hollings ask questions because it then
    eliminates most of mine.
        On the weather buoy issue, if you could tell us a little
    bit about how many of them, what percentage of them, are under
    the National Weather Service control and what is the status of
    the weather buoy situations, specifically the status of the
    weather buoy off of Portland Harbor? If you know? Generally,
    what is happening with the data buoys?
        Dr. Baker. Joe, can you answer that? Joe Friday is the
    Director of the Weather Service.
        Dr. Friday. Yes, sir; there are about 30 of the buoys in
    coastal stations that have been funded by other agencies or
    sources of funds that were temporary in nature. And those
    agencies, many of the other agencies have discontinued their
    programs. I do not know the specific status of yours but I will
    get back to you on the record, sir.
        Senator Gregg. It is not mine, it is Maine's.
        Dr. Friday. We will get back to the record on that one.
        [The information follows:]

        NOAA operates a network of 89 buoys, of which 17 are paid
    for by other agencies or through special project funds on a
    reimbursable basis. NOAA's current appropriations only supports
    our base network of 72 buoys. In addition, there are 28 buoys
    that were previously operated and maintained via special funds
    or other Federal agency support, but are unfunded in fiscal
    year 1997. The Portland buoy is one of these unfunded stations.
        The U.S. Coast Guard established and operated this station
    from 1984-94. In 1994, USCG retired their buoy. Using other
    funding sources, NOAA installed a replacement buoy in 1994.
    Unfortunately, NOAA's alternative funding source (NOAA's
    Geostationary Operational Environmental Satellite Contingency
    Fund) was exhausted on September 30, 1996, at which time all
    maintenance and repairs on these 28 buoys, including the
    Portland buoy, ended.
        Recently, the wind instruments on station 44007 have
    failed. The buoy is still reporting wave heights, air pressure,
    and air and water temperature. The NWS will operate the buoy
    through the summer unless there is a significant failure
    wherein the buoy ceases to provide useful data and/or the hull
    itself becomes a threat to navigation. The situation will be
    reevaluated in the fall, and it is likely that the buoy will be
    removed since the position fixing equipment has also failed.
    Once removed, stations cannot be replaced without additional
    funding.
        NOAA has asked the National Research Council (NRC) to
    conduct a short-term study on the buoy system to determine the
    required number of stations and associated location to ensure
    that essential data is available for coastal and marine
    warnings. The NRC plans to complete its study by the end of
    1997. Based on this study, NOAA will review our entire base
    funded network of buoys to ensure data points in critical
    areas. The Portland buoy will be included in this assessment.

        Dr. Friday. But this is a situation that we are faced with.
    We have approximately, again as I say, about 30 of these
    facilities around the coast of the United States that were
    funded by other agencies for other programs. We were taking
    advantage of the data and using those data. But as their
    programs terminated then the funding sources have literally
    dried up for that. We are continuing approximately 65 buoys
    that are funded by NOAA and we will continue that operation.
        Senator Gregg. Well, what is going to happen to the 30 that
    were funded by other people? Are they just going to be allowed
    to sort of whither out there or be picked up and brought in or
    are they going to be left there and the information used?
        Dr. Friday. Our process as far as the maintenance of those
    buoys are concerned is that there is no funding for
    refurbishment and replacement of those buoys. So, what happens
    is as soon as those buoys fail the next time the Coast Guard
    buoy tenders are in that area they will pull them out so that
    they do not become a hazard to navigation.
        Senator Gregg. Are these buoys valuable, these 30 buoys, to
    your weather prediction capabilities or are they marginal?
        Dr. Friday. The data buoys, themselves, are a very valuable
    source of information in the immediate ocean areas. We are
    looking at the capabilities now of new remote sensing
    capabilities such as the NASA scaterometer flying on the
    satellite and we are beginning to see good results from that
    and some of the near shore areas as well. So, there are other
    alternatives for ocean data. But the buoys are the only things
    that we have at present time that give us in situ data in the
    oceans.
        Dr. Baker. We have just agreed to fund a study by the
    National Academy to give us some advice on how we could
    prioritize the value of the buoys for our weather forecasting.
    We are just going to start that process.
        Senator Gregg. Is this all the buoys or just your buoys?
        Dr. Baker. That is the full set. So, we will be able to
    answer that question about the priorities.
        Senator Gregg. It would be helpful if we could get a map of
    where the buoys are, the 30 buoys that are at risk, and also
    some idea of what the transition time is between when these
    other technologies become available relative to when the buoys
    are going to go out of service.

                 NOAA-DOD polar orbiting satellite convergence

        What is the current status of the polar convergence?
        Dr. Baker. I think we are in very good shape on the Polar
    Convergence Program at the moment. We have very good agreement
    between the Department of Defense and NOAA about how the
    satellite program will move ahead and on the timing and the
    instruments. We expect to have the first satellite fly in about
    the year 2007. As you know, we have to start these programs
    very early to make sure that they do fly. This is a program
    that would be shared in cost equally between DOD and the
    Department of Commerce. And this year the budget that is
    requested is, in fact, equally shared between the two.
        We do not yet have agreement from the Office of Management
    and Budget about the out-years in the Department of Commerce
    budget and this is something that we are working with OMB at
    the moment. As I say, we do have agreement between the
    Department of Commerce and DOD about the program that is the
    converged program that saves about $1.7 billion over what would
    have flown if we had not done the converged program.
        Senator Gregg. So, do you have a carryover that you are
    working with here?
        Dr. Baker. There is always some carryover in satellites as
    they last longer. I do not think there is a carryover in the
    convergence program but there is in the polar program which is
    the existing program. Once again, this is a question of NASA
    setting requirements, telling us what they need. We fund NASA
    to do that. If NASA changes its views or does not need the
    funding then there is some money available which is then used
    for satellites.
        Senator Hollings. Well, I was at the State Department and I
    heard they held up on the finalization of the full satellite
    conversion.
        Dr. Baker. We had a disagreement with the Department of
    State on a question of the memorandum of understanding that we
    wanted to sign between NOAA and the European Meteorological
    Satellite Organization on data. Greg Withee, the Deputy
    Assistant Administrator for Satellite and Information Services,
    can tell us where we are on that memorandum of understanding
    with the Europeans.
        Mr. Withee. The discussion was on the nontechnical and
    restricted data portions which is going on with DOD and the
    State Department right now. And, hopefully, they will come to
    conclusion in the next few weeks.

                         Satellite funding requirements

        Senator Gregg. How about this GAO report, what is your
    reaction to that relative to the GOES program?
        Dr. Baker. The GAO report indicated that there was
    carryover funding that could be made available, and I think, if
    I am referring to the right one, they suggested that NASA was
    asking for more carryover than was really needed. We have gone
    back and looked at that question. NASA has typically asked us
    for 3 months of forward funding so that they can, in fact, have
    the money to provide the contractors.
        The GAO has suggested to NASA that they could live with
    less. We have been in discussions with NASA since that report
    has come out, and we have reached an agreement that we could
    probably live with 2 months forward funding, not 3. And this
    does, in fact, free up some money in the system because it
    changes the NASA requirements and we have made those numbers
    available to the committee.
        Senator Gregg. I think the report also talked about the
    managerial issues of the program. Can you comment on that?
        Dr. Baker. Let me ask the satellite expert here, Greg?

                             GOES follow-on program

        Mr. Withee. Yes, sir, they reference the major GOES follow-
    on program and whether we were ready to start it or not. The
    situation is that we are not asking for new money for GOES
    follow-on beyond our present GOES program which we call GOES-Q.
    The reason is that we are still trying to formulate follow-on
    requirements working with the Weather Service and other users.
    We are also working with technology with NASA and DOD and other
    satellite research agencies who are developing technology and
    waiting for a little bit of a signal as to whether we should
    design our programs in 2010. We certainly will come back with a
    follow-on program in the next few years, but right now, it is
    too early.

                             National ocean survey

        Senator Hollings. Mr. Chairman, regarding the national
    ocean survey backlog. Last year I think NOAA produced 235 new
    editions of the nautical charts and acquired and processed data
    from some 50 hydrographic surveys, but we still have some
    43,000 miles. How long is this going to take? Are we using up
    the date charts or do we have a backlog due to a lack of money
    or expertise? How do you explain it? What is your comment?
        Dr. Baker. Meeting the critical area needs is really a
    question of money. Having money to pay for the surveys that we
    do. We received an increase last year, and we were able to
    increase the amount of mapping and charting that we did but we
    are still very, very far behind in mapping all the critical
    areas in the United States. Very far behind.
        Senator Hollings. Well, there you go. The money you get
    from NASA or whatever this is should be put to these charts or
    put to the maintenance of your equipment--your ships. Thank
    you, Mr. Chairman.

                                   NOAA fleet

        Senator Gregg. On that ship issue, you alluded to the fact
    that you think the fleet is critical to the NOAA purpose. Could
    you restate that for the record, why you feel that way.
        Dr. Baker. Well, Mr. Chairman, NOAA is the National Oceanic
    and Atmospheric Administration with the capability of going to
    sea, just like the capability of measuring and operating in the
    atmosphere is critical for the functioning of our agency from
    doing the trawling and measurements of stock assessment for
    fisheries. As you know, stock assessment for fisheries is
    critically important to measuring toxic substances and status
    and trends of pollution in the ocean to looking at the role of
    the ocean in climate. NOAA's ability to go to sea and make
    measurements in the ocean is the reason that we have El Nino
    forecasts today.
        These are all critical elements. Senator Hollings just
    mentioned mapping and charting. NOAA is the U.S. agency
    responsible for the maps and charts of the ocean bottom out in
    the exclusive economic zone. The Navy is responsible for other
    countries but we are responsible for the United States. And,
    so, we must have the capability to go to sea. If we do not,
    these critical national functions will simply be lost. We are
    in danger of doing that if we do not replace the NOAA fleet.

                              Right whale rulings

        Senator Gregg. Tell me a little bit about the right whale
    rulings and the effect it is going to have on the small lobster
    fishermen who have been in close. The fact that this new ruling
    will change the number of pots on a line and change the type of
    line creates a huge equipment expense. We all want to make sure
    that we protect this species, but there is some belief that the
    proposed regulations not only will not help protect the species
    all that much but are going to incur a lot of costs which
    probably would not be necessary. So, can we get your thoughts
    on that?
        Dr. Baker. A couple of things, Mr. Chairman. One is we have
    a very, very endangered population of right whales. Right
    whales used to be so plentiful that they were one of the major
    commercial species that was whaled in the United States. Now,
    we have about 300 of these right whales and it is not clear
    that even at that level that this population will survive.
        We have done a couple of things with these proposed
    regulations. One is to expand the State area slightly just
    north in Massachusetts and then we have also put out a proposed
    ruling asking for public comment about restrictions that would
    take place further north in the Gulf of Maine.
        We are now looking at the comments that are coming in, and
    we will respond to those. But it is a difficult situation on
    both sides, I think. We have this very, very endangered
    population--really it is difficult to lose even one of the
    whales. At the same time we recognize the needs of the small
    fishermen and the lobstermen. And, so, that is why we have a
    proposed rule. We are looking for comment, and we will,
    hopefully, go back and we can try to accommodate everybody's
    needs here.
        Senator Gregg. Well, if my office is any example, we only
    have 18 miles of coastline but we are sure getting a lot of
    comment. [Laughter.]
        So, hopefully, we can work together. We want to protect the
    whale, obviously. We also want to do it in a way that does not
    end up putting an industry, which is already under significant
    stress because of overfishing and because of the big factory
    ships coming in and taking out the stock, under even greater
    stress. So, I hope we can work out something there, and we look
    forward to trying to find a solution.

                             Clean water initiative

        How about this clean water initiative which is now running
    money through the Coastal Zone Management Act? Is that an
    effective way to address these issues or is it basically taking
    away flexibility from the coastal zone management people?
        Dr. Baker. Well, we were big supporters of this program
    because it was not something that was laid on us as an
    additional or different activity from NOAA programs. This was
    an opportunity for us to provide some more resources within the
    context of programs that have been very successful. Our coastal
    zone management program, I think, has been one of the most
    successful State/Federal partnerships that has ever been
    developed. You can see that Texas and Georgia just joined.
        And, as you know, this is where States decide what they
    want to do and NOAA is involved in looking at Federal
    consistency providing financial support and expertise to help
    States develop their coast but in a way that is consistent with
    environmental protection and providing the kind of coastline
    that people want to live on.
        I think it is a wonderful example of sustainable
    development because our population along the coasts is growing
    and people who live on the coast want to have clean water and a
    nice environment but they also want to live there. So, you want
    development, and you want a way that it can be done
    sustainably.
        The coastal zone management program has done very well and
    this provides additional funding for us to do that. So, the
    largest part of the funding simply enhances our ability to do
    more in our coastal zone management program. When I say, our, I
    mean the State/Federal partnership. Then we also have about
    $2.9 million that we are adding for additional monitoring of
    toxic pollution, sediments, and organisms in coastal areas so
    we can address these problems of harmful algae blooms and
    change of pollution.
        Then we are also providing funding for a cleanup of toxic
    waste within existing programs. So, it was an opportunity for
    us to take successful, State/Federal partnerships and enhance
    them and do what the States want to do.
        Senator Gregg. The coastal zone management is a great
    program--very strongly supported in New England. But, the
    frustration is that it is creating a stream of funding,
    targeting it, and not giving it any flexibility as to its
    utilization. And, as a result, redirecting the energies of the
    coastal zone management initiative when it might be more
    appropriate that these funds flow through some other activity
    and get the same result--better than drawing off of the
    energies of the coastal zone management. Have you heard that
    frustration?
        Dr. Baker. I have heard a little of that. As we look at the
    opportunity for new funds, we wanted to make sure that programs
    were done in a way that was consistent with programs we know
    are successful. And the thing about the coastal zone management
    program is that States decide what they think is important and
    then we do it through an existing mechanism. So, it is an
    efficient way to address State needs. It is not the Federal
    Government saying this is what ought to be done. We ask the
    States what they want to do and then we use this mechanism to
    get the funding out. NOAA will monitor this to make sure that
    we do not have this problem of what might be a separate stream
    of funding. We will closely watch that.
        Senator Gregg. Do you have any more questions, Senator
    Hollings?
        Senator Hollings. No; thank you, Mr. Chairman.
        Senator Gregg. Did you have anything else you would wish to
    add?
        Dr. Baker. Just to say that we appreciate this committee's
    support of NOAA programs and the opportunity to say something
    about the NOAA fleet. I am very concerned about this, it is a
    central passion of mine, and I look forward to working with you
    to see if we can solve the problem.

                         Additional committee questions

        Senator Gregg. Well, this committee is a strong supporter
    of your efforts. Doctor, I think NOAA is one of the premier
    agencies we have in the science community and in the world, and
    I think you will find strong support throughout this committee
    for it. Thank you.
        Senator Hollings. Thank you.
        Dr. Baker. Thank you, Mr. Chairman.
        [The following questions were not asked at the hearing, but
    were submitted to the Department for response subsequent to the
    hearing:]
              Questions Submitted by Senator Kay Bailey Hutchison
                          endangered species act [esa]
        Question. Since 1990, you have been allocated $93.5 million to
    carry out your authority under the ESA to protect species. According to
    your data, your efforts have focused on 13 species over that period of
    time. On average, this amounts to $13.4 million per species. I have
    several concerns about these figures.
        Why, in spite of the tremendous amount of money spent on species
    protection, has a single species not been ``recovered'' and been
    delisted?
        Answer. In fact, the Gray whale (Eschrichtius robustus) was
    declared recovered and was delisted in 1995. With respect to other ESA-
    listed species, the National Marine Fisheries Service (NMFS) has made
    substantial progress in reversing the declines of some species though
    they are not yet ``recovered.'' The species under NMFS' jurisdiction,
    with the exception of salmon, are generally long-lived, highly
    migratory species that have a late age of reproductive maturity. It is
    unlikely that recovery can be achieved within several years when the
    species generation time may be 10-30 years. However, NMFS monitors each
    species to evaluate its recovery actions and to determine whether its
    actions are having a beneficial effect. For example, the Kemp's ridley
    sea turtle (Lepidochelys kempii) has benefitted from several years of
    increased hatchling production at its nesting beach in Mexico and
    protection at sea from shrimp trawl mortality through the use of turtle
    excluder devices. This population now appears to be in the early stages
    of exponential expansion and experts project that it could reach an
    intermediate recovery goal of 10,000 nesters by the Year 2020. NMFS
    will continue to evaluate the status of this and other species
    annually.
        Question. How can an increase in funding for these functions be
    justified when the millions spent on this effort so far have not
    yielded the result sought or the recovery of the species listed?
        Answer. In addition, funding is requested to prevent the extinction
    of highly endangered Pacific leatherback sea turtles from the effects
    of sustained losses of eggs on Mexican and Costa Rican nesting beaches,
    and incidental capture and mortality in high seas commercial fisheries.
    As stated, NMFS has made substantial progress in reversing the declines
    of some species, though they are not yet ``recovered.''
        Question. What do you intend to do to ensure that the millions of
    dollars allocated to species recovery actually yield the result
    intended by the Act?
        Answer. NMFS is committed to strategic planning and performance-
    based budgeting for its recovery activities. This process establishes
    long and short-term priorities and milestones by which to measure
    progress quarterly. Base-funded activities within NMFS are subject to
    these planning and review procedures and periodic detailed program
    reviews are held to further evaluate performance. NMFS has also
    established a national, collaborative process that considers immediate
    and long-term species needs and agency priorities in allocating new
    resources appropriated by Congress. This process involves all of our
    regional offices to help ensure that we are taking the most effective
    action to recover species. Actions supported by this process are
    evaluated as described earlier.
                                species recovery
        Question. With specific reference to species recovery, this year
    you seek an increase of $6.7 million over your fiscal year 1997
    allocation for this function alone, increasing that aspect of your
    budget from $13.5 million in fiscal year 1997 to $20.2 million in
    fiscal year 1998.
        Why, in spite of the fact that drafting a recovery plan is the
    first step toward actually recovering species, have you never written
    final recovery plans for six of the listed species?
        Answer. Many recovery plans have been completed. Plan completion
    depends on when a species is listed, plan complexity, whether the
    species already has a conservation plan, and the benefits that the
    species would derive from plan development. Since a recovery team must
    be assembled to prepare the plan and draft plans receive at least two
    stages of review, recently listed species (e.g. Umpqhua cutthroat trout
    and the Central California coho Evolutionary Significant Unit), would
    not yet have final plans. Other plans, such as the complex Sacramento
    winter-run chinook recovery plan, are currently in the draft stage. The
    highest priority for plan development is assigned to plans for species
    that will derive the greatest benefit from recovery plan development.
    Listed species with conservation plans already developed, such as
    whales, are a lower priority. Listed species unlikely to benefit from
    recovery plan development, such as foreign species over which the
    United States has no management control, are the lowest priority.
        Question. For what specific aspects of species recovery do you seek
    additional funds?
        Answer. As stated earlier, additional funds are being sought
    primarily for Pacific salmonid recovery actions to be conducted in
    cooperation with states, tribes, and other Federal agencies. New
    funding will support conservation planning for state conservation
    programs. In addition, support will be used to undertake actions
    required to address increased responsibilities and workload associated
    with harvest, hatcheries, habitat and hydropower activities in response
    to additional salmon and steelhead listings along the west coast.
    Additionally, NMFS proposes to complete more habitat conservation plans
    in response to landowner interest in cooperatively addressing salmon
    conservation, improving state-Federal cooperation through technical and
    policy support to states, and assisting Federal interagency efforts to
    take an ecosystem approach to multispecies management. Finally, NMFS
    proposes to establish cooperative conservation program agreements under
    Section 6 of the ESA with additional states, including Alaska,
    California and Washington. Actions to recover highly endangered Pacific
    leatherback turtles will also involve cooperative conservation measures
    with Central American nations and cooperation with U.S. and
    international fisheries that interact with these turtles to document
    the impacts of incidental take and to develop appropriate mitigation
    measures.
                                     ______

               Questions Submitted by Senator Ernest F. Hollings
                          noaa corps disestablishment
        Question. The National Oceanic and Atmospheric Administration
    (NOAA) Corps can trace its roots back to 1807--then President Thomas
    Jefferson signed a bill for the ``Survey of the Coast.'' For about two
    centuries, members of the NOAA Corps and their predecessor, the Coast
    and Geodetic Survey, have ably served our Nation. Last year, you
    announced that the Corps would be ``civilianized'' as a cost-cutting
    measure eliminating it as a uniformed service. However, a study by
    Arthur Andersen and Company suggests that annual costs to the
    government associated with NOAA Corps officers are about $29.7 million
    annually. By contrast, the study estimates that the annual costs to the
    government for an equivalent civilian workforce would be $30.3 million.
    In addition, civilian moving costs are about three times higher than
    those for NOAA Corps officers.
        Dr. Baker, I'm having a hard time understanding how eliminating the
    NOAA Corps qualifies as a cost-cutting measure. Please explain.
        Answer. The dedicated men and women of the NOAA Corps have a proud
    history of service to the Nation. The recommendation of the National
    Performance Review to disestablish the Corps should in no way be viewed
    as a reflection on the past contributions and fine work of the officers
    of the Corps. However, it is difficult to justify a separate uniformed
    service with a distinct personnel system to support less than 300
    active duty officers, particularly in view of a recent report of the
    General Accounting Office that concluded the duties currently performed
    by NOAA Corps officers can be performed by civilian employees.
        You expressed concern about the longer term savings of the proposal
    to disestablish the Corps. NOAA has commissioned a study by an
    independent actuary familiar with the NOAA Corps compensation system
    and the Federal Employees Retirement System (FERS) to take a hard look
    at the comparative costs of continuing the NOAA Corps as a uniformed
    service and the cost of a FERS system for officers not eligible to
    rehire. That study, contained in the Administration's Disestablishment
    Plan transmitted to Congress on May 21, 1997, indicates that
    disestablishment would result in retirement systems savings of $2
    million per year by reducing the system's unfunded liability. These
    costs were not considered by the Arthur Andersen study. Additional
    savings--involving salaries and benefits, as well as increased tax
    receipts--that would result from disestablishment are identified in the
    Disestablishment Plan.
        Question. Last year's appropriations conference report called for
    submission of a long-term plan for the Corps along with the legislative
    changes needed for implementation. I understand that a plan to
    disestablish the Corps has been under review at the Office of
    Management and Budget for some time but that there is concern over its
    cost. At the same time, the fiscal year 1998 NOAA budget request
    includes $6 million to cover the costs of disestablishing the Corps.
    What is the hold up on the plan and when can we expect to see it?
        Answer. The Office of Management and Budget has completed its
    review of the draft plan and accompanying legislation to disestablish
    the NOAA Corps. The package was transmitted to Congress on May 21.
    Under the Administration's plan, officers who are eligible for
    retirement would be retired and would be invited to compete for
    positions essential for the accomplishment of the NOAA mission. With
    respect to those officers who have insufficient service to retire, the
    plan contains financial inducements for officers to convert into
    civilian employees of NOAA. There is a one-time cost associated with
    this payment.
        The principal cause of the delay in getting the plan and
    legislation has been the complexity associated with this transition, in
    particular, from one retirement system to another. We commissioned a
    study by an independent actuary familiar with the compensation and
    retirement system of the NOAA Corps and the civil service FERS to help
    us understand the costs and implications of this change. The report
    appears in an appendix to the plan.
        Question. The Reserve Officers Association suggests that the actual
    cost civilianizing the Corps far exceeds the $6 million requested in
    the budget and a better number would be at least $14 million plus
    retired pay. Is this assessment accurate? Please explain.
        Answer. The one-time costs associated with disestablishment
    (including, for example payments in lieu of separation pay to officers
    who convert to NOAA civilian positions--approximately $9.1 million) are
    estimated to total $13.3 million and are detailed in the
    disestablishment plan. These expenses fall within the $14 million
    requested in the fiscal year 1998 budget. Upon disestablishment, the
    Corps' retirement program (expected to consist of approximately 415
    individuals) would be transferred to the Department of the Navy. If
    this transfer occurred on October 1 (as proposed by the Department's
    legislation), the full $14 million would be available to NOAA to cover
    the one-time disestablishment costs. If the disestablishment occurred
    after October 1, NOAA would be required to use a portion of the $14
    million to pay retirement benefits to retired NOAA officers. The share
    of the $14 million to be used for such payments would depend on the
    timing of the disestablishment.
        Question. If the Corps is to be eliminated, what assurances can you
    provide that the current members will be extended the full range of
    compensation programs afforded military personnel during a defense draw
    down?
        Answer. Disestablishment of the NOAA Corps recognizes the need to
    continue (through the use of civilian employees) duties performed by
    Corps officers. For example, Corps officers ineligible for retirement
    would be offered the opportunity to convert to a civilian position
    within NOAA and receive a conversion payment, in lieu of separation
    pay. Disestablishment, therefore, is not analogous to a defense draw
    down and the compensation and other provisions affecting NOAA Corps
    officers, while equitable, are not necessarily identical to those
    provided in connection with a defense draw down.
        Question. Is the $6 million request adequate to provide such
    compensation? If not, why not?
        Answer. Yes, $6 million is adequate to fund the additional
    compensation costs.
                              fleet modernization
        Question. Dr. Baker, we've been talking now about modernizing the
    NOAA fleet for about a decade. Over that period, NOAA, the General
    Accounting Office, the Inspector General, the National Research Council
    and Vice President Gore's reinventing government team have completed
    half a dozen plans and studies. Meanwhile, the fleet is aging and the
    condition of the ships is deteriorating. In 1989, 23 ships were
    operational in the NOAA fleet. Today, the fleet consists of 15 active
    ships and several tied to the dock. Now, your budget request for fiscal
    year 1998 proposes to spend $3.8 million to design a new class of
    acoustically quiet fisheries research vessels. But, while your budget
    proposes to spend over $2 billion in the next five years on weather
    satellites and equipment, it provides no money to actually procure any
    vessels. I'm concerned that we will continue to put off funding
    decisions and study the NOAA fleet until it completely rusts away.
        Question. What can we do to bring this planning process to a close,
    and get on with implementing a modernization plan?
        Answer. Over the past several years, NOAA's fleet modernization
    planning has evolved from a large in-house fleet to the current
    planning which includes a mix of NOAA vessels, charters, university
    vessels, and contracts for data. NOAA has revised its plan to reflect
    this approach and the plan is currently under review at the Department
    of Commerce. Future budgets will consider the cost of financing the new
    vessels.
        Question. Why is the Administration willing to commit to long-term
    investments in satellites and weather equipment but not ships?
        Answer. The Administration, cognizant of the desire of Congress to
    reduce the deficit, has chosen to commit to long-term investment
    programs on a priority basis. Even though ships are critically
    important to NOAA's stewardship mission, the satellite and weather
    equipment programs, because of their involvement in the safety of human
    life, received first priority status for long-term funding. The weather
    service modernization has been NOAA's highest priority, assuring that
    NOAA has access to a sea going capability is essential. Any future
    vessel acquisitions are currently under consideration as a part of the
    Administration's fiscal year 1999 budget formulation.
                                     ______

                Questions Submitted by Senator Daniel K. Inouye
                                  aquaculture
        Question. How much is included in the President's fiscal year 1998
    budget for aquaculture research, development and implementation? How
    does the National Oceanic and Atmospheric Administration (NOAA) plan to
    disburse these funds? Which NOAA department(s) will administer these
    funds?
        Answer. Aquaculture is an emerging area of great importance to
    NOAA. NOAA currently administers funding for aquaculture research,
    development and implementation primarily through two of its line
    offices: the National Marine Fisheries Service (NMFS) and the Office of
    Oceanic and Atmospheric Research (OAR). Within the fiscal year 1998
    budget request for NMFS, there is no dedicated funding for aquaculture
    research, development and implementation. However, through our
    Saltonstall-Kennedy grants and the fisheries finance programs, it's
    likely that aquaculture projects would be funded in fiscal year 1998.
    Our Milford, CT and Manchester, WA labs, as well as others, have vast
    aquaculture experience. In the past, NMFS has provided funding to the
    Oceanic Institute and a private company in the Gulf of Mexico for
    mariculture projects, although none is planned for fiscal year 1998.
    NMFS provides approximately $10.3 million to support Mitchell Act
    hatchery operations in the Pacific Northwest. In addition, NMFS is in
    the process of hiring a full-time aquaculture coordinator to facilitate
    the program and promote development in this area.
        The President's fiscal year 1998 budget request for OAR does not
    explicitly include funds for aquaculture research, development, and
    implementation. Funds are provided through the National Sea Grant
    College Program competitive research and outreach processes at the Sea
    Grant College level. Funds are not set aside specifically for
    aquaculture. Aquaculture competes for funds among other high priority
    topics supported by the Sea Grant Colleges. In fiscal year 1996, Sea
    Grant supported, with Federal and matching funds, $9.7 million of
    aquaculture research and outreach programs. We would expect this level
    of activity to continue in fiscal year 1997 and beyond.
                   national undersea research program [nurp]
        Question. I understand that during a budget briefing for the Senate
    Appropriations staff in February, representatives from the Department
    of Commerce indicated that the President's fiscal year 1998 request for
    NURP contemplates termination of the regional centers. Is there any
    truth to this statement?
        Answer. We do not contemplate terminating the regional undersea
    research centers. NURP is currently being redesigned to meet both
    Congressional and Administration concerns. The new program will
    continue to be a national program managed by a network of regional
    undersea research centers. While the research centers will have more
    autonomy in running their research programs, they will be held
    accountable for their performance through a series of review processes
    integral to the new program. The research centers will be closely
    linked to NOAA's strategic planning process so that their programs can
    be more closely tailored to focus on research relevant to NOAA and
    national needs. Important to the new program is the addition of a
    national level advisory council composed of NOAA and other agency
    program leaders, as well as academic representatives, with a stake in
    undersea research. We will be looking to this body for advice in
    determining future directions for the program.
          reorganization of national marine fisheries service regions
        Question. What is the status of plans to reorganize the northwest
    and southwest regions of the National Marine Fisheries Service? Is
    consolidation of the two regions still an option under consideration?
        Answer. At this time, NOAA/NMFS are not pursuing the consolidation
    of the Northwest and Southwest regions.
                              pacific area office
        Question. Because of the ongoing discussions about reorganization
    in the southwest region and recent personnel changes in the region, as
    well as the unique issues facing the Western Pacific community, I am
    very interested in exploring the idea of establishing a Pacific Area
    Office (PAO) headquartered in Hawaii, which will focus on the needs of
    the western Pacific. The acting southwest regional director and others
    in the NMFS leadership have expressed their support for this idea. I
    would appreciate your reviewing this matter and assistance in working
    toward the goal of establishing a PAO.
        Answer. The establishment of a PAO in Hawaii, as an option for the
    best organizational structure, is under review by NOAA. We are
    currently scoping the costs and other factors associated with
    establishing a PAO. Discussions are ongoing and we will be working with
    you and your staff as the concept is being developed.
                    pacific insular area fisheries agreement
        Question. What is the status of NOAA's efforts to implement the
    terms of the Pacific Insular Area Fisheries Agreement authorized by the
    Sustainable Fisheries Act of 1996?
        Answer. NMFS, the Western Pacific Fishery Management Council, and
    the Department of State participated in two working group meetings with
    key representatives of fishery and economic development agencies from
    Guam, Northern Mariana Islands and American Samoa to work toward the
    development and implementation of the Pacific Insular Area Fishery
    Agreements (PIAFA).
        The first workshop on the development and implementation of the
    PIAFA was held in Honolulu, Hawaii, in February and discussed (1) a
    schedule for the process of implementing a PIAFA, (2) the development
    of a marine conservation plan, (3) the content of a PIAFA, (4) the
    PIAFA negotiation process, (5) the foreign fishing vessel permit
    process, (6) determination of total allowable level of foreign fishing
    (TALFF), (7) determination of fishing fees, and (8) reversion of
    fishing violation payments to the appropriate insular area.
        The second workshop on the development and implementation of the
    PIAFA was also held in Honolulu, Hawaii, in April, and discussed (1)
    various options for an observer program, (2) consistency with Fishery
    Management Plans, (3) model foreign fishing agreements, (4) uses of the
    Sustainable Fisheries Fund, (5) the development of foreign fishing
    regulations, and (6) further determination of TALFF.
        The insular areas continue to work toward the initial preparation
    of their marine conservation plans and foreign fishing regulations as
    well as establishing options for an observer program. At the second
    workshop, the delegate from American Samoa suggested that locally
    focused working groups to work through the foreign fishing regulations
    in detail would be more efficient in determining what was appropriate
    for each particular insular area. This was supported by the
    representatives from Guam and the Northern Mariana Islands who said
    that these groups should focus on providing assistance in the
    development of marine conservation plans as well as other appropriate
    issues.
       united states-japan common agenda global observation information
                           network [goin] initiative
        Question. What role, if any, does NOAA have in the State
    Department's efforts to implement the Common Agenda for Cooperation in
    Global Perspective, commonly referred to as the Common Agenda,
    negotiated between the United States and Japan in 1993?
        Answer. Through the GOIN initiative, the United States and Japan
    have gained broad support to make earth observations and environmental
    data and information held by their agencies and institutions more
    accessible and useable by scientists and researchers via electronic
    links across the Pacific. Since the GOIN initiative was launched in
    1993, NOAA and Japan's Science and Technology Agency have coordinated
    activities of other U.S. and Japanese agencies and institutions in
    collaborating on pilot projects during the first and second two-year
    phases outlined in the GOIN Implementation Plan. These efforts have
    increased network connectivity and computer interoperability between
    U.S. and Japanese participants. Through private circuits and the
    Internet, the participants are developing a ``virtual GOINnet'' to
    support cooperative agency and institution programs and collaboration
    among scientists in both countries.
        Building on the successful First GOIN Joint Technical Symposium and
    Workshop in Tokyo, Japan during June 1996, participants are planning
    GOIN97--the Second GOIN Joint Technical Symposium and Workshop at the
    National Center for Atmospheric Research Mesa Laboratories in Boulder,
    Colorado, June 23-27, 1997. The symposium on major global change issues
    for participants at the G-7 Economic Summit in Denver will emphasize
    the consensus on data and information exchanges, highlight common
    technologies, and demonstrate ongoing and new GOIN pilot projects.
        The following is NOAA's International Affairs office participation
    and involvement in Common Agenda activities:
      --NOAA is advising the Department of State (DOS) on priorities for
            joint International Coral Reef Initiative policy development
            and implementation. This includes encouraging Japan to follow
            the U.S. lead in funding a portion of the GLOBAL cost of the
            global coral reef monitoring network. (Japan, like the U.S.,
            has provided initial support for an Asian regional monitoring
            network.)
      --NOAA is developing a Concept Paper for a Caribbean Marine Center
            which was originally proposed by the United States Agency for
            International Development at a January 1996 Common Agenda
            meeting. This center has not yet been agreed to as part of the
            joint work plan.
      --Under the leadership of DOS, NOAA has provided logistical support
            for and participated on a DOS led research and planning team to
            Palau to develop a Palau Marine Research Center.
                                     ______

               Questions Submitted by Senator Frank R. Lautenberg
                         ecosystem fisheries management
        Question. Section 406 of the Magnuson-Stevens Act requires the
    Secretary to establish an advisory panel to develop recommendations to
    expand the application of ecosystem principles to fishery conservation
    and management activities. Could you please provide the status of
    NOAA's efforts to fulfill this requirement? How, if at all, did NOAA
    consult with the National Academy of Sciences in developing this panel?
        Answer. National Marine Fisheries Service (NMFS) finalized the list
    of 20 panelists on April 10, 1997 and is in the process of notifying
    the individuals of their appointment to the panel. A press release
    announcing the panelists is scheduled to be distributed on May 6. In
    developing the panel, NMFS solicited nominations from several sources
    including the National Academy of Sciences and several of the Academy's
    nominees were appointed to the panel.
        Question. How is NOAA currently incorporating ecosystem principles
    into fishery conservation and management? What research is being
    conducted in this area? How is this research being applied to make
    fisheries management more effective?
        Answer. NOAA incorporates ecosystem principles into fishery
    conservation and management through a number of mechanisms. For
    example, stock assessments are increasingly incorporating environmental
    variability, and habitat protection is recognized as a critical
    component in maintenance of healthy fish populations.
        Almost all of NMFS research activities make contributions to our
    understanding of marine ecosystems. The task now is to determine the
    critical gaps in our knowledge of ecosystem structure and function, and
    to fill those gaps through a strong research program.
        Question. The fiscal year 1998 budget requests more than $160
    million for assessing fish stocks using traditional approaches. Only
    $12.9 million is requested to advance fisheries predictions through new
    research under the Coastal Ocean Program that incorporates multispecies
    interactions and environmental variables into fisheries predictions.
    Why is NOAA proposing a $1.1 million cut in the Coastal Ocean Program?
        Answer. The Coastal Ocean Program is requesting $15.2 million in
    fiscal year 1998 which is the same level as appropriated in fiscal year
    1997. The $1.1 million reduction in advance fisheries predictions in
    fiscal year 1998 is associated with the National Undersea Research
    Program not the Coastal Ocean Program. This decrease is addressed in
    the answer to a question asked by Senator Inouye during the fiscal year
    1998 Senate Appropriations hearing.
                            highly migratory species
        Question. As you know, Atlantic Highly Migratory Species (HMS),
    such as tunas, oceanic shark, swordfish, and other billfishes, are
    internationally shared resources whose effective conservation and
    management must involve the cooperation and compliance of many
    harvesting nations. Many fisheries from my state participate in the HMS
    fishery. The U.S. participates through the International Commission for
    the Conservation of Atlantic Tunas (ICCAT) and the United Nation's Food
    and Agricultural Organization. The U.S. has an international commitment
    to provide scientific support and to abide by these international
    agreements. The management of commercial and recreational fishing for
    these species is carried out by the NMFS HMS Division. Because of the
    economic value of highly migratory species, this is indeed one of the
    most contentious fisheries to manage. However, the budget request for
    this division does not appear sufficient to conduct the extensive data
    collection and scientific monitoring needed.
        For example, recently the U.S. was invited to an international
    ICCAT meeting in Madrid to develop a fisheries observer program to
    scientifically monitor juvenile Bigeye Tuna and Yellowfin Tuna. The
    Southeast Fisheries Science Center was told that no funds were
    available to send a U.S. scientist to this important meeting.
        How are the HMS Division budget needs determined, and how can
    important U.S. priorities such as this be dropped without the necessary
    follow-up to actually achieve conservation goals?
        Answer. Data collection and scientific monitoring for highly
    migratory species (tunas, sharks, swordfish, and billfishes) are
    conducted by several NMFS Offices of which the HMS Division is only one
    component. The HMS relevant budget concerns are also independently
    managed by the Office of Protected Species (observer programs), and the
    Northeast and Southeast Regions and Science Centers (assessments,
    biology, vessel logbooks, and dealer reports). Fiscal year funds are
    allocated to each line office consistent with the goals established by
    NOAA's strategic planning process. A portion of HMS Division funds are
    further reallocated consistent with the priorities for management and
    research determined by discussions and meetings among all concerned
    offices within NMFS. Normally, the HMS division allocates direct funds
    among HMS division tasks, contracts with universities, states and the
    private sector, and by transfers to the regions and centers for
    specific HMS research projects. As with any program, limited funds must
    be applied on a priority basis to seek solutions for multiple
    objectives simultaneously.
        The ICCAT meeting referenced in your question was one of many
    meetings for which priorities and expenditures had to be evaluated. The
    meeting ranked high in terms of priority for representing U.S.
    interests in developing the ICCAT observer program. Initially, it was
    planned that a center scientist would attend. However, agency budget
    constraints precluded authorization of travel for that meeting.
                                     ______

                 Questions Submitted by Senator Lauch Faircloth
                                summer flounder
        Question. Please explain how the National Marine Fisheries Service
    (NMFS) determines or defines when summer flounder is fully recovered or
    rebuilt.
        Answer. In amendment two to the Fishery Management Plan for Summer
    Flounder (FMP), the Mid-Atlantic Fishery Management Council (MAFMC) did
    not specify a recovered or rebuilt stock level. Instead, the FMP
    addressed overfishing by setting a target fishing mortality rate that
    would maximize yield per recruit (Fmax) of 0.23. This goal
    is a yield-based target that will maximize the landings from the stock
    on a per-recruit basis. A recruit is a fish that is available to the
    fishery for harvest due to growth to some legal size or through
    migration. The FMP goal is attainment of Fmax (a level at
    which overfishing is no longer occurring) in 1998 and beyond. Within
    several years after fishing has been maintained at this level, spawning
    stock abundance will have increased. The sustainable annual yield of
    summer flounder will eventually reach about 40 million pounds, slightly
    more than double the 1997 coastwide quota (commercial plus recreational
    fisheries) of 18.5 million pounds.
        The Sustainable Fisheries Act (Public Law 104-297) revised the
    Magnuson-Stevens Act to require FMP's to end overfishing and to rebuild
    affected stocks. The MAFMC plans, in a future amendment, will define
    rebuilding for the summer flounder stock so that the stock will produce
    maximum sustainable yield.
        Question. Please explain the ``target fishing mortality rate.''
    What is the current rate? When was this rate developed? How does it
    relate to rebuilding of summer flounder?
        Answer. The target fishing mortality rate is the rate of fishing
    that the MAFMC has established that would maximize the yield per
    recruit.
        The target fishing mortality rate of Fmax for summer
    flounder was developed using the Thomson-Bell Yield per Recruit Model.
    This model is used by NMFS, Northeast Fisheries Science Center (NEFSC)
    scientists, and other fishery scientists to calculate yield per recruit
    for many fish species. The target Fmax of 0.23 was derived
    from an analysis conducted in 1990 by the Stock Assessment Review
    Committee (SARC) for the 11th Northeast Regional Stock Assessment
    Workshop (SAW-11). This level is periodically reviewed, but because the
    input parameters that determine the value of Fmax have
    changed very little since the target was established, estimates
    calculated in subsequent assessments have varied little from the 0.23
    value. As a result, the SARC has not revised the estimate. If the stock
    were fished at Fmax, then the annual rate of exploitation
    (exploitation rate), or the percentage of the stock removed each year
    by fishing, would be about 19 percent. SAW-22 estimated that the 1995
    fishing mortality rate was 1.5; this corresponds to an exploitation
    rate of 72 percent. This is far above the target level of fishing
    mortality (F) and its corresponding exploitation rate.
        Reductions in F directly relate to fish survival and stock
    rebuilding. Reductions in F on fully recruited summer flounder will (1)
    contribute to spawning stock biomass (SSB) which enhances the chances
    of strong recruitment, (2) provide protection against the negative
    impacts to the fishing industry that would accompany recruitment
    failure, and (3) promote an expanded age distribution that will provide
    more valuable (larger) summer flounder to the fishery.
        Question. NMFS reports that the spawning stock biomass has grown
    from 5,247 metric tons in 1989 to 15,235 metric tons in 1995. During
    that same period, the commercial quota has shrunk from 15.6 million
    pounds to 11.1 million pounds, and there is a proposal to reduce the
    quota further to 8.4 million pounds in the 1997 season. Please explain
    the apparent inconsistency in these trends.
        Answer. The annual commercial quota has been reduced several times
    over the past few years, because the target fishing mortality rate that
    corresponds to an allowable percent removal from the stock (an
    exploitation rate) has been reduced consistent with FMP objectives. The
    abundance of summer flounder should increase substantially within
    several years after 1998 (the first year that the rate of removal
    reaches the long-term annual goal of 19 percent). When stock abundance
    increases substantially, the 19 percent removal rate will still result
    in larger commercial quotas than have occurred in the summer flounder
    fishery in the past few years. In 1989, the summer flounder stock was
    heavily exploited. SAW-22 estimated that fishing mortality was 1.75, an
    77 percent exploitation rate. At that time, the landings were not
    constrained by a quota which was first implemented in 1993. The quota
    is set each year to achieve the target fishing mortality rate rather
    than being based on SSB. It is true that the stock is increasing but
    fishing mortality levels have not approached the goal of 0.23. The
    projected reduction in commercial quota to 8.4 million pounds was not
    adopted because MAFMC and NMFS determined that an increase in minimum
    fish size and a quota of 11,111,298 pounds could attain the FMP
    objectives.
        Question. What are the problems associated with age and/or year
    class? How do these problems impact stock assessment and establishment
    of annual quotas? If there are problems, what can be done to resolve
    age/year class questions? Has NMFS reviewed the North Carolina landings
    data which show a landing percentage of 44 percent of flounder three
    pounds or greater?
        Answer. SAW-22 noted that there were discrepancies between how NMFS
    and North Carolina staff determine what is or is not an age-1 summer
    flounder. If the assumptions that North Carolina staff use are
    accepted, then some of the age-1 fish used in the assessment would be
    considered age-2. These changes would affect both Northeast Regional
    commercial fishery and NEFSC survey age-length keys. The potential
    magnitude of such changes is likely to be small but pending research on
    their effect on the assessment has not been completely evaluated.
        NMFS and North Carolina officials have noted that the aging
    discrepancies are a problem, and the differences in aging are being
    investigated. Participants in recent NEFSC winter and spring trawl
    surveys have collected both otoliths (ear bones) and scales from summer
    flounder in the size range that is in question. NMFS is hopeful that
    examination of both aging structures (scales and otoliths) may help to
    resolve aging differences.
        NMFS is aware that North Carolina biologists report a higher
    percentage of market medium and large summer flounder this year than in
    previous years. An examination of the 1996 fall mean-length-at-age data
    indicate that, at that time of year, those fish were age-1 and 2
    (mostly age-2, market category medium), and age-2 and 3 (market
    category large). These fish are the result of relatively strong 1994
    and 1995 year classes. If the age structure of the stock were more
    robust (i.e., there were more fish of older age classes represented in
    the population), there would be a higher percentage of large and jumbo
    fish landed in North Carolina and elsewhere. The landings information
    provided by North Carolina supports the conclusions of SAW-22 that
    biomass is increasing but that the majority of that biomass remains in
    the younger age classes. It is important to protect these larger fish
    so that the age distribution may expand and contribute to a more stable
    stock condition.
        Question. Fishermen on the water believe that they are seeing a
    record number of fish but this does not appear to be adequately
    reflected in the stock assessments? How does NMFS determine whether or
    not there is an abundance of large fish farther offshore in North
    Carolina and other coastal states? What recommendations do you have
    about the increased stock assessment and survey work on summer
    flounder?
        Answer. SAW-22 in 1996 estimated an increase in spawning stock
    biomass (abundance), and fishermen have also noted this increase. SAW-
    22 used NEFSC research vessel survey data, state survey data, and state
    commercial landings data in the assessment of summer flounder.
        NEFSC surveys areas as deep as 150 fathoms. To obtain information
    about the stock beyond this depth, NEFSC depends on commercial fishery
    landings data. If concentrations of large fish beyond the range of the
    survey are exploited by the commercial fishery, they would be reported
    as landings in the commercial fishery in the large and jumbo market
    categories.
        The SAW-22 document specified research recommendations for the
    summer flounder fishery. These included the following: (1) support of
    ongoing cooperative work between the NEFSC and the North Carolina
    Division of Marine Fisheries (NCDMF) to ensure consistent aging of
    summer flounder, (2) better domestic sea sampling coverage to include
    adequate age and length sampling, continued sampling once quotas are
    reached, and better sampling of discards, (3) research to determine
    discard mortality rates and length and age frequency in the commercial
    and recreational fisheries, and (4) research to better characterize the
    spawning potential of younger summer flounder. A copy of the SAW-22
    research document, which includes these recommendations, is available
    upon request.
        Question. NMFS has recently utilized North Carolina landings data
    to impose reductions on the North Carolina quota. Please explain the
    extent of the NMFS commercial flounder sampling program coastwide. How
    does the agency monitor harvest data coastwide? Does the agency receive
    and rely upon such data from the other coastal states to take similar
    action coastwide? If not, please explain how the quota system is
    managed and what safeguards are in the place to ensure that each state
    is treated equally.
        Answer. NMFS has not been able to utilize data collected by the
    NCDMF. During the last year, we have attempted to come to an agreement
    on several issues involving the confidentiality of the NCDMF data.
    NCDMF and NMFS are currently working on a memorandum of understanding
    to develop coordinated and nonduplicative data collection systems in
    the State.
        In North Carolina, as in other states, NMFS has the responsibility
    to collect landings data for all federally-managed species. These
    collections are conducted by requiring federally permitted dealers to
    report their purchases from fishing vessels. Dealers report these
    landings to NMFS on a weekly basis. These are the data NMFS uses to
    monitor landings of species managed under a quota system, such as
    summer flounder. In accommodating the normal business activities of
    dealers and still meet our quota monitoring needs, we allow dealers to
    report only summaries of their purchases of quota managed species
    within this time schedule. The dealers then follow up these summaries
    with complete and detailed reports of all species purchased. This later
    data set is used to validate the weekly summaries. The FMP is a joint
    plan with the Atlantic States Marine Fisheries Commission (ASMFC), and
    states are encouraged to implement systems for coordinating statistical
    efforts. The Council and ASMFC are considering making this a
    requirement in the draft amendment ten to the FMP for summer flounder,
    scup, and black sea bass fisheries.
        Some states, such as North Carolina, already have in place detailed
    data collection programs. However, none of these programs are able to
    collect and process data fast enough to allow for their use in quota
    monitoring. Thus, NMFS continues to collect the weekly summaries from
    all federally-permitted dealers. For the states that have a detailed
    collection system, such as a trip ticket system, the detailed reports
    of all species are provided to the state agency instead of NMFS. This
    detailed information is later shared between the state and NMFS and is
    used to validate the weekly summaries. As noted, this has not been
    accomplished with data collected by NCDMF.
        Question. Please explain the basis for the quick closures of the
    summer flounder fisheries in 1997.
        Answer. The 1997 commercial quota was set at 11,111,298 pounds and
    the states instituted a variety of management measures to control how
    their allocation would be harvested. NMFS has closed Maine and Delaware
    to commercial harvest in 1997. In other cases, the states themselves
    have established both seasons and trip limits to extend their quota,
    distribute catches to various fleet sectors and maximize market values.
    When the 1997 fishery opened in January, some states effected seasonal
    closures quickly because the trip limits had been set too high to
    significantly constrain the fishery. For instance, North Carolina set a
    trip limit of 10,000 pounds and closed its initial open season in 10
    days. Similarly, Virginia established a 9,000-pound trip limit, which
    was reduced to 5,000 pounds, and closed its initial open season in 3
    weeks. In contrast, other states have set lower initial trip limits and
    have adjusted these limits downward to remain open. For instance, New
    York opened with an initial trip limit of 2,000 pounds. This limit was
    changed to 700 pounds in mid-January, was increased again to 2,000
    pounds for 2 weeks in February, and remained at 700 pounds until early
    April, when the trip limit was set at 200 pounds. As a result, New York
    State has not yet been closed to summer flounder harvest.
                                  striped bass
        Question. Fishermen have informed me that there are a record number
    of striped bass off North Carolina. Has this stock been determined
    ``rebuilt'' and ``recovered.'' If so, when can we expect to see a
    larger commercial, coastwide quota? If not, please explain how NMFS
    determines when this fishery is fully recovered or rebuilt, and please
    provide a time estimate based on current trends in the resource.
        Answer. Historically, over 90 percent of striped bass landings have
    been taken in state waters; therefore, ASMFC is the lead agency for
    striped bass management. NMFS supports the ASMFC Fishery Management
    Plan for Striped Bass and has actively participated in the management
    process since passage of the Atlantic Striped Bass Conservation Act in
    1984.
        All striped bass stocks, with the exception of the Roanoke/
    Albemarle system stocks, have been treated as ``fully recovered'' by
    ASMFC since 1995. The fishing mortality rate (F) at which the recovered
    population can be fished and maintained at a healthy level was
    determined to be F=0.50. However, as a precaution, ASMFC chose F=0.4 as
    the preferred long-term mortality rate and, based on concerns about
    accuracy of the measured F, selected an even more conservative
    ``interim'' rate of F=0.33 for the 1995-1997 fishing seasons.
        The ASMFC Striped Bass Stock Assessment and Technical Committees
    review the status of striped bass annually based on analyses of
    fishery-dependent and fishery-independent data. Beginning in 1997 (for
    the 1998 fishery), the basis for the stock assessment and
    recommendations to management is scheduled to shift from a spawning
    stock biomass model to virtual population analysis (VPA). The VPA will
    allow determination of a coastwide quota based on the most recent data
    available. This quota will then be allocated among each of the Atlantic
    coastal states and then among the respective user groups (commercial,
    recreational/charter) within each state. Allocation of each state's
    quota between recreational and commercial fishermen is a state
    responsibility. Even though the stock is determined to be fully
    recovered, annual quotas could rise or fall depending on the abundance
    of the component age classes.
        Question. There is some evidence that the larger striped bass
    population may be having a negative effect on the recovery of North
    Carolina shad fishery. What steps has NMFS taken to investigate the
    relationship between the growth in striped bass and the slow recovery
    of other species?
        Answer. There have been suggestions, based on inverse trends in
    abundance of striped bass and other species (e.g., shad, river herring,
    bluefish), that the recovery of striped bass populations has resulted
    in declines in stocks of other species. To date, no scientific studies
    have been conducted which definitively demonstrate a cause-and-effect
    relationship for these trends (i.e., specific ecological interactions
    which account for these apparent relationships). Observations of large
    numbers of striped bass feeding on shad at the base of dams have led to
    the suggestion that striped bass predation might have contributed to
    the decline of the Connecticut River shad population and/or delayed its
    recovery. However, studies have not been adequate to validate the
    extent to which this interaction may account for observed trends in
    abundance.
        NMFS is currently funding research, through Rutgers University,
    which will address the issue of interactions between striped bass and
    bluefish, and their prey species. This effort will include laboratory
    and field studies to determine: when and where the species overlap,
    what life stage/age/size classes co-occur, the potential for
    competition for prey species, and the extent of the predator-prey
    relationship between the two species. Results of this research may be
    helpful in designing studies to address similar relationships between
    striped bass and other stocks, such as North Carolina's shad stocks.

                             conclusion of hearings

        Senator Gregg. If there is nothing further, the
    subcommittee is recessed.
        [Whereupon, at 3:11 p.m., Thursday, April 24, the hearings
    were concluded, and the subcommittee was recessed, to reconvene
    subject to the call of the Chair.]

    DEPARTMENTS OF COMMERCE, JUSTICE, AND STATE, THE JUDICIARY, AND RELATED
                  AGENCIES APPROPRIATIONS FOR FISCAL YEAR 1998

                                  ----------

                                           U.S. Senate,
               Subcommittee of the Committee on Appropriations,
                                                        Washington, DC.

                           NONDEPARTMENTAL WITNESSES

        The following testimonies were received by the Subcommittee
    on Commerce, Justice, and State, the Judiciary, and Related
    Agencies for inclusion in the record. The submitted materials
    relate to the fiscal year 1998 budget request for programs
    within the subcommittee's jurisdiction.
    Prepared Statement of Shirley Mount Hufstedler, Chair, U.S. Commission
                             on Immigration Reform
        The Commission on Immigration Reform was created by the Immigration
    Act of 1990. We are a fully bipartisan body. There are eight
    Commissioners who were appointed by the majority and minority
    leadership in each house of Congress. The President appoints the Chair.
        When the President asked me to chair this bipartisan Congressional
    commission, he emphasized that immigration reform must be based on
    principles that are ``pro-family, pro-work, and pro-naturalization.'' I
    accepted the task because developing and implementing immigration
    policies are of vital importance to the nation and to the many
    thousands of human beings who seek to live and work here.
        The nation and the Commission itself have been immeasurably
    assisted by the outstanding leadership of the late Barbara Jordan, who
    was my predecessor as Chair of the Commission. I hope to carry forward
    her legacy of principled bipartisanship.
        I shall describe briefly the recommendations the Commission has
    already made. Then I shall turn to our plans for this fiscal year and
    our plans for completing the Commission's work before our authorization
    expires at midnight December 31, 1997.
        The Commission has issued two reports to Congress. In September
    1994, the Commission published ``U.S. Immigration Policy: Restoring
    Credibility.'' This report included recommendations for a comprehensive
    strategy to deter illegal immigration. In June 1995, the Commission
    made a second report to Congress ``Legal Immigration: Setting
    Priorities.'' This report focused on reforming our system for legal
    admissions to serve our highest national priorities.
        Later this spring, the Commission will make recommendations on U.S.
    refugee policy for a post-Cold War world. The recommendations in this
    report will support a comprehensive and coherent U.S. refugee policy to
    permit the U.S. to assert leadership internationally and implement
    responsible programs domestically. The Commission will make specific
    recommendations to enable the U.S. government to stay attuned to the
    causes of refugee movements, including efforts to prevent them early on
    through political, diplomatic, and economic initiatives. We will focus
    on assistance and protection for the millions of refugees overseas who
    are forced to leave their countries. The Commission will recommend
    reforms to ensure that the United States will continue to lead by
    example not only in resettling refugees, but also in providing sensible
    transitional assistance for those few refugees for whom U.S.
    resettlement is the only or best option. The Commission will also make
    recommendations regarding a viable plan to respond to mass migration
    emergencies directed at our own nation. Finally, the Commission will
    recommend an effective asylum system that protects the bonafide refugee
    while deterring those who would abuse it.
        This summer, the Commission will receive the results of two major
    research contracts. One study will be issued by the National Academy of
    Sciences, from the Panel on Demographic and Economic Impacts of
    Immigration of the National Research Council Committee on Population &
    Committee on National Statistics. This has been a 30-month study of the
    demographic and economic impact of immigration on the United States.
        The second report will be the results of the Binational Study on
    Migration between the United States and Mexico, for which this
    Commission has been the lead U.S. agency. After a meeting of the
    Migration and Consular Affairs Group of the Mexican-United States
    Binational Commission in March 1995, the governments of Mexico and the
    United States decided to undertake a joint study of migration between
    the two countries. Research teams in each country are studying aspects
    of migration within their country and are collaboratively analyzing the
    findings. National coordinators have been designated for each country
    with the Commission on Immigration Reform coordinating the work of U.S.
    researchers. The main objective of the Binational Study is to
    contribute to a better understanding and appreciation of the nature,
    dimensions, and consequences of migration from Mexico to the United
    States. It also provides an opportunity to identify options to respond
    to these movements.
        The Commission's Final Report is due September 30, 1997. There will
    be four main components for this report, in fulfilling the Commission's
    mandate in the Immigration Act of 1990. First, the Commission will
    assess the effort to control illegal immigration, paying particular
    attention to monitoring the implementation and effects of last year's
    legislation. To the extent that the evidence is sufficient to draw
    conclusions, the Commission may make recommendations for changes in our
    comprehensive approach to deter illegal immigration.
        Second, the Commission will also re-assess the need for legal
    immigration reforms. In ``Setting Priorities,'' the Commission asserted
    that ``Properly regulated, legal immigration serves the national
    interest in many ways''; and provided a framework for determining if
    our legal immigration system is effectively serving the national
    interest. The Commission also urged that U.S. immigration policy be
    assessed on a regular basis every few years, and it has been nearly two
    years since the recommendations in ``Setting Priorities.'' Accordingly,
    there will be such an assessment in the Commission's Final Report,
    which will also include new recommendations on the non-immigrant visa
    system.
        Third, the Commission will make recommendations regarding the
    structure, organization and management of the immigration system as a
    whole. The Commission is examining systematically the roles and
    relationships of the federal agencies responsible for the management
    and implementation of immigration policy. Responsibilities are now
    dispersed across four principal Cabinet agencies: Departments of
    Justice, State, Labor and Health and Human Services. Within each of
    these departments, responsibility is further dispersed. Even within a
    single agency, such as the Immigration and Naturalization Service,
    competing and sometimes conflicting responsibilities (such as service
    and enforcement) must be balanced and coordinated. The Commission will
    report to Congress on the strengths and weaknesses of the current
    system as well as make recommendations to improve management of
    immigration-related activities.
        Fourth, the Commission will make recommendations regarding
    Americanization: the economic and social integration of immigrants. The
    Commission argued, in its fiscal year 1995 report to Congress, for the
    Americanization of new immigrants, that is, the cultivation of a shared
    commitment to the American values of liberty, democracy and equal
    opportunity. For its final report, the Commission is examining policies
    and programs that may foster or retard such Americanization.
        In fiscal 1998, the Commission will complete its work and close
    down by the end of calendar 1997. There are two principal functions to
    perform. First, the Commission will fulfill its statutory mandate to
    testify before the relevant Congressional committees. In addition, we
    will disseminate the final report and recommendations to interested
    federal agencies, members of Congress, and members of the public.
    Second, the Commission will complete its administrative operations,
    including archiving records of historical significance, the disposal of
    equipment, termination of employment and completion of financial
    accounting.
        The attached budget justification presents details of this
    appropriation request. I thank you again for this opportunity to
    discuss the work and recommendations of the Commission on Immigration
    Reform. I would also like to state for the record our commitment to
    work with this Committee as you address the very challenging issues
    arising in the appropriation of funds to improve implementation of
    immigration policy. The Commission is the creation of Congress and, as
    it completes its work, I offer the Commission to you as a resource to
    help you in your work.
                                     ______

     Prepared Statement of F.A. (Tex) Harris, President, American Foreign
                              Service Association
        Mr. Chairman and Members of the Subcommittee: We appreciate the
    opportunity provided the American Foreign Service Association (AFSA) to
    provide testimony to the Subcommittee regarding the 1998 fiscal
    appropriations for the Department of Commerce, Justice, State and the
    Judiciary. AFSA is both the professional organization and the
    recognized bargaining agent representing the 23,000 active and retired
    members of our Nation's Foreign Service. AFSA and its members have a
    particular interest in this legislation because of the direct affect it
    has on our professional and personal lives.
        We believe there is general agreement that it is in our national
    interest for our Nation to continue to be actively engaged in the in
    the world, and that in doing so, we should continue to provide
    leadership. This consensus is based upon a recognition that so much
    that affects our daily lives happens outside of our borders. The growth
    of our economy depends as much on our ability to successfully engage in
    international trade as it does on what happens domestically.
    International crime, terrorism, and the flow of drugs plague our nation
    without any recognition of borders. Environmental degradation can take
    place in far off our shores still harm our health. Starvation and civil
    strife in one area of the world can create huge migration flows that
    end up affecting life in the U.S. through illegal immigration or in the
    need to fund efforts to help save lives. The spread of weapons of mass
    destruction and outbreak of regional wars continue to threaten the
    stability of the world.
        While there is general agreement that the United States should
    maintain its international leadership role, there is disagreement over
    the level of resources we have provided in the past and what the
    necessary levels should be in the coming years. The recent study by the
    special Task Force of the Council on Foreign Relations and the
    Brookings Institution found resource problems at two levels that
    ``disheartens our friends and allies and undermines our effectiveness
    abroad * * *.''
        At one level of high policy, the severely limited lack of readily
    available, flexible resources effect the options available to avert or
    respond to foreign crises. We hear this daily from our members around
    the world. To stabilize Haiti, the decision had to be made to reduce
    economic support for Turkey despite its critical relationship to our
    Middle East interests and also transfer funds from other Latin American
    AID projects.
        Providing our share of the financing package assembled for
    Cambodia's first free election required deferring, for more than a
    year, support for smaller initiatives in a dozen or so other countries.
    Responding to the refugee crisis in Rwanda meant taking funds for
    democratic institution-building from the rest of Africa at a moment
    when positive trends were emerging elsewhere on the continent. When the
    United States needed $2 million to monitor a cease-fire between the
    Kurdish factions in northern Iraq, ready money was not immediately
    available, the situation deteriorated, and Saddam Hussein was afforded
    a pretext to send forces into northern Iraq--a move which culminated in
    U.S. military action costing multiples of the originally needed sum.
        However, at a second level, evidence of the lowering of the U.S.
    flag around the world shows up in reports to us each day in large and
    small examples. The scarcity of resources impacts on our ability to
    conduct the basics of promoting and protecting our interests around the
    world. Perhaps individually some of these examples might be passed
    over. However, cumulatively they become clear signs of the decline of
    America's diplomatic influence. We get reports everyday underscoring
    the deterioration of our Nation's diplomatic infrastructure. For
    example:
      --In the Consular field, tight budgets over the years have been
            steadily eroding the ability of consular sections (and passport
            agencies) to deliver the kinds of every-day services to
            American and foreign publics that most people had come to take
            for granted. Consular officers have done more with less for so
            long that we have forgotten that this used to be a business
            with some civility and humanity built into it. Now, its like
            operating a meat-packing plant. In 1962, consular officers
            overseas handled about 2,000,000 consular services in the major
            categories. There were 536 officers overseas to do it. By 1972,
            494 officers did over 4,000,000 services. By 1977, 603 officers
            did 7,000,000. And in 1993, 634 officers did 10,000,000
            services in the same major categories of non-immigrant visas,
            immigrant visas, passport and citizenship, and protection and
            services for American citizens. Further, we hear concerns from
            our members that travel funds are insufficient to do necessary
            American citizen protection work or anti-fraud field
            investigations. Immigrant visa cases of questionable pedigree
            just get stacked up for months until sufficient time and
            resources are available to examine them. These examples
            underscore the importance of the Department of State fee
            retention initiative which our dedicated consular staffs
            urgently need. This initiative is also compatible with the
            ``Consular Strategies for the Future'' initiative which AFSA
            developed and approved late last year.
      --Our members do not have funds for international business phone
            calls in many posts. They must send faxes and ask American
            businesses to call them back the next day to pursue business
            leads. Other nations' embassies speed dial their business
            calls. One of our members could not get full funding to attend
            an important conference. So in order to attend, he stayed with
            a foreign diplomat with whom he was friends as his embassy
            could not provide funds for a hotel. The air conditioning in
            our Embassy in Seoul shuts down at six p.m. each work day.
            People cannot stay late in the sweltering heat to finish their
            work on their own time. Others posts cannot afford to provide
            heating. In Tbilisi, Georgia the heat in Embassy homes is shut
            off at ten PM each night to save fuel. In Paris, the Embassy
            can no longer afford to provide light bulbs to employees living
            in apartments wired for 110 volts and the bulbs are not
            available on the local market.
      --The list goes on. We are aware of the lack of funding to support
            the ``Summit of the Americas'' initiative that is especially
            important for our export and trade relations. Because of the
            overwhelming diversion of personnel resources to Bosnia and the
            other areas involved in the former Yugoslavia conflicts, we do
            not have the personnel sufficient to do all the important
            preparatory work to support the Organization for Security and
            Cooperation initiatives and fulfill our convention arms control
            agreements. There is a great unmet need to buildup our
            facilities and expertise for the proposed ``China 2000''
            initiative to improve the resources available to strengthen our
            relationship with that great nation as we move toward the 21st
            Century. An AFSA member has started a web page in Beijing
            showing the substandard living conditions that Foreign Service
            employees endure there.
      --We have failed to take in sufficient numbers of Junior Officers and
            specialists to meet the future needs of American diplomacy. The
            Foreign Service Exam in 1995 was canceled to save funds. Our
            officers state that professionally they live in an age of
            triage. The hard job is deciding what cannot be done. The signs
            of the decline of American diplomacy goes on and on. We do not
            have enough funds to do needed jobs throughout the world.
        Mr. Chairman, the Administration has requested a 4 percent increase
    in the Administration of Foreign Affairs account of the State
    Department's appropriations request--a request that is barely above the
    inflation rate and a large portion of which will go for communications
    and information hardware improvements. This Presidential request is
    understandable in the context of balancing the budget and what OMB
    views as the competing claims for resources.
        But from our ``front line perspectives,'' this funding is not
    enough. The real need is much greater than just communication and
    information improvements, though that need is very real. We need more
    than just our facilities in Beijing improved. We need more than the
    planned 150 new general officers per year, and the Foreign Service exam
    should be given every year to assure an adequate number of potential
    candidates. Adequate intake is also needed for security in the form of
    Diplomatic Security agents, and other special functions. More funds for
    representation and travel for the smaller posts is needed, as well as
    greater funding for all types of training, but especially increases in
    management training and to increase the talent pool of officers skilled
    in the very hard languages such as Chinese.
        Mr. Chairman, AFSA understands the constraints on available
    resources in the current budget climate. However, it must be realized
    that there are real world consequences when sufficient resources are
    not available for the advancement and protection of American interests
    around the world. We would never accept this decline in our military
    readiness; yet our diplomats stand at the very front lines around the
    world. We are in decline. We cannot succeed if we continue to try to do
    things ``on the cheap.''
        Beyond funding, however, AFSA believes that certain management
    steps are necessary. As the Subcommittee supported and encouraged the
    Department to develop the ICASS system in lieu of the failed FAAS
    support method, and to develop an overseas staffing model, AFSA
    believes that more needs to be done to improve the management
    structure.
        The foreign affairs agencies management should be encouraged to
    develop a needs based work force planning system. There is concern that
    the Foreign Service Act's Sec. 6091 personnel report provided to the
    Congress by the Department of State is both static and backward-
    looking. The report does not reflect either current or future staffing
    needs of the Department. Furthermore, AFSA believes that anomalies in
    the statistical data and their underlying assumptions have perpetuated
    a system whereby, unrelated to actual skills needs, experienced and
    effective Senior and middle grade officers are being involuntarily
    separated from the Service solely for having reached time-in-class
    (TIC) limits. The need for work force planning in all foreign affairs
    agencies is indicated by this case study from the Agency for
    International Development, Ninety-one Foreign Service Officers were
    separated from the Service through a reduction in force (RIF) in fiscal
    year 1996 because their skills were allegedly in surplus to USAID's
    workforce demands. Within five months, 30 of these RIFed employees were
    hired back as personal service contractors because USAID still needed
    the skills and the experience these people had. The dollar costs to the
    Agency and the human costs to all USAID's employees were very high and
    could have been avoided by good management.
        AFSA believes that in an increasingly constrained resource
    environment, the Department should move to establish a true needs-based
    system of strategic personnel planning. Work force management in the
    agencies has been heavily concentrated on important, but narrow,
    personnel issues--assignments, promotions, recruiting--rather than
    fundamental needs, priorities and a systematic allocation of scarce
    personnel resources. Further, the State Department has moved too slowly
    to establish performance goals. Currently there is no system in place
    to quantify performance--to measure the success or failure to achieve
    goals. Without such objectives, adequate resource and personnel
    planning cannot be reasonably accomplished. USIA and USAID have at
    least attempted to install such systems.
        Mr. Chairman and Members of the Subcommittee, in earlier testimony,
    Secretary of State Albright provided an eloquent litany of the work of
    the Foreign Service. She said that:
        ``We depend upon our diplomats to negotiate and verify the
    agreements that keep us safe from the spread of nuclear weapons. We
    rely on them to maintain day-to-day support for the peacemakers over
    the bomb-throwers in strategic areas of the world. We turn to them to
    build relationships with other nations that will enable us to protect
    our citizens from the scourge of drugs, the plague of crime, and the
    threat of terror.
        ``We ask them to help open new markets and assure fair treatment
    for American goods and services in a fiercely competitive global
    marketplace * * *.
        ``We expect them to look behind the claims of dictators and despots
    and to report the truth about abuses of civil liberties and violations
    of human rights.
        ``We count on them to help Americans who are hurt or fall seriously
    ill or who are otherwise in need of a friendly voice in faraway lands.
        ``And we require them to provide support for other federal agencies
    * * *.''
        There is a most important job to be done in advancing and
    protecting U.S. interests abroad. It requires Foreign Service
    professionals with adequate resources and training to do the job. While
    they are exposed to exotic illnesses, personal security threats, family
    separation, the lack of decent education for their children, and other
    hardships for their families, they are there because America needs them
    and because they want to serve the country they love. As the Congress
    makes its decisions regarding this legislation, I trust that it will
    provide the necessary resources and support the Foreign Service needs
    and deserves.
        Thank you for taking our views into consideration.
                                     ______

            Prepared Statement of the Center for Marine Conservation
        The Center for Marine Conservation appreciates this opportunity to
    share our views regarding the President's fiscal year 1998 budget
    request for the marine conservation programs of the National Oceanic
    and Atmospheric Administration (NOAA).
        The Center for Marine Conservation is committed to protecting ocean
    environments and conserving the global abundance and diversity of
    marine life. Through science-based advocacy, research and public
    education, CMC promotes informed citizen participation to reverse the
    degradation of our oceans. CMC is a nonprofit conservation organization
    with 120,000 contributing members, headquartered in Washington DC, with
    field and regional offices in California, Washington State, Florida and
    Virginia.
        In general, we support the Administration's request for the marine
    conservation programs of NOAA as described under the agency's strategic
    plan goals: Build Sustainable Fisheries, $332 million; Recover
    Protected Species, $69.7 million; and, Sustain Healthy Coasts, $212.2
    million. Of particular interest are the marine conservation programs of
    the National Ocean Service (NOS) and National Marine Fisheries Service
    (NMFS). We urge the Senate Appropriations Committee to also support
    these funding levels and provide for the additional needs described
    below.
        We also strongly urge the Appropriations Committee to allow the
    NMFS Office of Protected Resources to do its job in protecting
    threatened and endangered sea turtles from shrimp trawls. We ask the
    Committee to cease requiring the agency to waste precious resources by
    engaging in unnecessary activities as Congress has done in the last two
    fiscal years.
        Just as the Interior Appropriations Subcommittee has jurisdiction
    over funding of stewardship of the nation's public lands, this
    Subcommittee has jurisdiction over funding for the stewardship of the
    Nation's public oceans. We refer to coastal waters and the Nation's
    exclusive economic zone (EEZ), those waters out to 200 miles off our
    shores. This is an area of approximately 3.4 million square miles, more
    than the area of the entire contiguous United States. Attached to this
    statement is a map of this area. Within this vast realm NOS and NMFS
    have responsibilities for natural resource management, pollution
    control and protection of threatened and endangered species and marine
    mammals.
        The living marine resources of our pubic oceans are of extreme
    importance to our Nation. It is estimated that in 1994 the commercial
    fishing industry contributed a total $20.2 billion to the U.S. Gross
    National Product. Limited analysis by NFMS estimates that almost 15
    million people made over 66 million marine recreational fishing trips
    in 1994. It is estimated that marine recreational fishing contributes
    $7 billion to the economy. The conservation of marine mammals and
    endangered marine species provide abundant recreational opportunities
    to millions of Americans annually. In the United States, more than 3
    million people annually participate in whale-watching, generating more
    than $230 million in direct and indirect revenue. Consequently,
    providing adequate funds today for the conservation and management of
    living marine resources will have both immediate and long-term benefits
    for the American people.
                             national ocean service
    National Marine Sanctuary Program
        We urge the committee to provide $15 million for this important
    program. This is an increase of $1.8 million over the President's
    request and is the level authorized in last year's reauthorization
    legislation for the program. While we appreciate the President has
    requested an increase of more that $1.5 million over the current year,
    we note that NOAA's justification document states the increase will
    only ``* * * partially fund the highest priority for the National
    Marine Sanctuary Program, which is to ensure that all designated
    sanctuaries achieve the basic operational level.'' We interpret this to
    mean that the program is not now meeting its basic operational
    requirements and that it will not, even with the proposed increase.
        Often referred to as our marine parks, the 14 sanctuaries around
    the country encompass almost 19,000 square miles of the Nation's most
    significant marine resources. NOAA's justification document goes on to
    state that with current funding resource protection, supporting
    research and education efforts are inadequate and that without
    additional funding research shortfalls will hamper the agency's ability
    to manage these areas. An independent National Marine Sanctuary Program
    review panel recommended annual funding of $30 million in 1990, a
    recommendation that was endorsed by NOAA's public advisory committee in
    1992.
        We also note that in 1997 and 1998 NOAA will begin implementing
    recently finalized management plans for the Florida Keys and Humpback
    Whale Sanctuaries, adding to the need for increased funding.
    South Florida Interagency Ecosystem Restoration Initiative
        We recommend that the Committee fully fund NOAA's portion of this
    vital initiative for the coming fiscal year. The $3.8 million requested
    by NOAA, a small portion of the overall request for the Initiative, and
    split between NOS and the NOAA's Coastal Ocean Program, will allow NOAA
    to fully implement its integrated ecosystem monitoring program, in
    partnership with state and local agencies and academic institutions, in
    Florida Bay and the Florida Keys National Marine Sanctuary. These
    waters are the downstream end of the South Florida ecosystem and thus
    are affected by the activities of other agencies working to restore and
    protect the Everglades. The monitoring program will help the agency
    model and assess changes to the marine resources of Florida Bay and the
    Florida Keys coral reef system.
    The Control of Polluted Runoff to Coastal Waters
        We urge the Committee to provide $4 million for the polluted runoff
    control program for coastal waters, section 6217 of the Coastal Zone
    Act Reauthorization Amendments of 1990 (CZARA). This program has been
    unfunded for the last two fiscal years and the President has requested
    only $1 million for fiscal year 1998. Polluted runoff is the largest
    source of coastal pollution to the Nation's coastal waters and is
    responsible for beach closures and shell fish bed closures.
        Section 6217 promotes reducing polluted runoff to coastal waters
    through better government coordination. There are few enforceable
    controls on this massive source of coastal pollution. Section 6217 is
    the only nation program to ensure that if voluntary measures taken to
    reduce polluted runoff are ineffective, the State has enforceable
    backup authority to protect coastal waters.
        States are making significant progress under CZARA and are
    uncovering important opportunities and authorities to address coastal
    runoff not previously identified or used. They have identified measures
    to reduce coastal pollution and restore critical coastal habitats vital
    to commercial and recreational fisheries, threatened and endangered
    species, wildlife and public health.
        The Nation's 6217 program has now reached a critical stage where
    adequate funding is absolutely necessary to ensure states and
    territories have resources to finalize their programs. Twenty-nine
    coastal states and territories have submitted programs to NOAA and the
    Environmental Protection Agency for final review and approval. Fourteen
    of these programs have already been conditionally approved, but there
    remains a great deal of work to be done. Additional funds are essential
    so that states and territories can finalize programs and measures
    necessary to satisfy federal guidelines and conditions.
                       national marine fisheries service
    Resource Information
        For the Resource Information line item we applaud the
    Administration's request for an additional $1.67 million in funding to
    conduct research and develop technologies to deal with the critical
    issue of bycatch. However, we are concerned that this line item is
    underfunded in the budget request in light of the tremendous need for
    more timely stock assessments for marine fisheries and other living
    marine resources.
        NOAA's justification shows the agency anticipates little or no
    progress on stock assessments for fiscal year 1998 when the recently
    reauthorized Fisheries Conservation and Management Act requires the
    agency to make annual reports on what stocks are overfished. The agency
    currently classifies the utilization of 31 percent of fish stocks as
    unknown. It is also behind in updating assessments of other important
    stocks. For example, NMFS is woefully behind in conducting a stock
    assessment on the spiny dogfish along in the Atlantic. This is a small
    shark that lacks a management plan and for which fishing pressure has
    increased dramatically as fishers seek alternatives to other depleted
    fisheries. Many scientists and fishermen think it is likely overfished
    at this time. The stock, however, is currently considered near full
    exploitation from a 1994 stock assessment, based upon 1993 data.
        NOAA also reports that for 1995 the status of 65 percent of marine
    mammal and sea turtle populations is unknown. Given the problems of
    high mortalities of endangered right whales off the east coast in 1996
    we recommend that the Committee retain the current level of funding for
    Right Whale Research as opposed to cutting it by $50,000 as the
    President has proposed. Similarly, given the uncertainty as to the
    cause of decline of Steller sea lions off Alaska, and need to determine
    whether the fishery is the reason, we think it is unwise to cut this
    research by $330,000 or 19 percent as the President has proposed. We do
    however credit the Administration for maintaining funding for New
    England stock depletion research and the Gulf of Maine groundfish
    survey.
    Fisheries Management Activities
        We support the Administration's requested increase of $8.9 million
    for this line item. For the first time our Nation's principle federal
    fisheries management legislation--reauthorized last fall as the
    Magnuson-Stevens Fisheries Conservation and Management Act (FCMA),
    enacted as the Sustainable Fisheries Act--directly addresses the issues
    of overfishing, bycatch and essential fish habitat. Under the FCMA, the
    regional fishery management councils and NMFS are required to adopt or
    amend fishery management plans that: (1) identify overfished stocks and
    stocks approaching an over fished condition, and prevent or eliminate
    overfishing and rebuild overfished stocks; (2) avoid bycatch and
    minimize the mortality of unavoidable bycatch; and (3) identify,
    designate and protect essential fish habitat, including minimizing
    adverse effects on essential fish habitat caused by fishing and
    consulting with federal agencies proposing activities that may
    adversely affect such habitat.
        For the fishery management councils to carry out their duties under
    the FCMA the Administration has requested an increase of $1.5 million.
    While this figure may not be adequate for the revision of 39 fishery
    management plans to bring them into compliance with the FCMA, it is a
    significant step in the right direction. The remaining $7.3 million
    increase will be used by NMFS to fulfill its new responsibilities under
    the Act including the extremely important Essential Fish Habitat
    provisions.
        While we support the increases, we do question the decreases of
    $550,000 proposed for International Fisheries Commissions and $400,000
    proposed for Pacific Tuna Management and urge the Committee to maintain
    funding at current levels. In the Pacific, longline fleets from other
    nations are increasing their fishing power exponentially. In order to
    conserve this resource we must be able to meet in fishery management
    forums to discuss conservation measures.
        We would like to highlight another issue that is not dealt with in
    the President's request and one we urge the Committee to take no action
    on. The issue is bycatch in the Gulf of Mexico shrimp trawl fishery and
    the need for this fishery to abide by the requirements of the FCMA just
    as all other fisheries must do. There is also an urgent need to protect
    the ecosystem of the Gulf and restore its depleted finfish fisheries.
    At its March meeting of this year the Gulf Fishery Management Council
    folded to political pressure from the shrimp industry and its political
    allies in Congress to back off on its previously approved requirement
    for shrimp trawls to use bycatch reduction devices (BRD's). The Council
    asked NMFS to delay implementation of this requirement by one year,
    effectively reversing its action of November of last year in voting to
    require the use of BRD's. The Council took this action reluctantly, in
    response to threats from Congress to impose a moratorium on the ability
    of NMFS to require BRD's in the Gulf and/or eliminate all funding
    related to this requirement unless implementation of BRD rules is
    delayed.
        The causal relationship between shrimp trawl bycatch and the
    decline of red snapper, which are overfished, has been clearly
    established. Over many years $7.5 million of taxpayer money has been
    spent on bycatch characterization, BRD development, and social and
    economic research. Research done in cooperation with the shrimp
    industry shows clearly that BRD's can reduce shrimp trawl bycatch of
    red snapper by 66 percent while retaining 97 percent of shrimp on
    average.
        CMC is currently urging NMFS to implement the BRD's requirements as
    required by the FCMA and urges the Appropriations Committee take no
    action to block the agency from carrying out its duty.
    Protected Species Management
        CMC appreciates the Administration's requested increase of $7.7
    million and 45 additional staff positions for Protected Species
    Management, but we feel this increase is inadequate. We recommend an
    additional $8.5 million for the Marine Mammal Protection Act and $4
    million for Endangered Species Act recovery plans.
        NOAA's justification document clearly spells out the need for
    additional funds. The agency states that for 80 percent of marine
    mammal populations it currently has insufficient information for which
    to make a negligible impact determination. Thus NOAA has to set more
    conservative take levels than may otherwise be necessary and which
    place additional restrictions on commercial activities. NOAA states
    clearly that it needs funds to gather the data necessary to make
    conservation decisions. In 1994 testimony before Congress NMFS stated
    that an annual appropriation of $18 million was required to implement
    the Marine Mammal Protection Act (MMPA). We recommend that the
    Committee provide $18 million for implementation of MMPA to ensure
    adequate stock assessment and take reduction plan implementation.
        Most of the additional funds, $6.7 million, in the Administration's
    request are slated for actions needed to develop and implement recovery
    plans for Pacific salmon populations. While CMC does not oppose this
    increase, we are concerned that for the last several years this issue
    has drawn off the bulk of resources available within NMFS for
    Endangered Species Act plans and that the additional increase slated
    for whales and sea turtles is not adequate. We support NMFS's intention
    to direct funds to protect the critically endangered right whale from
    ship strikes and gear entanglement and to implement the Pacific sea
    turtle recovery plan. The need for these additional funds is made clear
    when NOAA states clearly that current funding is inadequate to respond
    to the Endangered Species Act requirements to protect marine species
    while minimizing economic impacts of conservation actions.
        Unfortunately NMFS's ability to carry out protected species
    responsibilities has been hampered by Congressional attempts to further
    delay the protection of threatened and endangered sea turtles from the
    shrimp trawl fishery in the Gulf of Mexico. For the last two years
    Congress has included report language that required NMFS to conduct
    redundant activities to justify the need for Turtle Excluder Devices
    and divert needed funding from other protected species activities. One
    activity potentially affected is the badly needed Hawaii longline
    observer program. Pacific leatherback sea turtle populations are
    critically endangered and this program is essential to identifying ways
    to reduce takes to avoid the development of an ESA crisis.
        We are providing the Subcommittee with numerous copies of CMC's
    report Delay and Denial: A Political History of Sea Turtles and Shrimp
    Fishing, which documents the long and tortured process by which TED's
    were required to protect threatened and endangered sea turtles. Nearly
    24 years passed from the time that the Kemp's ridley sea turtle was
    listed as endangered and the time that TED's were required in all
    shrimp trawls. When Congress last inserted itself in this issue, in
    1988, the National Academy of Sciences report Congress mandated
    strongly endorsed TED requirements to reduce sea turtle mortality in
    shrimp trawls.
        Despite pressure from Congress not to do so NMFS has recently
    issued revised rules under the Endangered Species Act decertifying less
    effective soft TED's to protect threatened and endangered sea turtles
    in light of increased mortality over the last few years.
        We strongly urge the Appropriations Committee and Congress to cease
    their interference and to allow the agency to do its job in protecting
    sea turtles in a manner that allows the shrimp fishery to continue
    operation.
    Habitat Conservation
        CMC supports the Administration's requested $1.8 million increase
    in Habitat Conservation in light of new authority granted NMFS and the
    regional fishery management councils to influence federal decisions
    affecting fisheries habitats. CMC also supports the agency's efforts at
    completing Habitat Conservation Plans to protect salmon spawning
    habitat on the west coast.
    Enforcement and Surveillance
        CMC supports the Administration's proposed $1.7 million increase
    for enforcement. The enactment of the new provisions of the FCMA will
    require greater enforcement effort from NMFS. In addition, the agency
    has recently finalized regulations to conserve Atlantic sharks and sea
    turtles in the Gulf of Mexico and South Atlantic. Also the recovery of
    New England groundfish stocks will require increased enforcement to
    ensure compliance with the requirements of Amendment 7 to the
    multispecies management plan. Of great interest in New England is NMFS'
    work to implement the use of advanced vessel monitoring systems to both
    make enforcement more efficient as well as less burdensome on
    fishermen.
    Acquisition of Data
        CMC is very concerned about the Administration's proposed 6 percent
    cut in the acquisition of data. We urge the Committee to reject this
    cut of $1.74 million. It makes no sense to reduce days-at-sea of NOAA's
    fisheries research vessels when the agency is severely lacking data
    essential to the sound management of the Nation's living marine
    resources. Data are required for assessments of fish and marine mammal
    populations. The increased reporting on the status of fish stocks
    required to update 39 fishery management plans only increases the need
    for a greater number of days-at-sea to conduct assessments.
        NMFS estimates that it needs a total of more than 4,400 days-at-sea
    and is currently able to support only 3,600 days at sea. These days-at-
    sea are provided by combination of NOAA vessels, charters and through
    state and foreign cooperation.
    Fleet Maintenance and Planning
        CMC supports the Administration request of $11.8 million. We note
    that while NOAA is seeking no funds for the new vessel construction in
    fiscal year 1998 the agency is planning to begin design work for a new
    class of acoustically quiet fisheries research vessels. NOAA's
    dedicated fishery research fleet is aging and inefficient to operate.
    We recommend that replacement of the current fleet move forward in a
    manner that will allow the agency to utilize properly designed and
    equipped ships to complete its mission. It matters not whether these
    new vessels be owned and operated by NOAA. That determination can be
    made on the basis of cost to the taxpayer.
                            marine mammal commission
        In addition to the marine conservation programs of NOAA, we urge
    the Committee to increase funding for the independent Marine Mammal
    Commission. We urge the Committee to provide $1.35 million in fiscal
    year 1998. A fully funded Commission is a source of rational and
    constructive scientific advice on marine mammal protection issues. Many
    of these issues could become contentious absent the Commission's
    analysis. The President has requested $1.24 million which is an
    increase of $51,000 over current funding. For the last two years the
    Commission has only been able to function at a minimal level, unable to
    carry out an independent research program. The funding level we are
    recommending would boost funding to a level approaching the
    Commission's fiscal year 1995 budget and enable it to conduct needed
    research.
        This concludes our statement.
        [GRAPHIC] [TIFF OMITTED] T11AP24.000

                                     ______

     Prepared Statement of Lloyd Q. Dowdell, President, Advanced Telecomm.
                                  Tech., Inc.
        Mr. Chairman, I respectfully submit testimony on behalf of ATTI, a
    small R&D Telecommunications Company located in Belleville, New Jersey.
    ATTI has for the last six years committed its resources toward its
    mission to help address a top concern of Americans--the incidence of
    crime and violence in our society. In the company's effort to combat
    violence, ATTI has worked with members of Congress and prison officials
    to provide cost-effective learning systems and programs to aid
    Corrections officials in reducing recidivism.
        This testimony requests your support for the formation of a nine-
    state youth violence prevention network. Using the latest and most
    innovative computer and technology infrastructure, ATTI's network will
    connect nine or more of the largest cities in Ohio, Illinois, New
    Jersey, New York, Pennsylvania, Connecticut, Florida, California and
    Kentucky. ATTI's network will collaborate with state universities,
    colleges, teaching hospitals, libraries, churches, community centers,
    municipalities, YMCA's and YWCA's and other community organizations.
        ATTI will offer network links to Youth Correctional Facilities to
    provide training to incarcerated youth and provide access to aftercare
    in conjunction with churches and other community based organizations.
    Much of the company's training efforts will be directed towards at-risk
    youth. ATTI's network will focus on foundation skills for these youth,
    especially dropouts. Working with community colleges and the local
    school districts, ATTI's Basic Skills component will cover reading,
    writing, arithmetic and mathematics, listening, and speaking. Our
    Thinking Skills component involves various decision-making and problem-
    solving strategies through authentic tasks. ATTI's Personal Qualities
    component involves students learning responsibility, self-esteem, self-
    management, integrity, sociability and behavioral modification skills.
    ATTI's program will be delivered to housing facilities in the targeted
    areas.
        As Americans, ATTI and its collaborative partners' mission, is to
    intervene in the lives of at-risk youth; delinquents and youths
    involved in the criminal justice system--to help provide this targeted
    population with the skills competency that students need for success in
    the modern workplace and to become productive citizens.
        Mission Statement.--ATTI's mission is to save lives, reduce crime,
    violence, and save prison costs to taxpayers and to use human and
    capital resources to enhance and empower individuals with the
    essentials to take care of their families and to be good citizens.
        Vision.--To help eliminate poverty and to participate meaningfully
    in revitalizing urban areas and those in need.
        Goal.--To empower individuals seeking to improve their life with
    assistance to become self-sufficient.
        Objective.--To work in partnership with the private, public and
    religious sectors to strengthen America and its inner cities.
        Hence, we have identified several areas of intervention consistent
    with the May, 1996 Rand Study: Diverting Children From A Life Of Crime.
    ATTI's initiative, at an intervention of 2,000 individuals, can save
    each state approximately $330 million in crime and violence related
    costs over a period of 5 years.
        According to a study released in April, 1995 by the Department of
    Justice (DOJ), 1.6 million individuals are incarcerated in the United
    States and another 1 million is involved in the criminal justice
    system. In terms of violence, a separate DOJ study estimates that the
    price of violence and crime cost Americans some $460 billion annually.
        The Rand research brief, Diverting Children From A Life Of Crime:
    What Are The Costs And Benefits, states that although headlines show
    crime rates falling, in 1996, there was still likely one violent crime
    committed for every 130 U.S. citizens--a rate several times that in
    other industrialized democracies. The report goes on to say that
    despite the seriousness of America's crime problem, most of the money
    and effort devoted to solving it are restricted to one approach--
    incarcerating persons who have already committed crimes. Much less
    attention has been paid to diverting youths that have not yet committed
    crimes from doing so.
        This is what makes ATTI's comprehensive collaborative project so
    unique in helping to reduce crime among youth and to help make
    Americans safe. First, ATTI will not only deploy the most advanced
    cost-effective technology (through distance learning) initiatives and
    on-site training, but also, ATTI's network will tie-in to state
    operated youth facilities and at-risk youth sites in neighborhoods. In
    other words, ATTI's initiative will cover both the youths in and
    outside youth facilities.
        The United States now leads the industrialized world in prison
    population. The prison buildup has not come cheaply. According to a
    February 7, 1994 Time Magazine report, the average annual cost per
    inmate is $23,500 and the average cost per bed in maximum-security
    facilities is $74,862. Ohio leads the pack with its prisons operating
    at 182 percent of capacity. This demonstration project is aimed at
    reducing costs, recidivism, and violence as previously mentioned.
        As Founder of ATTI, I have committed over $600,000 to research and
    evaluation in over 20 states, to assess the problem and discover what
    works. The company's research reveals that almost all of the prisons
    lack mandatory education programs that lead to a GED in spite of clear
    statistics that show a direct correlation between illiteracy and crime.
    We also discovered that almost 90 percent of incarcerated individuals
    lack a high school diploma or a GED certificate, and it was indeed this
    group that was causing most of the crime and violence (illiterate
    repeat offenders).
        The statistics on violence, as you know Mr. Chairman, points to an
    emergency that threatens the future of this generation, our state, and
    our nation. The loss of human potential, the pain and suffering of
    families and acquaintances is enormous; and the spiraling, negative
    impact on the educational and health care systems, as well as
    businesses, demands our attention.
        Teenagers commit almost a fifth of violent crimes. Consistent with
    this reality, a significant number of ATTI's programs, services, and
    research pertains to the youth population. This project will further
    address this issue by offering youth detention centers ATTI's
    comprehensive programs.
        Violence prevention research is very much in its infancy. An
    overwhelming proportion of violence prevention efforts ongoing have not
    been evaluated nor has there been attention to what works best for
    whom. There is a need to attain a better understanding of risk and
    protective factors across populations, empirically establish the
    efficacy of preventive interventions, explore the individual,
    community, organizational, and cultural characteristics that moderate
    risk and intervention outcomes, and evolve guidelines and strategies
    for successful implementation and dissemination.
        ATTI, in collaboration with Harvard University Medical School, the
    University of Medicine and Dentistry of New Jersey and other prominent
    universities, proposes to develop, implement, and evaluate a
    multifaceted program designed to reduce crime, violence and
    delinquency. The collaboration will also address health and behavioral
    problems, enhance social skill competence, foster safer and healthier
    minds, increase education and create a renewed sense of hope and
    empowerment on the part of our targeted population from inner cities,
    especially youths at-risk.
        ATTI's initiative, with hospitals/academic partners, will also
    provide in-service teacher training to enable teachers to better deal
    with the epidemic of school-based violence and its associated causes.
    ATTI's connection to community policing initiatives disseminated to
    local school districts will help bring better cooperation between kids
    and law enforcement. A comprehensive system of school-based, school-
    linked and community based services (including health professionals)
    will be put together based on an organizational assessment involving
    the collection of data from all levels of the community, including
    parents and teens located in high rise apartment complexes and crime
    riddled neighborhoods.
        Funding for this demonstration program will accomplish and fulfill
    two very important needs. First, it will lead to the abatement of crime
    in targeted areas. It will also position this collaborative effort for
    private funding if Congress cannot appropriate for this initiative
    beyond the first year. ATTI's activities will involve a primary, but
    not exclusive, focus on violence prevention and control, given the fact
    that overall well-being impacts risk for violence. The interrelated
    services will emphasize the cognitive, effective, skills building and
    environmental elements of violence prevention, emphasizing the
    development of competencies essential not only to violence prevention
    but to the promotion of personal academic success as well. All
    components will be designed with the intent of strengthening the
    organizations' internal resources and linkages with existing and new
    community resources.
        The Department of Education reports that approximately 200,000 high
    school students drop out each year. Research shows that large
    proportions of dropouts become juvenile delinquents and eventually
    invade our criminal justice system. Without effective countermeasures,
    like ATTI's proposal, this problem will exacerbate in light of Senator
    Hatch and Daschle's youth crime bills introduced early this year.
    States spend an estimated $10,000 per year to educate a student in
    ATTI's targeted areas. When incarcerated, states spend approximately
    $23,000 to $30,000 annually to care for these individuals, our program
    will save states about $26,000 per individual. Teacher and
    administrative salaries account for 90 percent of the educational cost
    among prison schools. Due to the acute rise in the prison population,
    educational programs are available to a limited number of inmates for
    budgetary reasons. The few that are enrolled in educational programs
    often have to delay completing their education due to funding cuts.
        There are several other factors that may contribute to the lack of
    meaningful education programs in jails and prisons nationwide.
    Nevertheless, it would be disingenuous for one to believe that we can
    reduce recidivism and crime by rehabilitating the inmates when
    educational programs are unfunded. I have worked with members of
    Congress to gain support for an amendment to the recent crime bill.
    This amendment mandates that federal prisoners acquire at least a high
    school equivalency diploma (GED) before they can qualify for early
    release. This will fall on deaf ears unless we utilize innovative
    approaches as described above.
        Studies by Colombia University and other institutions of higher
    education provide critical research that shows recidivism decreases
    with increased levels of education obtained by individuals in the
    criminal justice system and conversely, the lack of education by these
    individuals increases in the level of recidivism which translates into
    increased rates of crime and cost. Indeed, Congress itself has found
    that 90 percent (70 percent among youth) of the incarcerated
    individuals are without basic skills and that obtaining a GED while
    incarcerated would reduce their chances of becoming a recidivist.
        A recent survey of Americans said that crime is a number one
    problem facing this country. Studies show that the industrialized world
    in prison population increased about 10 percent in 1995, but the U.S.
    prison population increased twice as much.
        The goals and objectives of ATTI's comprehensive interactive
    distance learning project will help address some of these problems and
    provide individuals with much needed education and training programs.
    ATTI's network will reduce the normal cost associated with educating
    the company's targeted individuals by more than half and at the same
    time provide 2 to 3 months of full scale comprehensive training. This
    approach will substantially reduce the cost to taxpayers, save lives
    and eventually cut into violence and crime in the targeted areas by
    assisting the criminal justice system in equipping targeted
    individuals, where appropriate, with marketable skills prior to and
    after release. Research shows with a GED and other skills, these
    individuals will become more productive and make positive contributions
    to their communities and society as a whole.
        Each of ATTI's training sites (except in youth detention centers)
    will be equipped with state-of-the-art computers linked to the Internet
    and the information highway. Trainers and course content will be
    provided through a combination of on-site, distance learning and
    computer based applications from colleges, universities, and where
    possible, from local school districts. Candidates that complete
    training will receive a certificate from a university, college or
    training organization. Training will include ABE, GED, employability
    and job-hunting skills, motivational programs, and various technical-
    training skills mentioned before. Key to the success of this project,
    is government's involvement as a collaborative partner. The results of
    this project will lay the groundwork to help attract new businesses to
    cities due to the increased number of trained individuals, an increased
    skilled workforce, and the reduction of crime.
        ATTI needs funding to accomplish the following:
      --Train and educate our targeted population, in the nine above
            states, as a five-year demonstration project.
      --Reduce the cost to both federal and state governments (taxpayers)
            by up to $330 million per 2,000 individuals, in crime and
            violence related expenses.
      --Increase the amount of targeted individuals' enrollment in training
            and educational programs by over 100 percent and at 100 percent
            less cost.
      --Furnish a ``Gateway'' for academic institutions and hospitals to
            assist ATTI's effort and provide access to ATTI's courses,
            training and skills enhancement programs on demand.
      --Provide a full days menu of numerous educational and skills
            enhancement programs.
      --Offer health related programs.
      --Provide basic skills and other preparatory programs.
        We request that the Senate Appropriations Subcommittee on Commerce,
    Justice, State, The Judiciary and Related Agencies designate funding in
    the amount of $16 million to implement this important national
    demonstration project. We also request that this appropriation be
    established on a multi-year basis to extend over a period of five years
    so that continued research and evaluation can be provided to the
    Congress and shared with other crime prevention organizations and
    agencies.
        In closing, I would like to thank the Chairman and the Committee
    for considering this important funding requests.
                                     ______

     Prepared Statement of Judy Clarke, President, National Association of
                            Criminal Defense Lawyers
        Mr. Chairman and Members of the Subcommittee: The National
    Association of Criminal Defense Lawyers (NACDL),\1\ appreciates this
    opportunity to offer our views concerning the Defender Services
    Appropriation for fiscal year 1998. This account has been badly
    underfunded for many years. During that same period, funding for law
    enforcement, prosecution and prison construction has grown
    dramatically. And, at the same time, criminal law and procedure have
    become more complex; death penalty litigation has expanded and
    accelerated, while funding for capital representation has been
    eviscerated; and the costs of legal practice have escalated.
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        \1\ NACDL is the preeminent organization in the United States
    advancing the mission of the nation's criminal defense lawyers to
    ensure justice and due process for persons accused of crime. A
    professional bar association formed in 1958, NACDL's 9,000 direct
    members--and 78 state and local affiliates with another 25,000
    members--include private criminal defense lawyers, public defenders and
    law professors committed to preserving fairness within America's
    criminal justice system.
    ---------------------------------------------------------------------------
        We believe it is essential to recognize the defense function as an
    integral part of America's criminal justice system if it is to ensure
    the Constitution's guarantee of fairness and due process to persons
    accused. To preserve and protect the integrity of that system, we
    strongly urge Congress to appropriate $400,000,000 for Defender
    Services an amount necessary to begin the recovery from too many years
    of inadequate funding.
                                  introduction
        The Defender Services Appropriation funds the Federal government's
    Sixth Amendment obligation to provide counsel to represent defendants
    unable to hire their own attorney.\2\ In addition, the appropriation
    enables the government to fulfill its Fifth Amendment duty to provide
    such defendants with the ``basic tools,'' \3\ and the ``raw materials''
    \4\ necessary to contest the prosecution's case within our country's
    adversary system of justice. These services are mandated by the United
    States Constitution; they are not ``discretionary.''
    ---------------------------------------------------------------------------
        \2\ Gideon v. Wainwright, 372 U.S. 335 (1963); Johnson v. Zerbst,
    304 U.S. 458 (1938).
        \3\ Britt v. North Carolina, 404 U.S. 226, 227 (1971).
        \4\ Ake v. Oklahomak, 470 U.S. 68, 77 (1985).
    ---------------------------------------------------------------------------
        Four years ago, the Judicial Conference of the United States
    reported to Congress the results of its extensive review of the
    Criminal Justice Act (CJA):

              There is no question that the single most important problem
            to confront the CJA program in recent years is that sufficient
            funding has not been appropriated to meet the increasing costs
            of providing the Constitutionally mandated services that the
            program was created to provide.\5\
    ---------------------------------------------------------------------------
        \5\ Report on the Federal Defender Program 11 (March 1993). The
    result of an extensive study of the effectiveness of the Criminal
    Justice Act, as required by Section 318 of the Judicial Improvements
    Act of 1990, the Report is reprinted at 53 CrL (BNA) 2003 (April 14,
    1993).

        Years of insufficient funding have resulted in federal criminal
    justice system with a number of shortcomings,\6\ including: Failure to
    fund federal defender organizations in all districts; failure to fund
    cost-effective death penalty representation; unreasonably low
    compensation for CJA ``panel'' attorneys; and inadequate qualification
    standards for panel attorneys.
    ---------------------------------------------------------------------------
        \6\ Report on the Federal Defender Program, at 12.
    ---------------------------------------------------------------------------
        NACDL strongly agrees with those findings of the Judicial
    Conference Report. Without adequate and long overdue Defender Services
    funding, the constitutional mandates of Due Process and Effective
    Assistance of Counsel cannot be fulfilled.
                                public defenders
        NACDL agrees with the Judicial Conference that each judicial
    district should have an adequately funded federal defender organization
    (Federal Defender or non-profit Community Defender).\7\ Defender
    offices provide consistently high quality representation because they
    specialize in federal criminal law, receive regular training through
    the Administrative Office and the Federal Judicial Center, and maintain
    ongoing professional relationships with the court and the other
    agencies involved in the criminal justice system. In many districts,
    defenders also provide training, legal advice, and administrative
    support to CJA panel attorneys.
    ---------------------------------------------------------------------------
        \7\ Report on the Federal Defender Program, at 20-21.
    ---------------------------------------------------------------------------
        Congress should appropriate funds sufficient to open defender
    offices in the districts now without such offices; to enable existing
    offices to continue to keep up with the caseloads added by accelerating
    law enforcement and prosecution budgets; and to accommodate the
    increase in complexity driven by recent and expected substantive
    criminal legislation.
                     post-conviction defender organizations
        The poor quality of much of America's death penalty representation
    is a well-documented national disgrace and international
    embarrassment.\8\ Exacerbating that crisis, Congress, in 1996, excluded
    funding for the Post-Conviction Defender Organizations (PCDO's) non-
    profit community defender organizations which served 20 of the 38 death
    penalty states (50 federal judicial districts). That precipitous act
    (repeated for fiscal year 1997) together with the accelerated
    scheduling mandated by the Antiterrorism and Effective Death Penalty
    Act of 1996, leaves hundreds of death row inmates without counsel,
    greatly increases the cost of representation for the rest, and has
    contributed to delay in the processing of capital cases.\9\ The
    Subcommittee should recommend omission of that funding prohibition for
    fiscal year 1998.
    ---------------------------------------------------------------------------
        \8\ See, e.g., ABA, Resolution of the House of Delegates, Feb. 1997
    (calling for a moratorium on imposition of the death penalty because of
    widespread defects, notably a failure to provide qualified and
    compensated defense counsel, investigators and experts); Int'l Comm'n
    of Jurists, Administration of the Death Penalty in the United States
    (June 1996).
        \9\ See, e.g., Davis v. Thomas, 266 Ga. 835, 471 S.E.2d 202 (1996)
    (describing the scramble to replace PCDO representation following de-
    funding, and ordering a continuance in the state habeas case).
    ---------------------------------------------------------------------------
        Established as a cost-effective means of providing counsel, PCDO's
    specialized in state and federal death penalty representation the law's
    most complex, burdensome and emotionally taxing specialty. In addition
    to direct representation in some cases, PCDO's performed a number of
    functions which help to ensure that fair and complete capital habeas
    corpus petitions were promptly filed and competently processed by
    trained counsel. Those organizations assisted the courts by recruiting
    counsel willing and able to provide representation in such complicated
    and demanding cases, thus relieving the courts of the need to perform
    this difficult and often time-consuming task. In many states, PCDO
    assistance enabled private attorneys to provide representation pro bono
    without charge to the government. And where pro bono attorneys were not
    able to satisfy the need for counsel services, PCDO staff attorneys
    provided cost-effective representation in these most critical cases.
    Finally, where a PCDO did not have funds to hire enough staff to
    represent all of a state's death row population, the PCDO provided
    support services that greatly reduced the cost of assigning private
    attorneys.
        In short, by providing competent, well-trained counsel, PCDO's
    reduced delay and, ultimately, the cost of processing capital cases in
    accordance with the constitutional requirements and procedures
    established by the Supreme Court. As the Judicial Conference Report put
    it:

              The Death Penalty Resource Centers have provided invaluable
            services in an appropriate and cost effective manner. They have
            facilitated the appointment of competent attorneys in capital
            cases and have brought a higher quality of representation to
            these cases. They have, moreover, streamlined the capital
            litigation process by expediting cases and avoiding costly
            repetitive legal proceedings. The resource centers demonstrate
            how the current flexible structure of the CJA program has
            allowed for the development of innovative uses of limited
            resources that facilitate the attorneys working within the
            program in delivering the kind of representation required to
            ensure the continued vitality of the Sixth Amendment in even
            the most complex and demanding cases.\10\
    ---------------------------------------------------------------------------
        \10\ Report on the Federal Defender Program, at 26. See also, U.S.
    General Accounting Office, Defender Services Program, 5 (July 1990)
    (finding that the PCDO's' average ``cost per representation'' was 46
    percent of the cost of panel attorney death penalty representations).

        Funding for PCDO's came from the Defender Services Appropriation
    and from non-CJA (state or private) resources sufficient to support the
    PCDO's work related to state court proceedings. The federal component
    of that funding should be restored in order to fill the growing capital
    caseload needs, consistent with legislative demands for more federal
    capital prosecutions and for faster processing of capital habeas cases.
                        cja panel attorney compensation
        1986 amendments to the CJA authorized the Judicial Conference to
    adjust the 1984 panel attorney hourly rates, up to $75 per hour:

              Any attorney appointed * * * shall be compensated at a rate
            not exceeding $60 per hour for time expended in court * * * and
            $40 per hour for time expended out of court, unless the
            Judicial Conference determines that a higher rate of not in
            excess of $75 per hour is justified for a circuit or for
            particular districts within a circuit. * * * The Judicial
            Conference shall develop guidelines for determining the maximum
            hourly rates for each circuit in accordance with the preceding
            sentence, with variations by district, where appropriate,
            taking into account such factors as the minimum range of the
            prevailing hourly rates for qualified attorneys in the district
            in which the representation is provided and the recommendations
            of the judicial councils of the circuits.

        That adjustment mechanism now 11 years old replaced a similar
    procedure adopted by Congress in 1970 authorizing hourly rate
    adjustments ``not to exceed the minimum hourly scale established by a
    bar association for similar services rendered in the district.''

              This goal was subsequently frustrated by the abolishment of
            minimum bar fee schedules following the decision of the Supreme
            Court in Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975),
            which held that a minimum fee schedule promulgated and enforced
            by a bar association constitutes unlawful price-fixing in
            violation of the Sherman Act. The Goldfarb decision thus
            resulted in a collateral deactivation of the adjustment
            authority conferred by Congress in the Circuit Councils. * * *
            While the CJA Revision of 1984 removed the 1970 language
            authorizing judicial councils to set alternate hourly rates, it
            made no provision to replace this mechanism for affording
            flexibility to the CJA compensation scheme.\11\
    ---------------------------------------------------------------------------
        \11\ House Report 99-417, 99th Cong., 1st Sess., (December 5, 1985)
    (Statement of Congressional Budget Office, appended to Report). See
    Cong. Record Vol. 131 (1985); 1986 USCCAN 61654; 1985 WL 25927
    (Leg.Hist.).

        The 1970 mechanism Congress revised in 1986 was intended to ensure
    that panel payments are ``neither a bonanza for some lawyers to get
    more than the going rate in that town, nor an empty shell which will
    not be used because the rates are below the going charge in those
    towns. * * * [A]nd it is hoped it will reflect what the private
    practitioner charges in those jurisdictions.'' United States v. Mills,
    713 F.2d 1249, at 1259, 1261 (7th Cir. 1983) (Swygert, J., dissenting,
    quoting Representative Abner Mikva).\12\
    ---------------------------------------------------------------------------
        \12\ See House Report 91-1546, 91st Cong., 2d Sess., (September 30,
    1970); 116 Cong. Rec. 34,812, 34812 (1970); 1970 USCCAN 3982; 1970 WL
    5700 (Leg.Hist.).
    ---------------------------------------------------------------------------
        Despite that legislative intention to adjust the rates to avoid
    impoverishing panel attorneys and despite the fact that overhead costs
    have risen to exceed the base rates established over a decade ago
    except for a token $5 raise in January, 1996, the Judicial Conference
    has postponed implementing higher rates in all but the first 16
    districts to be approved, in 1988.\13\
    ---------------------------------------------------------------------------
        \13\ In 1988, the $75 rate was established--and implemented--in the
    following districts and court locations: Alaska, California (Central,
    Eastern (Sacramento and Fresno), Northern and Southern), District of
    Columbia, Detroit, Michigan, New Jersey, Las Cruces, New Mexico, New
    York (Eastern and Southern), and Seattle, Washington; $70 rates were
    approved for Phoenix and Tucson, Arizona and for Hawaii; and $60 rates
    for Oregon and Las Vegas and Reno, Nevada. Proceedings of the Judicial
    Conference (JCUS) 16, 46, 75, 111 (1988).
    ---------------------------------------------------------------------------
        Seventy-five dollar rates (generally less than half the market
    rate, but more than the average cost of overhead) have been approved
    but postponed for lack of funding for the remaining judicial districts:
      --In 1990, the $75 rate was approved for all the districts in the
            Seventh Circuit (Wisconsin, Illinois and Indiana) and extended
            to entire districts where previously limited to specific court
            locations.\14\ Due to inadequate funding, those approved rates
            have not been implemented.
    ---------------------------------------------------------------------------
        \14\ JCUS 79, 108 (1990).
    ---------------------------------------------------------------------------
      --In 1991, $75 per hour was approved for the Southern District of
            Alabama, Arizona, Connecticut, Florida, the Northern District
            of Georgia, Guam, Idaho, Kentucky, Louisiana, Maryland,
            Massachusetts, the Western District of Michigan, Mississippi,
            Missouri, Nevada, the Western District of North Carolina, Ohio,
            Oregon, the Middle and Western Districts of Pennsylvania, South
            Carolina, Tennessee, Texas, the Western District of Virginia
            and West Virginia.\15\ Due to inadequate funding, those
            approved rates have not been implemented.
    ---------------------------------------------------------------------------
        \15\ JCUS 18, 47, 56-57, 73 (1991).
    ---------------------------------------------------------------------------
      --The $75 rate was approved in 1992 for the Northern and Middle
            Districts of Alabama, the Eastern District of Arkansas,
            Colorado, Delaware, the Middle and Southern Districts of
            Georgia, Iowa, Kansas, Minnesota, Montana, New Hampshire, the
            Western District of New York, the Eastern and Middle Districts
            of North Carolina, North Dakota, Northern Mariana Islands,
            Oklahoma, the Eastern District of Pennsylvania, Puerto Rico,
            Utah, Vermont, Virgin Islands, the Eastern District of
            Washington, Wyoming, and Hawaii.\16\ Due to inadequate funding,
            those approved rates have not been implemented.
    ---------------------------------------------------------------------------
        \16\ JCUS 21-22, 39 (1992).
    ---------------------------------------------------------------------------
      --And in 1995 the $75 rate was approved for the Western District of
            Arkansas, Maine, Nebraska, South Dakota, and the Eastern
            District of Virginia.\17\ Due to inadequate funding, those
            approved rates have not been implemented.
    ---------------------------------------------------------------------------
        \17\ JCUS ---- (1995).
    ---------------------------------------------------------------------------
        Except for the token $5 increase to $45 per hour for work out-of-
    court (generally two-thirds of the average billing) and $65 for work in
    court, the rates established after 1988 for those 77 districts have
    been repeatedly postponed. However, the cost of maintaining a law
    practice has not been postponed, but has steadily increased.
        In the District of South Dakota, one of the least expensive
    locations, surveys conducted by the Defender Services Division show
    that the average overhead cost of a law office in 1994 was $38 per
    hour.\18\ In most locations, the costs are notably higher. Average law
    office overhead in New Hampshire, for example, was $53 per hour back in
    1992.\19\ In Vermont, the overhead cost was $47 per hour in 1993.\20\ A
    1994 survey by the Tennessee Bar Association showed the average cost of
    office overhead of $46.81 per billable hour.\21\ In Texas, the average
    office overhead back in 1991 was $64.25 per hour.\22\ In Colorado, in
    1992, $46 per hour.\23\ In Kentucky, in 1991, $37 per hour.\24\ In
    South Carolina, in 1991, $50 per hour.\25\ In Arkansas, $47 per hour in
    1992.\26\ And in Maryland, in 1991, an average overhead cost of $70 per
    hour.\27\
    ---------------------------------------------------------------------------
        \18\ Records of surveys conducted by the Administrative Office of
    the United States Courts.
        \19\ Id.
        \20\ State of Vermont v. Bacon, 163 Vt. 279, 315 (1995).
        \21\ State of Tennessee v. Mathews, Criminal Court of Montgomery
    County, No. 33791, (March 18, 1995), at 1 (order setting a court-
    appointed hourly rate, in a capital case, at $100 per hour).
        \22\ Records of surveys conducted by the Administrative Office of
    the United States Courts.
        \23\ Id.
        \24\ Id.
        \25\ Id.
        \26\ Id.
        \27\ Id.
    ---------------------------------------------------------------------------
        Since those surveys were conducted, overhead costs have continued
    to rise. But the compensations rates have not, effectively turning
    panel attorney service, at $45/$65 per hour in most states, into a
    direct subsidy of the government's constitutional obligation to provide
    assistance of counsel to the indigent accused of crime.\28\ The
    Judicial Conference has long recognized this problem:
    ---------------------------------------------------------------------------
        \28\ The Judicial Conference's CJA Guidelines, para. 2.28 A.,
    excludes office overhead from those expenses reimbursed to panel
    attorneys: ``The statutory fee is intended to include compensation for
    these general office expenses.'' Compare, e.g., State of Louisiana v.
    Green, 631 So.2d 11, 13 (La. App. 1993) (setting an overhead expense
    rate of $30 per hour in addition to fees of $45 per hour).
    ---------------------------------------------------------------------------
        The $40 and $60 hourly rates paid to CJA panel attorneys are
    seriously deficient. In many locations, they do not even cover the
    basic office overhead costs of law offices. Thus, many lawyers accept
    assignments of cases from the federal courts at a financial sacrifice
    to their livelihood.\29\
    ---------------------------------------------------------------------------
        \29\ Report on the Federal Defender Program, at 30.
    ---------------------------------------------------------------------------
        Of course, the problem is most acute in districts without a federal
    defender organization, where panel attorneys are often conscripted to
    fulfill the government's constitutional obligations, losing their
    livelihood, and risking bankruptcy in the process.\30\
    ---------------------------------------------------------------------------
        \30\ See, e.g., Bey v. United States, No. 93-8442, cert. denied,
    114 S.Ct. 2714 (1994) (question presented: does conscription of panel
    attorneys to serve at a financial sacrifice violate the Constitution?).
    ---------------------------------------------------------------------------
        The crux of the panel attorney payment problem is this: The CJA,
    unlike the 1931 Davis-Bacon Act, does not require panel attorney
    payments reflecting, or even reasonably approximating, the prevailing
    private market wage. In fact, the $75 maximum rate is substantially
    less than fifty percent of the value set by the private market in most
    locations. Continued payments at a fraction of that statutory rate and
    below the out-of-pocket cost of keeping an office open continually
    violates the basic constitutional property rights of those panel
    attorneys who, after all, have the same rights and responsibilities of
    any other small business owner.\31\
    ---------------------------------------------------------------------------
        \31\ In FTC v. Superior Court Trial Lawyers Assn., 493 U.S. 411
    (1990), for example, the Supreme Court held (unanimously) that panel
    attorneys are small businesses covered by the Anti-Trust laws.
    ---------------------------------------------------------------------------
                  qualification standards for panel attorneys
        As the costs of living generally and practicing law in particular
    have risen, and as federal criminal law has become more complex, time-
    consuming and specialized, the pool of qualified CJA panel attorneys
    has decreased because the rates in most areas have been virtually
    frozen for over a decade. Some of the resulting problems are explained
    by the Judicial Conference Report:

              Federal criminal law, including its sentencing aspects, has
            become exceedingly complex. It is no longer feasible for a
            state criminal defense lawyer to appear occasionally in a
            federal court and be expected to perform competently. Lack of
            knowledge of federal law and procedure can create very serious
            adverse consequences for criminal defendants.
              In order to be an effective advocate in a federal criminal
            case today, it is essential that an attorney be knowledgeable
            in the federal sentencing guidelines. Unfortunately, however,
            information elicited by the Review Committee indicates that it
            is not uncommon for attorneys with little or no criminal
            experience to be appointed in federal cases, and a lack of
            training for panel attorneys was a common complaint cited in
            hearings before and correspondence to the review committee.\32\
    ---------------------------------------------------------------------------
        \32\ Report on the Federal Defender Program, at 28. The Report of
    the Committee to Review the Criminal Justice Act is reprinted at 52 CrL
    (BNA) 2265 (March 10, 1993).

        Given the well-recognized, increasingly serious difficulty in
    recruiting qualified panel attorneys, the Judicial Conference proposed
    ``only minimal qualification standards.'' \33\ Even though quality
    control is essential, because most districts are stuck at barely above
    the $40/$60 rates established in 1984, the Conference was forced to
    recognize that ``specific requirements might render it difficult or
    impossible to find a sufficient number of attorneys to serve on the
    panel.'' \34\
    ---------------------------------------------------------------------------
        \33\ Report on the Federal Defender Program, at 28.
        \34\ Report on the Federal Defender Program, at 27.
    ---------------------------------------------------------------------------
        However, the 1995 Long Range Plan for the Federal Courts recommends
    against further delay in qualification standards: ``The CJA does not
    establish qualification standards for attorneys serving on CJA panels.
    The practice of federal criminal law has become highly specialized.
    Defendants face increasingly lengthy prison terms. It is time for panel
    attorneys to be held to certain minimum qualifications.'' \35\ But with
    compensation at or below the cost of merely maintaining a law office,
    the continuing education necessary to meet minimum standards is an
    expense many lawyers cannot afford.
    ---------------------------------------------------------------------------
        \35\ Long Range Plan for the Federal Courts, 120 (1995).
    ---------------------------------------------------------------------------
        The clear solution is simply the market system: panel attorneys
    paid at a fair rate (even though substantially less than the market
    rate) can purchase from the private market the training necessary to
    competently fulfill the government's constitutional mandates. The
    Judicial Conference should set high standards; Congress should
    appropriate funding sufficient to enable panel attorneys to purchase
    the training necessary to obtain (and maintain) the skills necessary to
    do the job. The whole criminal justice system will work efficiently
    then, to the benefit, including tax savings, of us all and it will be a
    justice system worthy of its name.
                        conclusion the future of the cja
        The Criminal Justice Act requires a ``substantial proportion'' of
    appointments to the private bar.\36\ ``'Substantial' shall usually be
    defined as approximately 25 percent of the appointments under the CJA
    annually throughout the district.'' \37\ The American Bar Association
    also recommends ``substantial participation by the private bar,'' \38\
    in order to provide a broad-based constituency for improvement of the
    criminal justice system:
    ---------------------------------------------------------------------------
        \36\ 18 U.S.C. Sec.  3006A(a)(3).
        \37\ Administrative Office of the United States Courts, ``Model
    Criminal Justice Act Plan,'' Sec.  VI.C (1991).
        \38\ ABA Standards for Criminal Justice, Providing Defense Services
    (ABA Standard) 5-1.2 (3d ed. 1992).

              All lawyers, whether criminal practitioners or not, share in
            the responsibility of ensuring that the most visible legal
            institution in the Nation, the criminal justice system, is of
            the highest attainable quality. Increasingly, however, indigent
            defense in many cities is almost the exclusive responsibility
            of public defenders and a very small private bar. The remainder
            of the trial bar is not fulfilling its obligation to
            participate through the representation of indigent defendants,
            and as a result, the shunning of criminal defense practice
            deprives the criminal justice system of a powerful voice for
            criminal justice reform, because the influential lawyers are
            unfamiliar with the working of the criminal justice system.\39\
    ---------------------------------------------------------------------------
        \39\ ABA Standard 5-2.2 (Commentary).

        The private bar's participation in the federal criminal justice
    system is also necessary to counter the inherent trend, in any closed
    bureaucracy,\40\ of ignoring or rejecting alternative, even critical,
    points of view; in other words, to provide for a healthy and efficient
    system of checks and balances.\41\
    ---------------------------------------------------------------------------
        \40\ The Judicial branch, in its administrative role, is exempt
    from most laws covering open meetings, public records, or freedom of
    information.
        \41\ The institutional benefit of private bar participation is
    illustrated by In re Snyder, 472 U.S. 634 (1985), where the unanimous
    Supreme Court held that a private CJA panel attorney was not
    contemptuous for criticizing the administration of the CJA. ``Officers
    of the court may appropriately express criticism on such matters.''
    Government employees, however, may not be so protected. See Waters v.
    Churchill, 114 S.Ct. 1878 (1994) (public employees can be summarily
    fired for criticism that could disrupt efficiency).
    ---------------------------------------------------------------------------
        The combination contemplated by the CJA--approximately 25 percent
    private panel attorneys; 75 percent public defenders--is readily
    attainable. Defender offices can and should be opened in all federal
    districts, and should receive the lion's share of the appointments. The
    remaining cases should be assigned to panel attorneys who are willing
    (not conscripted), who are qualified (meeting high competency
    standards) and who are reasonably compensated (in order to maintain
    qualifications, pay necessary office overhead, and avoid destitution).
        But still, the only way to obtain these goals--and to fulfill the
    government's constitutional mandate--is to fully fund the Criminal
    Justice Act. Because past appropriations have been grossly underfunded,
    and because the pending appropriation proposed by the Administration is
    demonstrably inadequate to redress the dire need, NACDL urges this
    Committee to recommend--and the Congress to enact--an adequate Defender
    Services Appropriation of $400,000,000. This appropriation cannot be
    viewed in a vacuum. The Constitution of the United States mandates a
    fair and efficient criminal justice system for all Americans. Full and
    fair funding to accomplish that is a pittance to pay. On the other
    hand, the consequences of not doing so are dire.
        On behalf of the National Association of Criminal Defense Lawyers,
    I want to thank the subcommittee again for affording us this
    opportunity to be heard on this very important subject, and for
    considering our concerns and requests for congressional action.
                                     ______

          Prepared Statement of Eldon Hout, Chairman, Coastal States
                               Organization, Inc.
                                  introduction
        My name is Eldon Hout, and I am the Coastal Program Manager for the
    State of Oregon and the current Chairman of the Coastal States
    Organization (CSO). Since 1970, CSO has served as the Governors'
    representative for ocean, coastal and Great Lakes issues. Delegates to
    CSO are appointed by the Governors from each of the 35 States,
    Commonwealths and Territories bordering the Atlantic and Pacific
    Oceans, the Gulf of Mexico or the Great Lakes.
        On behalf of CSO, I want to thank you for the opportunity to submit
    testimony on fiscal year 1998 appropriations. This testimony focuses
    primarily on the ocean, coastal and Great Lakes programs administered
    by the National Oceanic and Atmospheric Administration (NOAA) under the
    Coastal Zone Management Act (CZMA).
                        coastal and great lakes programs
        At the outset I want to stress two points. First, although the
    programs outlined below are generally described as ``coastal and ocean
    programs,'' they include the Great Lakes, islands and territories and
    they provide substantial benefits to the entire nation. Second, these
    programs administered largely under the authorities of the CZMA,
    represent a model partnership between State, Federal and private
    interests allowing the States to set locally based priorities and
    leveraging public and private resources in order to achieve a
    responsible use of land and water resources.
        The economic and social value to the nation of prudent coastal
    resource management cannot be overstated.
      --Thirty-two percent, or $1.3 trillion, of the Gross National Product
            is generated from activities in coastal areas.
      --Fifty percent of the U.S. population currently lives on 11 percent
            of the land that is designated as coastal; and that is expected
            to increase to 60 percent by 2010.
      --40 percent of new commercial development and 46 percent of
            residential development is in coastal areas.
      --Travel and tourism is the nation's largest industry and 85 percent
            of that is focused on the coast.
      --The coast supports 70 percent of the commercial and recreational
            fishing harvests.
        Acre for acre, America's coastal zone is one of the Nation's most
    valuable resources.
        Coastal waters are linked ecologically and economically directly to
    the nation's heartland by the network of navigable waterways. These
    waterways provide substantial recreational and economic benefits to the
    nation. Coastal ports handle over 95 percent of the volume of imports
    moving in international trade. Only with effective coastal resources
    management programs will we be able to accommodate these ever expanding
    and essential uses of our waterways.
        The CZMA was reauthorized last year with broad bipartisan support,
    and this year is celebrating its 25th anniversary. Thirty-four of 35
    eligible States and Territories are voluntarily participating in this
    program. The most important feature of the CZMA is that it is State
    driven, placing management decisions at the State and local level. In
    addition, the CZM program puts the States on an level playing field
    with the federal government in the area of coastal resource management.
    Once State coastal management programs are federally approved, federal
    agency activities affecting the resources of the coastal zone must be
    consistent with the State's program.
        It is more important than ever that funding levels for these
    programs be sustained in order to ensure that we are prepared to meet
    the growing challenges and can continue to reap the substantial
    benefits that result from coastal management activities. We recognize
    that this Committee faces very difficult budget choices again this
    year. Therefore, we are requesting only a modest increase from last
    year's funding levels so that the States, in partnership with the
    Federal government, can sustain an essential level of services through
    NOAA's core coastal programs.
      requested fiscal year 1998 funding levels for national czm programs
        State Coastal Program Grants (Section 306).--Funding for the
    national CZM program over the past few years has been essentially
    level. While relatively speaking in the current budget environment this
    is good news, funding for State coastal programs in real terms has
    declined due to inflation and the increasing number of States
    participating in the program. In addition, ``level funding'' in the
    face of the increased program needs and more competing demands on
    coastal resources is an effective decrease in support for State
    programs.
        With the addition of Ohio and Texas to the CZM program, the other
    29 States and territories with approved programs are faced this fiscal
    year with projected funding decreases of 4.8 percent--6.8 percent as
    compared with fiscal year 1996 levels. Similarly, Georgia and Minnesota
    are scheduled to come into the program this year and, although the
    Administration's proposed budget recommends an additional $1.5 million
    in spending, it will only partially cover actual costs thereby
    resulting in still further reductions in State funding allocations in
    fiscal year 1998.
        The Coastal States Organization recommends that no less than $49
    million be provided in fiscal year 1998 to fund CZMA Sec. 306 grants
    for State coastal zone management programs. This request would provide
    adequate funding to incorporate the four new States into the CZM
    program without significantly reducing existing commitments to the
    other States. The $49 million request is also consistent with the
    authorization level provided by Congress last year in reauthorizing the
    CZMA. This request reflects a $2.8 million increase above the $46.2
    million provided in the fiscal year 1997 appropriation. In light of the
    growing demands on these coastal resource programs and the substantial
    economic return, this is a very modest request.
        Clean Water Initiative (Sections 306/310).--The Administration's
    budget proposes an additional $18 million in new funding for a Clean
    Water Initiative: Protecting Health in Coastal Communities. The funds
    would be expended on priorities identified by States and local
    communities to eliminate specific sources of pollution and clean up
    degraded sites. Six million dollars would be distributed to States
    under Section 306 to specifically address coastal water quality
    problems that directly affect human health such as shellfish
    contamination and beach closures. Twelve million dollars would be
    provided in grants under Section 310 to clean up priority sites
    degraded by pollution.
        This Initiative would greatly assist coastal communities in
    protecting public health where chronic pollution sources result in
    shellfish contamination and beach closures. This $18 million would fill
    an important gap in existing programs thereby enabling states to target
    a discreet category of chronic pollution problems and protect public
    health particularly in smaller communities which do not have the
    resources to address these problems.
        CSO is encouraged by the recognition that there is a need for
    increased funding for the implementation of the 306 and 310 programs,
    based on State priorities. There is a backlog of worthy projects in the
    States that will not receive funds under the base funding level for 306
    programs. CSO supports this additional funding which will provide the
    tangible benefits directly to communities across the country.
        Coastal Nonpoint Source Pollution.--NOAA and EPA have begun issuing
    findings for the approval of State coastal nonpoint source control
    programs developed under CZARA Sec. 6217. All States are expected to
    receive conditional approval of their programs. NOAA, EPA and the
    States have agreed upon a process for resolving the obstacles to full
    program approval. CSO is optimistic that EPA and NOAA are committed to
    working with the States to address our concerns related to
    implementation of this program. CSO supports the President's request of
    $1 million for funding CZARA Sec. 6217 program development activities.
        The National Estuarine Research Reserve System (Section 315).--
    Section 315 of the CZMA established the National Estuarine Research
    Reserve System (NERRS) to serve the national interest by providing a
    network of sites for research, education, and long-term monitoring.
    NERRS researchers are helping to control the invasion of exotic
    species; working with the agricultural community and forest industry to
    minimize the impacts on coastal resources; and, developing sustainable
    management strategies for shellfish beds and commercial fishery
    habitat.
        Currently there are 22 sites comprising over 500,000 acres of
    varied estuarine environments. Six more sites are in the pipeline for
    federal designation. Yet, funding levels have been static over the past
    several years. Indeed, Congress directly appropriated only $1 million
    in fiscal year 1997 with the balance of funding being provided by NOAA
    under its Coastal Zone Management Fund (see discussion below). The
    NERRS managers have identified $7 million in basic funding which is
    necessary to maintain existing operations at the Reserves. CSO supports
    funding at the maximum level Congress can provide.
        Further, we request that the funding be provided through the
    Section 315 line item, in contrast to funding this program out of the
    CZM Fund. In fiscal year 1997, the lion's share of funding for the
    NERRS program ($3.3 million) came out of the CZM Fund. The President's
    fiscal year 1998 budget request also recommends funding the NERRS
    system through its line item authorization. It is important to restore
    full line funding for this program because revenue in the CZM Fund are
    projected to decrease in the coming years and will not be available to
    offset any funding shortfalls.
        CSO also requests that the Subcommittee provide $6 million from the
    NOAA Construction Account for the NERRS system, an increase of $1
    million over levels provided in fiscal year 1994 and 1995. Bearing in
    mind that we are not requesting any increase in the President's request
    for the NOAA construction account, we are requesting that Congress make
    available $6 million of these funds for land acquisition and facility
    construction of the NERRS system.
        The Coastal Zone Management Fund: CZMA Section 308.--The Coastal
    Zone Management Fund is designed to provide funding for projects that
    address a broad array of coastal resource management issues. The
    Coastal States Organization requests that $7.8 million be appropriated
    to the CZM Fund for fiscal year 1998. This fund is financed through
    loan repayments of the retired Coastal Energy Impact Fund, and NOAA has
    projected that $7.8 million in loan repayments will be received in
    fiscal year 1997. Thus, we support the President's request of $7.8
    million to be appropriated to the CZM Fund. The funds in the CZM Fund
    should be available solely for Sec. 308 purposes not to offset other
    budget line programs.
        National Marine Sanctuary Program.--There are 14 designated
    National Marine Sanctuary sites in the United States. Two major sites--
    the Florida Keys and Hawaii--will become fully operational in late 1997
    and early 1998. The program has substantial new responsibilities, as
    evidenced by the greatly expanded size of the system. Marine
    Sanctuaries cover 19,000 square nautical miles. These are invaluable
    resources that are being preserved for future generations. Congress
    provided $11.7 million in funding in fiscal year 1997 for the National
    Marine Sanctuary Program, essentially level funding compared to fiscal
    year 1996. We recognize the tight budgetary constraints this year, but
    also realize that level funding for a greatly expanding National Marine
    Sanctuary will actually result in significant cuts for several
    individual Marine Sanctuaries. Recognizing the importance of the
    National Marine Sanctuary program to coastal resources and State
    economies, CSO supports $15 million in appropriations for fiscal year
    1998.
        NOAA Coastal Services Center and Coastal Ocean Program.--Both of
    these programs have provided state coastal programs with services which
    have made for tangible improvements to state coastal management
    programs. Both deserve at least level funding which is $12 million and
    $15.2 million respectively.
        National Sea Grant College Program.--The National Sea Grant College
    Program was established by Congress in 1966, with the mission of
    employing a broad range of physical and social marine sciences to
    address the multitude of problems affecting America's coastal, ocean
    and Great Lakes waters. For thirty years this program has served the
    needs of coastal, ocean and Great Lakes resource managers in the fields
    of fisheries, aquatic nuisance control, aquaculture, coastal zone
    management, marine biotechnology and seafood safety, to name a few. CSO
    recommends providing continued funding for this important, long-
    standing and successful program.
                                   conclusion
        The Coastal States Organization supports funding in the following
    amounts--$49 million for State coastal zone management program
    (Sec. 306) grants; $18 million for coastal clean up initiatives ($6
    million through Sec. 306, and $12 million through Sec. 310); $7 million
    as requested for grants for management and research (Sec. 315) of the
    22 National Estuarine Research Reserve sites, and $6 million for the
    NERRS system from the NOAA construction account; $7.8 million in
    appropriations from CZMA Coastal Zone Management Fund (Sec. 308); and
    $15 million for the National Marine Sanctuary Program;
        These programs are justified by the national interest, financial
    need and program merit. The Coastal States Organization recognizes the
    tight fiscal constraints upon the Subcommittee in fiscal year 1998. It
    is for this reason that priority must be given to existing, proven,
    operating programs that truly do stimulate economic growth and
    development. We respectfully urge this Subcommittee to establish the
    CZMA as its priority environmental/economic development program, and
    fund the CZMA programs at the levels requested herein.
        We greatly appreciate the opportunity to submit our recommendations
    to this Subcommittee. The Coastal States Organization stands ready to
    assist you in any way we can. Thank you for your consideration.
                                     ______

         Prepared Statement of Charles G. Scalet, President, National
           Association of University Fisheries and Wildlife Programs
        The National Association of University Fisheries and Wildlife
    Programs (NAUFWP) submits this statement in support of more adequate
    appropriations in fiscal year 1998 for important practical research and
    outreach to citizens through the National Sea Grant Program carried in
    proposals for the National Oceanic and Atmospheric Administration, U.S.
    Department of Commerce.
        Members of the NAUFWP include 55 Universities. We seek to enhance
    public understanding of the needs for improving natural resource
    management and to advance the science and practice of sustainable uses
    and management of the resource base. Our efforts focus on cooperative
    work with partners and customers to advance research, education,
    outreach and management to benefit people and communities throughout
    the country.
        Results from the Roper Starch fifth annual survey of adult
    Americans, prepared for the National Environmental Education and
    Training Foundation and released in December 1996, illustrates pressing
    needs for Sea Grant's research and outreach programs. Key findings of
    adult views on natural resources provide an overall context in which to
    consider the specific figures in the President's proposed fiscal year
    1998 budget. Adult Americans believe: Environmental resources should be
    conserved in ways that balance economic growth while protecting the
    environment and human health; natural resources can be managed in ways
    that protect wildlife and ecosystems while people benefit from their
    planned uses; Federal government spending should be shifted to
    environmental programs from other areas; and concerns for the
    environment and management of natural resources can be responded to by
    expanding education programs designed to raise current low levels of
    knowledge about the environment, such as to maintain and improve water
    quality.
        Within this context of public views and needs for research,
    education, outreach and management, the NAUFWP supports continuing and
    strengthening the Sea Grant Program. Stronger programs are required to
    be more responsive to needs of the public and resource managers.
        The National Sea Grant Program has been acclaimed a model for
    organizing research and providing practical, useful information for
    specific geographic areas. Universities with Sea Grant Programs bring
    together federal, state, business and other private interests to
    provide extraordinary returns on a small federal investment. Results
    from studies show that each federal dollar is leveraged tenfold or more
    in private sector development, often in small businesses.
        Importance of the National Sea Grant Program in maintaining and
    enhancing the nation's marine, coastal and Great Lakes' resources is
    paramount to continuing a strong economy and quality of life enhanced
    by the values, products and services flowing from these aquatic areas.
    With more than half of the U.S. human population living in coastal
    counties, and expanding at a faster rate than the nation as a whole,
    there is great need for information and guidelines to plan human
    activities carefully.
        To respond to pressing needs for research, information, and
    advisory services in various geographic areas the NAUFWP provides two
    recommendations:
      --Ensure that the U.S. continues to invest in its future through the
            soundly-based Sea Grant program:
          Information from Sea Grant research, education and advisory
            services is important to a broad spectrum of people in using
            coastal resources responsibly and sustainably, without
            enlarging costly restoration efforts. With more than three
            decades (1966-1997) of valuable experiences in meeting real-
            world situations and resolving pressing problems, Sea Grant is
            unique in generating and translating science into information
            used by businesses, agencies at all levels and the general
            public.
      --Provide $56 million for the Sea Grant Program in fiscal year 1998
            rather than $50,182,000 carried in the President's proposed
            budget.
          This larger amount is consistent with the overall thrust of the
            Sea Grant reauthorization (H.R. 437) being processed now. The
            President's proposed reduction of $4.1 million from fiscal year
            1997 would terminate the National Coastal Resources and
            Development Institute, as well as essential research on oyster
            diseases and the zebra mussel. These important activities
            should be continued, not eliminated.
        Please include this statement in the official record on the fiscal
    year 1998 appropriations.
                                     ______

         Prepared Statement of Cyrus M. Jollivette, Vice President for
                   Government Relations, University of Miami
        Mr. Chairman and Members of the Subcommittee: I am pleased to
    submit testimony on behalf of the University of Miami and Florida State
    University. Both of the institutions have long enjoyed your support,
    and my colleagues in Florida are deeply appreciative of your
    leadership, Mr. Chairman, and the Subcommittee's confidence. At no time
    in the past have you and your colleagues on the Committee on
    Appropriations faced more difficult constraints. Yet, I am certain that
    you will continue to make the difficult choices with the best interests
    of the nation guiding your decisions. My colleagues and I hope that you
    will find it possible to fund the important initiatives detailed below
    in the fiscal year 1998 appropriations cycle.
        On behalf of the University of Miami and Florida State University
    jointly I commend you, Mr. Chairman, for your affirmative response to
    the Florida Delegation's fiscal year 1997 request concerning The
    Florida Consortium for Climatic Research, a project involving the
    University of Miami, Florida State University, the University of
    Florida, and the University of South Florida.
        The importance of El Nino Southern Oscillation (ENSO) events as a
    major source of climate fluctuations, together with advances in ENSO
    predictability, suggest that forecasts have significant potential for
    benefiting agricultural productivity and economic decision-making.
    However, until last year, no significant attempts had been made to
    develop a system which would take advantage of climate forecasts. For
    fiscal year 1998, we seek $2 million for the Florida Regional
    Application Centers, one for the southeastern U.S. and one for a multi-
    national area.
        The geographic focus of this project will include the southeastern
    U.S.; southeastern South America including portions of Brazil, the
    entire territory of Uruguay, and the province of Buenos Aires in
    Argentina; northern Mexico; and Costa Rica. Each of these regions are
    large food producers whose productivity is significantly impacted by
    weather conditions generated by the ENSO phenomenon. Decisions made by
    well-informed participants from farm to policy level, made several
    months or seasons in advance, can significantly benefit productivity.
        This project presents an end-to-end approach that will provide the
    bridge between climate forecast producers, such as the recently formed
    International Research Institute for Climate Prediction (IRICP), and
    agricultural decision makers. Specific objectives for the project are
    to: (1) adapt, develop, and evaluate a generic, flexible set of tools
    and methodologies for assessing regional agricultural consequences of
    El Nino events and for applying forecasts to improve agricultural
    decision-making; (2) demonstrate the successful applications of
    forecasts to agriculture and other sectors which would benefit best in
    the southeastern United States and South America that began in 1996;
    (3) assess the value of climate predictions to different agricultural
    sectors in these southeastern regions; and (4) extend methods and tools
    to northern Mexico and Costa Rica, working with cooperating agencies in
    demonstrating the effectiveness of the proto-regional application
    center concept.
        Again, for the University of Miami and Florida State University and
    approximately 80 other entities we seek your continuing support for a
    major environmental initiative within your purview, the South Florida
    Coastal Ecosystems and Florida Bay Multi-Agency Plan.
        Florida Bay is a triangularly shaped body of water about 600 square
    miles in area. Over 80 percent of the Bay lies within Everglades
    National Park. The Bay is bounded by the Florida Everglades on the
    north and the Florida Keys on the southeast. In the Bay over 200 small
    islands or ``keys'' occur, many of which are rimmed with mangroves and
    have interior, irregularly flooded, ``flats'' with calcareous algal
    mats. The Bay is shallow, often hyper-saline, and, until recently, was
    characterized by clear waters, and lush sea grass meadows covering a
    mosaic of shallow water banks and numerous relatively deeper water
    basins or ``lakes''. Deep narrow channels connect neighboring basins.
    Hard bottom habitats in southwestern Florida Bay support sponge and
    hard and soft coral communities.
        Florida Bay is known as the principal inshore nursery for the
    offshore Tortugas pink shrimp fishery, for providing critical habitat
    for juvenile spiny lobster, stone crab, and many important finfish
    species. While the Bay is the site of an extensive sport fishery, it is
    also important as a nursery area for many recreationally important
    finfish in the Florida Keys National Marine Sanctuary. Moreover, the
    Bay supports numerous protected species including the bottle nosed
    dolphin, several species of sea turtles, manatees, and the American
    crocodile.
        There are many indications that the environmental health of Florida
    Bay has deteriorated. Fishing success has declined for many of the
    species that depend upon the Bay as a juvenile nursery habitat.
    Atypical algal blooms, attributing to sponge and manatee dieoffs, are
    occurring in the Bay and Florida Keys. Mangroves appear to be in
    decline. While the causes of the various problems and the relationships
    between them are not well understood, there is no question that, like
    the sawgrass habitat of the Everglades, the coastal marine ecosystem of
    Florida Bay is in jeopardy.
        The objective of the South Florida Coastal Ecosystem and Florida
    Bay Multi-Agency Plan is to provide decision-makers who are working to
    restore and maintain a healthy South Florida coastal ecosystem with
    reliable scientific information. At present there is insufficient
    knowledge to predict with confidence the consequences of alterations in
    freshwater input to Florida Bay.
        Since no one can turn back the clock and South Florida's rapid
    development will almost certainly continue, a series of compromises and
    tradeoffs will have to be made in restoring and maintaining a healthy
    South Florida coastal ecosystem including Florida Bay. It is essential
    that decisions be made based on reliable scientific information. That
    is the objective of the South Florida Coastal Ecosystem and Florida Bay
    Multi-Agency Plan which is collaboratively managed and conducted by the
    National Oceanographic and Atmospheric Administration's Atlantic
    Oceanographic and Meteorological Laboratory, the National Marine
    Fisheries Service Miami Laboratory, and the Rosenstiel School of Marine
    and Atmospheric Science.
        We urge you, Mr. Chairman, to provide $6 million in dedicated
    National Oceanographic and Atmospheric Administration funding for this
    project, a multi-agency activity in which more than 80 Florida entities
    are at work seeking solutions to very critical Florida Environmental
    issues.
        The Rosenstiel School of Marine and Atmospheric Science at the
    University of Miami is one of the premier academic, oceanographic
    research facilities in the world. Located on a 16-acre facility on
    Miami's Virginia Key in Biscayne Bay, the Rosenstiel School offers the
    only subtropical marine research base in the continental United States.
    With the Gulf Stream off shore, a vast expanse of living coral reefs
    just to the south, and the Florida-Bahamas Carbonate Platform to the
    east, the campus is surrounded by a unique marine laboratory.
        My colleagues at the Rosenstiel School, 90 well-published and
    broadly talented Ph.D. scientists are who work in close collaboration
    with other scientists--in Florida and across our region--are uniquely
    qualified to conduct valuable research in their fields. On their behalf
    I bring the following five projects to the attention of and
    respectfully request the endorsement of the Subcommittee for these
    projects through the National Oceanographic and Atmospheric
    Administration.
     south florida ocean measurements laboratory, university of miami (um)/
     florida atlantic university (fau), south florida test facility (sftf)
        A partnership is currently being defined between UM, FAU, and SFTF
    for the purpose of developing a unique Ocean Measurements Laboratory to
    expedite ocean research and testing by direct access to the sea with
    high speed fiber optic cables that are connected to the Port Everglades
    (Fort Lauderdale), Florida facility operated by the SFTF and the new
    FAU facility in Dania, Florida.
        The partnership would afford the participants equal input for state
    and federal infrastructure proposals, and on the working level,
    individual investigators from each organization would compete within
    the peer review process for specific research projects. Natural spheres
    of interest among the participants are: FAU has program in autonomous
    underwater vehicles and the applications of high frequency underwater
    acoustics to problems in sub-bottom profiling, underwater
    communication, and mine warfare; SFTF is involved with the at sea tests
    and trial for U.S. Navy ships, submarines, sonars, and other systems;
    and UM has nearly a 40-year history of research in the Florida Straits
    on low frequency long range acoustic propagation in shallow water, bio-
    acoustics, and the development of underwater signal processing methods.
    UM can successfully contribute to the design of the general purpose
    instrumentation suite for defining the oceanic and atmospheric
    environments at the FAU and SFTF sites.
             university of miami ocean surface current radar (oscr)
        The University of Miami's OSCR system is a shore-based, dual-
    frequency Doppler radar which transmits short pulses of electromagnetic
    radiation in the radio frequency band. The signal is scattered back
    from the moving ocean surface and received by a linear phased-array
    antenna system erected along the shore. The radar measures the Doppler
    shift of resonant surface waves by the underlying flow. The measuring
    principle is identical to that used by police to clock speeding cars.
    The result is a map of surface vector currents over a large domain (30
    km  45 km) at high spatial (1 km) and temporal (20 min)
    resolution. With increasing interest in the coastal ocean there is also
    a requirement to acquire high-quality surface current data for long-
    term monitoring of the surface circulation to study their effect on a
    broad spectrum of societal and environmental issues such as coastal
    pollution, oil spills, beach erosion and sediment transport. A wide
    variety of management decisions would be enhanced with the ``real-
    time'' knowledge of the circulation patterns in a body of water.
        The OSCR system operated by the University of Miami has been
    rigorously tested and used in numerous applications over the past
    several years, such as experiments to study the transport of reef fish
    larvae, the detection of eddies and fronts, the evolution of fresh
    water plumes in the coastal ocean and validation of airborne and
    satellite-based remote sensors. Recently, we have expanded the
    measurement capability of OSCR to extract sea state information. Other
    studies are also underway to specify the wind speed and direction from
    OSCR measurements.
     southeast consortium for oceanographic research (secor) operation of
                         fisheries oceanographic vessel
        The three universities comprising SECOR are the University of
    Miami, Texas A&M University, and the University of Texas. Additionally,
    the NOAA Atlantic Oceanographic and Meteorological Laboratory has
    joined SECOR as an associate member. The three universities seek
    funding for and propose to operate a new regionally-based fisheries-
    oceanography ship in cooperation with the National Marine Fisheries
    Service (NMFS) of NOAA. Research trends over the past few years, as
    well as national needs, make the Gulf coast and the Caribbean an area
    of great opportunity and international coordination. Such a vessel
    could fill the need for a sub-intermediate class ship, capable of
    working on fishery-oceanographic projects on the continental shelf, as
    well as conducting NMFS fishery stock assessment surveys.
        SECOR has already implemented joint operations. The combined
    strengths of the universities and NOAA laboratories can create an
    efficient use of existing facilities and can lead to enhanced regional
    multidisciplinary research programs. SECOR anticipates that there would
    be scientific and cost-saving benefits in coordinating the operation of
    a regionally-based ship.
      the recent discovery of a sand channel and its implications for the
                       supply of phosphate to florida bay
        Scientists at the University of Miami Rosenstiel School have
    discovered a possible connection between the occurrence of algal blooms
    in Florida Bay and the underlying rocks. Based upon a series of core
    borings taken throughout South Florida, it appears that a confined bed
    composed of coarse quartz sand runs from areas close to Lake Okeechobee
    south underneath the Everglades and close to the surface in Florida Bay
    and the Keys. Rosenstiel School scientists have suggested that
    phosphate rich waters could be transporting this sand into Florida Bay,
    providing this essential nutrient to algal and plant life in the area.
    Excess supply of phosphate result in algal blooms which are detrimental
    to water clarity and life in the Bay.
        It is important that this discovery be investigated as soon as
    possible. Funds are being expended in attempts to find solutions for
    excess phosphates, such as restrictions on agricultural sources.
    Results from this study could have significant impact on decisions now
    being discussed by various agencies for remedying the perceived decline
    in Florida Bay.
    intra-american sea regional control global ocean observing system (ifs-
       goos)--the linkage of fisheries oceanography and ocean pollution
                            research and management
        The worldwide oceanographic community is working to develop the
    Global Ocean Observing System (GOOS) as a vehicle for providing regular
    observations to document climate variability and global change in
    support of the Rio Treaty; and to support marine operations, such as
    safe navigation, fisheries management, ocean pollution control, and
    search and rescue. GOOS already has begun to implement these activities
    in Europe and Asia. Now is the time for the U.S. to move ahead in
    cooperation with Mexico and other Latin American and Caribbean nations,
    with the initiation of a regional GOOS named IFS-GOOS.
        Modern marine operations have a common need for a regular program
    of remote oceanographic and atmospheric observations. These
    observations must be synthesized with computer models to provide
    predictions and products that can be applied to fisheries management
    and ocean pollution control. The Rosenstiel School's proposed plan
    includes a five-year research and demonstration phase, and includes
    partnering activities with regional NOAA laboratories.
     developing a fishery-independent index of giant bluefin tuna abundance
        Bluefin tuna are the prized target of important fisheries in the
    Atlantic Ocean. Assessment of the two distinct tuna stocks indicates
    that there was a dramatic decline in its abundance in the western
    Atlantic during the 1970's and 1980's. However, recent trends are not
    estimated precisely enough to determine if the population decline has
    been halted. Of particular concern to managers and fishermen is the
    population size of mature bluefin tuna (ages 8 and older) which are
    needed in order to renew the resource. The estimation of this
    population via Virtual Population Analysis method is imprecise and
    logistically difficult.
        We are proposing to evaluate the feasibility of an alternative
    fishery-independent index of relative giant bluefin abundance. These
    fish are thought to carry out a predictable seasonal migration that
    takes them into the Gulf of Mexico for spawning around May, and then
    out into the Florida Straits, passing the Great Bahamas Bank sometime
    in June. An ideal index would be one that would capture an accurate
    view of this spawning stock as it moves out of the Gulf every year. We
    are proposing to use state-of-the-art acoustic techniques that can
    count individual fish in the water column over a relative wide area. We
    are seeking $1 million in funding from NMFS for this proposed research.
    The research would be conducted jointly with a Canadian acoustician at
    the Institute of Ocean Sciences in Sidney, British Columbia. This joint
    partnership is opportune because Canada recently initiated a 5-year
    National Hydro acoustics program to develop improved approaches to
    acoustic stock assessment.
                                     ______

        Prepared Statement of John D. Bossler, Rear Admiral (Retired),
              Director, Center for Mapping, Ohio State University
        Mr. Chairman and members of the subcommittee: My name is John D.
    Bossler, Rear Admiral, NOAA (Ret.) and I am a former Director of the
    Coast and Geodetic Survey, which produces the nautical and aeronautical
    charts vital to our nation's safe, efficient marine and air
    transportation. Currently I am the Director of The Center for Mapping
    at The Ohio State University, Director of the NASA Commercial Space
    Center in Real-Time Satellite Mapping, and a full professor in the
    Department of Civil and Environmental Engineering and Geodetic Science
    of The Ohio State University. I have been president and chairman of
    numerous professional societies including the American Congress of
    Surveying and Mapping, National Academy of Science Advisory Committee
    on Mapping Science, and the University Consortium for Geographic
    Information Science. It is my pleasure to provide my views on the
    future of the Commissioned Officer Corps of the National Oceanic and
    Atmospheric Administration (NOAA).
                                   noaa corps
        The Administration has included in its fiscal year 1998 budget a
    ``place-maker'' of $14 million to civilianize the NOAA Commissioned
    Corps. If this proposal is adopted, a uniformed service that plays a
    key role in our Nation's charting program will be dissolved. This would
    mark the first elimination of a uniformed service in our nation's
    history.
        A full inquiry into the facts and circumstances surrounding the
    proposal will reflect that the Administration's intended proposal is
    simply not supportable. In this respect, three major areas must be
    carefully considered and fully examined--service history, national
    interests, to include potential environmental and national security
    issues, and cost savings.
                                service history
        First, background on the history of the Commissioned Corps. The
    Commissioned Corps has been integral to our nation's development for
    the past 190 years. The Corps traces its lineage to 1807 when President
    Thomas Jefferson signed a bill for the ``Survey of the Coast.'' Today's
    Commissioned Corps is the direct descendant of the commissioned service
    of the United States Coast and Geodetic Survey (C&GS). It has served
    the American people on many occasions over the decades, providing
    valuable scientific and engineering skills to the armed services and
    the nation.
        The Commissioned Corps is unique in that it provides an
    organization of uniformed professionals to conduct NOAA's operational
    activities such as managing ships, aircraft, and field assignments with
    great flexibility and rapid response. The NOAA Corps is the only
    uniformed service that requires every officer to have a college degree
    in science or engineering prior to being commissioned. The Commissioned
    Corps selects its personnel from the strength of the country's premier
    colleges and universities. NOAA line managers are very supportive of
    the Commissioned Corps because these officers bring not only key
    technical skills, but heightened skills in operations, program needs,
    and management.
        The Commissioned Corps is distinctively designed to meet the
    operational needs of NOAA (ships, aircraft and mobile duty) and to
    respond quickly to the emergent needs of the nation. Officers enter the
    Corps with the expectation that they will be separated from their
    families for long periods of time and will have to move their families
    often as a part of the Commissioned Corps' rotational assignment
    system. This continual rotation of officers provides for transfer of
    ideas throughout NOAA components. It has served NOAA and the nation
    very well, and should continue to do so into the 21st century. This
    rotational system, which has many of the positive attributes of the
    Senior Executive Service, is not limited to the executive level, but
    spans the entire breadth of NOAA--from an officer in charge of a field
    hydrographic survey launch, to a commander of a hurricane research
    aircraft, to the director of the National Geodetic Survey.
        The Director of the NOAA Corps, a flag officer, has the capability
    to immediately direct transfers as required to meet national
    emergencies. A civilian, or privatized system would be more expensive
    and not as responsive to emergent requirements. Therefore, with the
    disestablishment of the Commissioned Corps, the nation would lose an
    important capability.
        The Commissioned Corps' composition of scientists and engineers
    also provides a cadre of talented and technically competent officers
    who are intimately familiar with the operational needs of the
    organization. Many officers pursue advanced degrees, some attaining the
    doctorate level. Academic advancement is a factor in the Corps' ``up or
    out'' promotion system, i.e., as the percentage of officers becomes
    fewer at each senior grade, only the most talented advance, ensuring
    the highest quality support.
        The Commissioned Corps also provides NOAA with officers who are
    multifaceted. In this respect, officers typically serve within multiple
    line components, similar to the Department of Defense's joint service
    commands. The multiplicity of assignments, therefore, engenders
    officers that are multifaceted, as well as extremely dedicated and
    loyal to NOAA and the nation. This talent pool has contributed
    significantly, not only to NOAA but to other agencies, as well as the
    international community. Examples are numerous, but include the current
    president of the International Hydrographic Office in Monaco, fellows
    in the American Geophysical Union, past presidents of various sections
    of prestigious scientific and professional societies, and acknowledged
    world experts in the areas of geodesy, photogrammetry, and hydrography.
                               national interests
        There are significant national interests, to include environmental
    safety and potential national security implications that must also be
    carefully examined and considered in evaluating any proposal to disband
    NOAA.
        First, Commissioned Corps officers are subject to a legislative
    transfer provision similar to that of the United States Coast Guard and
    Public Health Service, whereby the Corps' officers, ships, and
    equipment can be transferred immediately to the armed services in time
    of war and or national emergency. This legislative transfer provision
    was enacted to ensure that the nation could rapidly and efficiently tap
    the technical expertise of C&GS officers for the purpose of national
    defense. During World War II, officers served under assignment to the
    Army, Navy, and Marine Corps in all theaters of the war, often in the
    front lines or in enemy-held territory as artillery surveyors,
    amphibious engineers, hydrographers, geophysicists, reconnaissance
    specialists, and cartographers.
        This contingent of officers received four Silver Star medals for
    gallantry under fire, seven Legion of Merit medals for exceptional
    technical contributions to the war effort, and numerous Bronze Star
    medals with Combat ``V'' for conducting surveys in enemy-held territory
    or while under fire. C&GS ships also received commendations for their
    role in charting the unknown waters of the western Pacific, often in
    advance of, and therefore unprotected by, fleet units.
        Within the Navy, C&GS officers served as hydrographers throughout
    the western Pacific and were present at all major landings subsequent
    to Tarawa. As a direct result of difficulties encountered during the
    Tarawa landings, in which these officers had not been employed, Admiral
    Richmond Kelly Turner, chief of Naval amphibious forces in the Pacific,
    placed a C&GS officer in charge of all hydrographic operations
    associated with naval amphibious forces. A C&GS officer served as Force
    Hydrographer for the remainder of the war and directed the hydrographic
    efforts at Kwajalein, Peleliu, Saipan, Guam, Tinian, Iwo Jima, and
    Okinawa.
        C&GS officers attached to the Marine Corps served primarily in two
    capacities, as either artillery surveyors or as intelligence officers,
    and they served in all major actions of the Pacific war. As artillery
    surveyors they often landed with the first wave to orient Marine
    artillery amidst the initial assault firestorm, and then carried their
    surveys forward--often beyond the front lines. After providing survey
    control for Marine artillery, they aided in locating enemy artillery.
    On Iwo Jima, for example, a C&GS officer determined the position of 16
    Japanese guns that were subsequently destroyed. Because of the nature
    of the work, these officers were readily exposed to hostile fire and
    often referred to as ``sniper bait.''
        The nation has since been fortunate to not have seen another
    conflict on the scale of World War II and the need to directly transfer
    NOAA Corps officers to one of their sister services has, therefore, not
    arisen. Nevertheless, the NOAA Corps has continued to make vital
    contributions during national emergencies.
        Today's threat includes not only military, but environmental
    threats as recently announced by the State Department. When the Exxon
    Valdez oil spill occurred, NOAA Corps officers, working with the Coast
    Guard, were heavily involved both ashore and at sea by operating NOAA
    ships that conducted environmental surveys of the area around the
    spill.
        During Operation Desert Storm, Iraq created some of the worst oil-
    field fires and oil spills in history. The Commissioned Corps served
    with the armed forces during both Operation Desert Shield and Operation
    Desert Storm. NOAA provided ship and technical expertise for
    environmental appraisal, and the first comprehensive study of the
    Persian Gulf. NOAA Corps officers ashore provided scientific expertise
    in hazardous-materials management, leading shore parties and conducting
    surveys of oil-related damage to beaches and tidal areas.
        The NOAA Ship MT Mitchell carried a contingent of world-class
    scientists to the Persian Gulf to evaluate and determine the extent of
    the environmental damage. Prior to sailing, the uniformed service
    status of the officers allowed for immediate access to critical and
    classified information such as mine threat, and other military risk
    assessments. As a U.S. Government vessel commissioned in the public
    service, commanded by uniformed service members, and with sovereign
    status, MT Mitchell easily bypassed the routine restrictions placed
    upon commercial and civilian research vessels. This status provided
    instant credibility in dealing with the on-site commanders of several
    Persian Gulf nations, where port security and logistics are controlled
    by military services. Research operations around several critical
    islands, controlled by these countries' military services, required
    negotiations between NOAA Corps officers and the local commanders.
        While operating in the Persian Gulf, MT Mitchell maintained close
    communications with other U.S. forces, both as a safety measure and to
    ensure smooth logistics through the military. The MT Mitchell was the
    first U.S. Government ship to operate in Iranian waters in over 13
    years. Although subject to occasional challenges by Iranian warships,
    the warship status and uniformed service command ensured recognition of
    MT Mitchell's sovereign status and prompt acknowledgment of support for
    the mission. Both the Iranian scientists and Iranian naval observers on
    board MT Mitchell commented that such operations would have never been
    possible on a civilian research ship, and provided anecdotal
    information on the earlier failure of such efforts involving civilians
    and non-government ships. The NOAA Corps uniform was also accorded
    instant credibility by Saudi Arabian, Kuwaiti, and Iranian authorities
    and observers. Most importantly, the skills and knowledge of the NOAA
    Corps officers maximized the productivity of this scientific expedition
    by providing a safe, effective research platform, and a means to
    collect critical data. The captain and crew of this expedition received
    a Commerce Gold and Silver Medals, respectively, for their service.
        A more recent example of the continued vital importance of the NOAA
    commissioned corps is the NOAA Ship Rude, which located the wreckage of
    TWA Flight 800 within 24 hours of the crash. The Rude and a shore
    component, composed of NOAA Corps officers, created highly detailed map
    products that greatly facilitated the retrieval of wreckage by Navy
    divers. The efforts of these Commissioned Corps officers was recently
    recognized by Secretary Pena of the Department of Transportation at a
    United States Coast Guard Awards Ceremony with a Public Service
    Commendation and by NOAA's parent bureau, the Department of Commerce,
    with the Department's highest award--the Commerce Gold Medal.
        In summary, the Commissioned Corps continues to be recognized for
    technical competence, leadership, and devotion to duty--even under the
    most difficult conditions. The Corps provides ``instant government
    recognition'' and excellent interface to their fellow uniformed
    services. In addition, the Corps has a code of dress/appearance,
    readily gaining trust and respect, and providing NOAA and the nation
    with a needed ``service to service'' interface. The Corps is subject to
    transfer to the military services on immediate notice and has served,
    or is serving, in interface assignments with the Coast Guard, Defense
    Mapping Agency, Oceanographer of the Navy, Naval Meteorology and
    Oceanography Command, and occasionally with foreign offices. In my
    opinion, the nation would lose an extremely valuable asset if the
    Commissioned Corps were eliminated. As Vice President Gore stated in a
    letter to the Commissioned Corps on its 1994 anniversary:
        ``The NOAA Corps has provided valuable support to the other
    uniformed services in times of war and will continue to play an
    important role in supporting safe navigation, sustaining the health and
    harvests of our oceans, and providing advance warnings of hazardous
    weather conditions. As the Corps looks to the future, there will be
    many opportunities to utilize advanced technologies and alternative
    platforms and to develop new and innovative ways of operating. I am
    sure that the flexibility and adaptability that the Corps has
    demonstrated in the past will serve it well in the years to come.''
                                  cost savings
        The last point is the projected cost savings from eliminating the
    NOAA Corps--the cost savings are minimal or non-existent. The asserted
    basis for dissolution is the mistaken belief that savings can be
    garnered through the privatization and civilianization of the
    Commissioned Corps. Simply stated, the original proposal to eliminate
    the Commissioned Corps was, unfortunately, not based on a thorough
    economic analysis.
        When the NOAA administrator announced his intentions to eliminate
    the NOAA Corps, a General Accounting Office study requested by
    Representative Kasich was underway and nearing completion. The only
    cost study available at that time, in fact, showed that the NOAA Corps
    was actually less costly than an equivalent civil service work force.
    This study, prepared by Arthur Andersen & Co. under a contract
    initiated by the administrator's office, showed that the NOAA Corps was
    about $500,000 less expensive than its civilian counterparts. Clearly,
    NOAA'S decision to eliminate the NOAA Corps was not based on economics,
    but simply politics, i.e., to comply with the Vice President's National
    Performance Review recommendation to eliminate the NOAA Corps with a
    projected cost savings of $35 million.
        The subsequent GAO report (GAO-GGD-97-10, ``Federal Personnel
    Issues: Issues on the Need for NOAA's Commissioned Corps'') found only
    a 2 percent or about $600,000 cost differential between the Corps and
    an equivalent cadre of civil servants. The GAO's cost comparison did
    not, however, include either the overtime costs of using civilian
    aircraft pilots versus NOAA Corps pilots who do not earn overtime or
    the increased cost of moving a civilian as noted in the study conducted
    by Arthur Andersen. In particular, moving a member of the uniformed
    services entails less than one-third the cost of moving a civilian.
    Therefore, when moving costs are considered, the cost benefit tilts in
    favor of the NOAA commissioned officer.
        There are also environmental issues. NOAA Corps officers are the
    only group of uniformed federal hygrographers in the nation. NOAA's
    nautical charts are highly regarded by the maritime community. The loss
    of the hydrographic expertise at NOAA could, therefore, jeopardize the
    nation's ability to conduct overseas military operations from the sea,
    as previously discussed. In addition, the loss of this hydrographic
    expertise could jeopardize the environment and safety of our coastal
    waterways through which most of our international trade is conducted.
        Any purported savings realized through eliminating the Commissioned
    Corps would potentially be more than offset by the loss of the
    Commissioned Corps' capacity for rapid response to prevent catastrophic
    environmental accidents, such as the grounding of an oil tanker on an
    uncharted rock. Mobility and rapid response--attributes displayed
    during Operation Desert Shield/Desert Storm, the Exxon Valdez disaster
    and the crash of TWA flight 800--reflect the value of uniformed-service
    status to the nation.
        As NOAA looks to increase reliance on private contractors and
    outsource hydrographic surveys, there is the issue of tort liability
    for any private civilian organization providing hydrographic surveys
    for use in creating U.S. government nautical charts. In particular, it
    is extremely doubtful that a private entity could obtain catastrophic
    insurance from another commercial entity for liability against a suit
    arising from the grounding of a cruise ship on an uncharted rock or an
    environmental catastrophe such as Exxon Valdez that resulted from
    deficiencies in nautical charts. As a result, the federal government
    would in all probability have to assume such liability. Given the
    foregoing, privatization of the national charting program must be
    carefully considered and explored in-depth to ensure that increased
    costs are not incurred as a result of privatization.
        As currently presented in the proposed fiscal year 1998 budget, the
    apparent ``cost'' of eliminating the NOAA Corps is only $6 million more
    than the fiscal year 1997 retired pay line item of $8 million, or a
    total cost of $14 million. However, in reality, the total cost is much
    higher. In addition to the $14 million currently budgeted for
    elimination, are the retirement pay for current retirees and the
    retirement pay for those officers who would be forced to retire if the
    Corps is eliminated. These additional retirement pay costs are
    estimated to be in excess of $10 million annually; this is an unfunded
    liability that does not appear in the proposed fiscal year 1998 NOAA
    budget.
        Simply stated, for no increase in costs, the Commissioned Corps
    provides the nation with a cadre of highly professional and dedicated
    women and men who serve in a multitude of ways. Without the Corps, the
    nation will suffer over the long run. Furthermore, when we again find
    we need the Corps, it will take years to get it back, at an even higher
    cost, perhaps at the cost of lives.
        If all the costs of elimination are fairly considered, there is a
    significant savings in keeping the NOAA Corps that has served the
    nation faithfully for decades. Clearly, the potential cost savings from
    eliminating the NOAA Corps is nonexistent. The short-sighted reasoning
    of the Administration in eliminating the NOAA Corps could have an
    adverse impact on the environment and potentially impair our national
    security in time of crisis.
                                    summary
        In closing, any proposal to eliminate the Commissioned Corps must
    carefully examine the potential risks to the nation from the loss of
    the Corps and its technical expertise. Dissolution should not be
    permitted to proceed without a verifiable plan for how NOAA plans to
    continue providing services to the nation, such as nautical charting,
    without added cost to the taxpayer. This plan should be especially
    specific in the area of hydrographic surveys, where private contractors
    may not accept tort liability for their surveys or agree to conduct
    surveys in remote areas such as Alaska or in times of national
    emergency with the other uniformed services. In short, the outstanding
    service the NOAA Corps provides to the nation and the fact that there
    will be virtually no savings in its dissolution must lead to the
    retention of the Commissioned Corps.
                                     ______

       Prepared Statement of Beth Marks Clark, Director, The Antarctica
                                    Project
                                  introduction
        Thank you for the opportunity to submit testimony today on the
    fiscal year 1998 budget for the Department of Commerce, and
    specifically, the Antarctic Marine Living Resources (AMLR) Program of
    the National Oceanic and Atmospheric Administration (NOAA). I am Beth
    Marks Clark,\1\ Director of The Antarctica Project. The following
    organizations join with me in supporting an appropriation of at least
    $1.2 million to support the Antarctic Marine Living Resources Program
    (AMLR), NOAA's directed research program in Antarctica: Center for
    Marine Conservation, Defenders of Wildlife, Environmental Defense Fund,
    Friends of the Earth, Greenpeace, The Humane Society of the U.S.,
    Humane Society International, National Audubon Society, National Parks
    and Conservation Association, National Wildlife Federation, Natural
    Resources Defense Council, Sierra Club, and World Wildlife Fund. An
    appropriation of $1.2 million is the level at which AMLR has been
    funded for the past five fiscal years.
    ---------------------------------------------------------------------------
        \1\ Public sector representative on the U.S. delegation to the
    meetings of the Convention on the Conservation of Antarctic Marine
    Living Resources, 1990-present.
    ---------------------------------------------------------------------------
        AMLR has always enjoyed bipartisan Congressional support. In fact,
    it was due to the efforts of Congress that funding for AMLR has been
    available since its inception in 1986. Our organizations urge your
    Committee to ensure that continued funding is available.\2\
    ---------------------------------------------------------------------------
        \2\ From fiscal year 1987 through fiscal year 1993, funding for
    AMLR was not included in the President's annual budget request. Funding
    was provided by Congressional add-ons to NOAA's budget. Fortunately,
    due to the foresight of Congress, AMLR remained a viable program
    despite attempts to cut it. I am sure that this allowed it to be
    included in the President's budget request, starting with the fiscal
    year 1994 budget.
    ---------------------------------------------------------------------------
        Until it was taken off line in 1995, the AMLR Program was supported
    by the NOAA ship, R.V. Surveyor. Two years ago, NOAA contracted a
    Russian ship to support AMLR. NOAA will again need to charter a ship to
    support AMLR for the coming season, and will require up to $2 million
    for this charter. We urge your Committee to ensure that funds are
    available for this charter.
        Thus, a $1.2 million appropriation is sufficient if there is
    funding within the National Marine Fisheries Service budget to charter
    a ship to support AMLR. However, if there are insufficient funds, then
    additional funds would be needed to charter a vessel. Obviously,
    without a vessel, AMLR cannot continue its research program.
        The Antarctic Marine Living Resources Program is vital to
    longstanding U.S. economic, environmental and political interests in
    Antarctica, and supports our international obligations to the
    Convention on the Conservation of Antarctic Marine Living Resources
    (CCAMLR).
                              background on ccamlr
        CCAMLR was established under the Antarctic Treaty System to provide
    a management system that would both protect the ecosystem and allow
    fishing activities in the Southern Ocean. It is unique among fisheries
    agreements in that measures must be agreed which consider the impact of
    a fishery on the entire ecosystem, rather than on just the harvested
    species. CCAMLR is thus the first international convention to address
    ecosystem management goals.
        The Convention entered into force in 1982, and established an
    advisory Scientific Committee and a regulatory Commission with
    authority to impose restrictions on commercial fishing operations. To
    date 22 nations and the European Community \3\ have agreed to subject
    their fishing activities to regulation under the Convention. The
    Convention requires consensus decision-making, which means that all
    nations must approve each measure agreed on to prevent overharvesting.
    Barring consensus, fisheries could proceed without regulation.
    ---------------------------------------------------------------------------
        \3\ The following nations are members of CCAMLR: Argentina,
    Australia, Belgium, Brazil, Chile, European Community, France, Germany,
    India, Italy, Japan, Republic of Korea, New Zealand, Norway, Poland,
    Russian Federation, South Africa, Spain, Sweden, Ukraine, United
    Kingdom, United States and Uruguay.
    ---------------------------------------------------------------------------
        The only way that the fishing nations will agree to and comply with
    conservation measures that limit fisheries to ecologically sustainable
    levels is if they are presented with scientific proof of a fishery's
    status. Thus, for CCAMLR to remain effective, nations need to continue
    funding research programs that generate the data to support these
    measures.
        Research results from the Antarctic Marine Living Resources Program
    have provided this information. Since its inception, this U.S. program
    has been critical to CCAMLR's success because it has provided the
    scientific foundation for the adoption of ecologically-sound
    conservation measures by CCAMLR member governments. The U.S. is
    therefore able to be proactive in promoting measures aimed at
    safeguarding the ecosystem.
                 the antarctic marine living resources program
        Through AMLR, the U.S. has played a leading role in identifying and
    brokering internationally acceptable approaches to conservation
    problems in the Southern Ocean. The ability of the U.S. to influence
    long-term international conservation efforts stems from our leading by
    example--both in Southern Ocean conservation and in the larger
    framework of the Antarctic Treaty System. A U.S. presence is especially
    important now that U.S. fishers have initiated Southern Ocean
    fisheries. Decreasing the U.S. research effort while increasing U.S.
    fishing in the region could undermine U.S. leadership in Antarctica,
    and could jeopardize the continuing success of CCAMLR.
        During the last two years, nations have begun to bow to domestic
    economic pressures at the expense of conservation, and have attempted
    to gain consensus for catch levels which were economically beneficial,
    without regard to the state of the fishery. At present, the principal
    fishing nations are Argentina, Chile, Japan, Russia and the Ukraine.
    During the last year, new fisheries have been proposed by Australia,
    Korea, New Zealand, Norway, South Africa, and the UK.
        Research results from AMLR have allowed the U.S. delegation to
    argue persuasively that conservation measures be based on science
    rather than economics. Without a strong U.S. research presence,
    Southern Ocean fisheries will be regulated by nations with a strong
    economic interest and presence in the region. Under such circumstances
    we fear that implementation of conservation measures will be difficult,
    overfishing will persist, and the region's marine living resources will
    be exploited beyond sustainable levels.
        By helping to effectively implement CCAMLR, AMLR also provides a
    model for ecosystem management of domestic and international fisheries.
    CCAMLR was launched as an experiment to determine if nations could
    design new ways to govern fisheries that would avoid ecological and
    subsequent economic catastrophe. The Large Marine Ecosystem experiments
    carried out by the National Marine Fisheries Service stemmed directly
    from the CCAMLR experience in the Southern Ocean.
        The U.N. Food and Agriculture Organization has warned that ``fish
    production from most of the world's fisheries has reached or exceeded
    the levels at which fish stocks can regenerate themselves.\4\ As we see
    fisheries around the world continuing to collapse, with consequent
    economic and diplomatic implications, it is clear that the ``ecosystem
    as a whole'' model initiated by Antarctic research needs to be
    extrapolated to all fisheries.
    ---------------------------------------------------------------------------
        \4\ Committee on Fisheries, U.N. Food and Agriculture Organization,
    March 1993 meeting.
    ---------------------------------------------------------------------------
                       background on antarctic fisheries
        Commercial harvesting of Antarctic fish began in the early 1970's.
    By 1976, several nations had launched commercial harvesting operations
    for krill, the one- to two-inch long shrimp-like crustacean that forms
    the basis of the Antarctic food chain. CCAMLR was negotiated in
    response to the collapse of several species of fish from unregulated
    fisheries, and the concern that a rapid escalation of a krill fishery
    could precipitate the demise of the Southern Ocean marine ecosystem.
    Because of krill's pivotal role in the food chain, an unregulated
    fishery could also impede the recovery of whale populations.
        Krill fishing peaked in the early 1980's, and is currently at its
    lowest level.\5\ The decrease in recent years is primarily due to the
    break up of the Soviet Union, and the decline in Russia's krill
    fishery. Even in the 1980's, krill catches remained relatively low.
    This was primarily attributed to palatability problems caused by high
    fluoride concentrations in the exoskeleton. Technology is currently
    available to overcome this problem, and recently there has been renewed
    interest in this fishery.
    ---------------------------------------------------------------------------
        \5\ In the 1981/82 season, 528,201 tonnes were caught; in 1994/95,
    118,714 tonnes were caught; in 1995/96 95,040 tonnes were caught.
    ---------------------------------------------------------------------------
        In addition to krill, in recent years three species have been
    targeted by commercial fisheries: Patagonian toothfish or black hake,
    Mackerel icefish, and crabs. In the 1996/97 season, a new fishery on
    squid was opened. Fisheries have been open on several additional
    species (lanternfish and grey notothens); however, economic factors
    have not permitted commercial ventures to proceed. Southern fisheries
    have been primarily concentrated in the Atlantic sector of the Southern
    Ocean; however, the last CCAMLR meeting opened most of the remainder of
    the Southern Ocean to toothfish fisheries.
      importance of ccamlr and the u.s. antarctic marine living resources
                                    program
        Proper implementation of CCAMLR is necessary to ensure the wise and
    sustainable use of Southern Ocean fisheries. The Antarctic Marine
    Living Resources Program is essential for the proper implementation of
    CCAMLR because research results have provided the foundation for the
    adoption of ecologically sound conservation measures by CCAMLR.
        To give effect to the Convention domestically, and to ensure the
    acquisition of the requisite scientific information, Congress enacted
    the Antarctic Marine Living Resources Convention Act of 1984.\6\ This
    act directed NOAA to develop and implement a research program to
    support and facilitate implementation of CCAMLR. This program, the U.S.
    AMLR Program, has been implemented by NOAA's National Marine Fisheries
    Service since 1987, when Congress approved the Program Development
    Plan.\7\
    ---------------------------------------------------------------------------
        \6\ The Antarctic Marine Living Resources Conservation Act of 1984
    (Public Law 98-623).
        \7\ The Program Development Plan recommended annual funding of AMLR
    at the $4 million level, including $1.8 million for the charter of a
    dedicated research vessel.
    ---------------------------------------------------------------------------
        The U.S. AMLR Program was the first national research program to
    investigate the state of the fish stocks in the Southern Ocean. The
    first AMLR cruise confirmed that fishing operations were having adverse
    impacts on marine life, and indicated that several fish stocks were
    being exploited at rates above those levels which allow replacement of
    the stock. Several species had been so heavily fished that their
    populations were less than 10 percent of their size in 1982.\8\
    ---------------------------------------------------------------------------
        \8\ Because these early studies confirmed low standing stocks of
    fish, the traditional harvesting areas surrounding the South Shetland
    and South Orkney Islands in the Southern Atlantic Ocean were closed to
    finfishing. Attempts to reopen these areas have not been successful.
    However, unless fish stock surveys are completed in the future, we
    could lose the agreement to keep these areas closed. It will only be
    due to the consistent and vigilant application of the results of the
    research cruises that consensus will be maintained to prohibit or limit
    fishing in these and other areas.
    ---------------------------------------------------------------------------
        The importance of CCAMLR and the U.S. AMLR Program is in their
    ability, over a decade's time, to monitor changes in the Southern Ocean
    ecosystem. Whether fluctuations in the marine environment, including
    changes in marine populations, can be attributed to human or natural
    events, can only be determined by research which continues over a long
    period of time.
        Results from the past few years are illustrative.
        One, the survival of krill predators (seals and penguins) is a good
    indication of the availability of krill. Since 1990, the survival of
    young penguins and seals has fluctuated. Although the krill harvest is
    at its lowest level, the availability of krill to its predators has
    fluctuated, as evidenced by the annual survival rate of penguin
    chicks.\9\
    ---------------------------------------------------------------------------
        \9\ Anderson, Ian. Penguins move out after chicks starve to death.
    New Scientist. Vol. 145, no. 1962, p. 9. January 28, 1995.
    ---------------------------------------------------------------------------
        Whether these changes are the result of natural fluctuations or due
    to the location and timing of the krill fishery is still not fully
    understood. An article in Nature \10\ reports that juvenile Emperor
    penguins forage further north than previously believed. This appears to
    bring these penguins into commercial fishing areas, raising the
    potential for competition.
    ---------------------------------------------------------------------------
        \10\ Kooyman, G.L., et al. Penguin dispersal after fledging.
    Nature, vol. 383, 3 October 1996.
    ---------------------------------------------------------------------------
        However, these results highlight the challenges facing CCAMLR, and
    the need for continued research: to establish a relation between
    changes in the marine ecosystem and external (human-induced) vs.
    natural impacts, and to determine what is overfishing.
        Two, a healthy krill population is also essential for the recovery
    of some depleted fish stocks. The AMLR Program initiated the first
    ecosystem monitoring program which studied the relationships between
    krill, their predators, and their environment. Research results led
    CCAMLR to adopt a precautionary catch limit on krill fishing. The U.S.
    is the only nation which is consistently conducting these studies.\11\
    ---------------------------------------------------------------------------
        \11\ Review of the United States Antarctic Marine Living Resources
    (AMLR) Research Program, 27-29 May 1992, La Jolla, CA (Dr. Robert J.
    Hofman, Marine Mammal Commission, Chairman). This interagency review
    panel noted that ``AMLR is focussed on tasks that are essential to
    meeting the ecosystem-oriented objectives of CCAMLR, * * * and are not
    being done by other Parties.''
    ---------------------------------------------------------------------------
        Three, there is much uncertainty over the status of krill stocks in
    some sectors in the Southern Ocean, and some evidence that krill
    recruitment might actually be decreasing. Based on a U.S. proposal,
    CCAMLR placed a high priority on undertaking a new synoptic krill
    survey. The U.S. is organizing this effort.
        Four, in response to a U.S. fisherman applying for a permit to
    initiate a crab fishery in the Southern Ocean, the U.S. took the lead
    in ensuring that the fishery was developed using a conservative
    approach by developing a model research and development plan. In
    developing this plan, the fisherman was consulted, along with
    biologists and fishery management specialists. The crab fishery was
    used as an example of how to manage a new fishery, and set a precedent
    for other new and developing fisheries.
        Based on the U.S. example, measures were adopted which defined
    ``new'' and ``exploratory'' fisheries and articulated procedures for
    conducting them. At the last CCAMLR meeting, the U.S. secured agreement
    for the need for a measure which articulates the procedure to be
    followed when resuming a fishery for which there is no data upon which
    to base a sustainable catch limit. These measures are necessary to
    assure that fisheries develop slowly and in concert with the
    acquisition of biological and demographic data. Prior to this,
    fisheries were allowed to develop until the resource was depleted.
        Five, one of the biggest obstacles to the adoption of conservation
    measures is lack of data submission. Without this data, the Scientific
    Committee is unable to provide the best scientific advice on the state
    of a fishery or fish stock. Without data to back up claims of
    overfishing, fishing nations can attempt to increase allowable catches,
    and open previously-closed areas to fishing.
        To help overcome this, personnel from the U.S. AMLR Program
    implemented the CCAMLR Scientific Observer program by placing an
    observer on board a Russian vessel. Observers enable compliance
    monitoring with the conservation measures adopted by the CCAMLR
    Commission. They provide verification of the fish species caught,
    fishing methods used, catch data, and accurate and timely reporting to
    the CCAMLR Secretariat.
        Six, U.S. AMLR personnel also initiated the CCAMLR Inspection
    Program of commercial boats in the 1990/1991 season with the boarding
    of a Japanese vessel, and have carried out additional inspections
    during the past seasons. This set a precedent for other countries.\12\
    ---------------------------------------------------------------------------
        \12\ The CCAMLR Inspection Program seeks to measure compliance with
    CCAMLR conservation measures by allowing for unannounced checks of
    commercial boats which are engaged in harvesting activities.
    ---------------------------------------------------------------------------
        Seven, during the past two years, there has been a significant
    illegal fishery occurring on the Patagonian toothfish. Prior to last
    year, nations were unable to censure those flag states because of the
    narrow definition of fishing which specified that a boat had to be
    observed actually fishing on a closed fishery for an inspector to
    report a violation. The U.S. was successful in getting nations to agree
    to broaden this definition to give inspectors greater latitude in
    determining whether an infringement of a conservation measure has
    occurred when inspecting a research or fishing vessel. The U.S. had
    hoped that nations would agree to placing satellite-linked vessel
    monitoring systems (VMS) on their boats. These systems have proved
    successful in ensuring compliance with conservation measures in
    domestic fisheries, because a boat's location is automatically conveyed
    to a central computer. Nations agreed to voluntary placement of VMS on
    board their vessels, and have agreed to discuss mandatory placement at
    this year's meeting.
                            u.s. economic interests
        As fisheries around the world have become depleted, over the past
    two years there has been a hugh resurgence in interest in Southern
    Ocean fisheries. It is believed that the Southern Ocean is the ``last
    remaining major source of marine protein, [and this will lead to]
    considerable harvesting activity in the Southern Ocean, which will
    require, if it is to have a chance of being sustainable, a massive
    extension of current ecological research * * *.'' \13\
    ---------------------------------------------------------------------------
        \13\ Drewry, D.J. 1993. The future of Antarctic scientific
    research, Polar Record 29:37-44.
    ---------------------------------------------------------------------------
        As mentioned above, the U.S., through AMLR, has been successful in
    achieving agreement on conservation measures designed to ensure the
    long-term sustainability of the marine resources of the Southern Ocean,
    and has taken the lead in developing monitoring programs, primarily
    through the CCAMLR Ecosystem Monitoring Program. For example, the
    measure designed to ensure that new fisheries did not develop ahead of
    the collection of biological and demographic data was instigated by the
    U.S.
        However, it is clear that for the underdeveloped marine resources,
    it is in the best interest of U.S. fishers to understand as clearly as
    possible what the status of that resource might be, so that the
    resource can be managed sustainably over the long term. In this way
    U.S. fishers can make informed decisions about the potential for future
    participation in Southern Ocean fisheries. Thus, a continued U.S.
    presence in Antarctic marine resources research will ensure both an
    ecological and economic benefit to U.S. fishers.
        This has already been demonstrated by the initiation of the crab
    fishery by an Alaskan fisherman. The presence of the U.S. at the
    meetings of CCAMLR were critical to ensuring that the interests of this
    fisherman were properly represented.
        As noted above, the research conducted through AMLR could generate
    valuable lessons for managing U.S. domestic fisheries. Viewed from this
    perspective, the very small investments being made in Antarctic
    research can pay handsome dividends.
                            u.s. political interests
        In the U.S. view, Antarctica is owned by no one. It is governed by
    the Antarctic Treaty System, a collection of international treaties
    which set policy and articulate permitted activities in the Antarctic
    region for those governments that are members. Central to the Antarctic
    Treaty System is the Antarctic Treaty, which entered into force in
    1961. Its primary purpose is to ensure that Antarctica will be used
    exclusively for peaceful purposes. To this end, the Treaty provides for
    the freedom of scientific research, promotes international cooperation
    towards this goal, and, most importantly for CCAMLR, freezes all
    territorial claims.
        Seven nations claim sovereignty over territory in Antarctica
    (Argentina, Australia, Chile, France, New Zealand, Norway and the
    United Kingdom; the claims of Argentina, Chile and the UK overlap). The
    U.S. and Russia reserve their rights to assert claims in the continent.
    By freezing these claims, the Antarctic Treaty ensured that scientific
    research could proceed anywhere on the continent.
        With the break up of the Soviet Union, and the reduction in the
    Russian Antarctic Program, the U.S. has become the principal non-
    claimant nation with a substantial presence in Antarctica. Thus, if a
    claimant nation tried to act on its claim, the U.S. might be the only
    country which could effectively challenge this action. This is
    especially true in the waters surrounding Antarctica. As long as claims
    are frozen, these waters are open to all fishers (provided they abide
    by CCAMLR's regulations).
        A decreased U.S. presence and involvement could alter this fragile
    balance and open up the possibility of claimant nations declaring 200
    mile exclusive economic zones (EEZ's) in these waters, thus limiting
    access to the viable fisheries to fishers from the U.S. and other
    nations.
                     fiscal year 1998 appropriation request
        Although the AMLR Program is vital to U.S. interests in Antarctica,
    and to the sustainable management and geopolitical stability of
    Southern Ocean fisheries, it had been constrained by funding
    limitations since its inception. Congress originally recommended
    funding the Program at $4 million annually; this included $1.8 million
    to charter a research vessel. AMLR has never been funded near this
    level.
    AMLR Funding Levels

                                                                 In millions

    Fiscal year:
        1987......................................................\1\ $1.8
        1988.......................................................\1\ 1.5
        1989.......................................................\2\ 1.3
        1990.......................................................\2\ 1.3
        1991.......................................................\2\ 1.3
        1992.......................................................\2\ 1.275
        1993.......................................................\2\ 1.2
        1994.......................................................\2\ 1.2
        1995.......................................................\2\ 1.2
        1996.......................................................\3\ 1.2
        1997.......................................................\3\ 1.2
        1998.......................................................\4\ 1.2

    \1\ Included contracting the Polish vessel, Professor Svedlecki.
    \2\ Use of NOAA's ship Surveyor.
    \3\ Charter of Russian vessel.
    \4\ Requested; assumes availability of charter funds.
    ---------------------------------------------------------------------------
    Fiscal Year 1998 Appropriation Request
        For fiscal year 1998, level funding of $1.2 million will be needed
    to continue the principle research components of the U.S. AMLR Program.
    Funding will allow the continuation of both the land-based and ship-
    based research programs. The land-based ecosystem monitoring program
    monitors the reproduction and foraging behavior of the primary
    mammalian and avian krill predators, while the ship-based studies
    monitor the physical oceanography and spatial distribution and
    abundance of krill in the Southern Ocean contiguous with, and extending
    beyond, the land-based site.
        As indicated above, when the R.V. Surveyor was taken off line, NOAA
    chartered a Russian ship to support the AMLR Program. NOAA will again
    be contracting for a ship to support AMLR for the coming season, and
    will require up to $2 million for this charter. If these funds are not
    available within the National Marine Fisheries Service budget, then
    additional funds would be needed to charter a vessel. We urge you to
    ensure that money is available for this charter.
                                   conclusion
        CCAMLR was launched as an experiment to determine if nations could
    govern fisheries to avoid ecological and subsequent economic
    catastrophe. By helping to effectively implement CCAMLR, AMLR provides
    a model for ecosystem management of domestic and international
    fisheries.
        As fish stocks have decreased globally, economic pressures have
    begun to compel nations to increase fishing in the Southern Ocean.
    Without continued scientific effort to judge proposals for fishing, the
    same problems could emerge in the Southern Ocean that are occurring in
    other regions of the world.
        The results of the research undertaken through NOAA's Antarctic
    Marine Living Resources Program have enabled the U.S. to argue
    persuasively for the adoption of conservation measures aimed at
    limiting the harvesting of exploited species. Without a strong U.S.
    research presence, Southern Ocean fisheries will be regulated by
    nations with a strong economic interest and presence in the region.
    Further, implementation of conservation measures will be difficult,
    overfishing will persist, and the marine living resources will be
    exploited beyond sustainable levels.
        Continued funding of the Antarctic Marine Living Resources Program
    will protect the lead role that the U.S. has played over the past
    thirty-five years, in the Antarctic Treaty and in the Antarctic Treaty
    System, in developing ecologically sound and internationally acceptable
    approaches to Antarctic issues.
        Continuing to fulfill our obligations under CCAMLR will send a
    strong message about our desire to maintain the Antarctic as a region
    dedicated to science and other peaceful uses, and to minimize harm to
    the environment. It will allow the continued stability with regard to
    claims in the region. It will reflect positively on our commitment to
    the Antarctic Treaty System, and will preserve the leadership role of
    the United States in marine living resources research. In addition, now
    that the United States has become a fishing nation, it is especially
    important for us to maintain credibility. This is not the time for the
    U.S. to decrease its research efforts.
        The AMLR Program has encouraged collaboration with scientists of
    many nations. Politically, this cooperation enhances U.S. interactions
    in other international fora, in addition to CCAMLR and the Antarctic
    Treaty System.
        While we recognize that Congress must make difficult budget
    decisions, it is important not to underestimate the value of the U.S.
    AMLR Program. The modest allocation of funds that is being requested
    for investment in Antarctic marine research will go a long way toward
    addressing critical environmental and political issues that the United
    States faces in Antarctica. For future generations, investing in this
    cost-effective program will be more important than the modest savings
    gained through its elimination.
        For these reasons, we respectfully request this Subcommittee to
    approve an appropriation of $1.2 million to support NOAA's Antarctic
    Marine Living Resources Program.
                                     ______

       Prepared Statement of the Indigenous People's Council for Marine
                                    Mammals
        Mr. Chairman, Members of Commerce, Justice, State, Judiciary, and
    Related Agencies, and the Senate Subcommittee on the Appropriations. On
    behalf of the Alaska Native Community, the Indigenous People's Council
    for Marine Mammals (IPCoMM) is requesting the Senate Subcommittee of
    the Appropriations Committee to appropriate, for fiscal year 1998, the
    authorized levels of: $1.5 million to the Secretary of Commerce to
    implement Section 119 of Public Law 103-238, 1994 Amendments to the
    Marine Mammal Protection Act (MMPA). Section 119 authorizes the
    Secretary of Commerce to ``* * * enter into cooperative agreements with
    Alaska Native Organizations to conserve marine mammals and provide co-
    management of subsistence use by Alaska Natives.'' It also authorizes
    Congress to appropriate funds to implement Section 119. Unfortunately,
    no funds have been appropriated to the Department of Commerce since
    Section 119 was added to the MMPA in 1994. In fact the only funding
    provided since 1994 was a $250,000 congressional add-on to the
    Department of the Interior's fiscal year 1997 budget which allowed U.S.
    Fish and Wildlife Service (USFWS) to enter into co-management
    agreements with Alaska Native Organizations for conservation and
    subsistence use of walrus, polar bears and sea otters.
        Despite the lack of funding, significant progress has been made in
    Alaska in terms of implementing Section 119 of the MMPA. The Alaska
    Native Community, represented by IPCoMM, the Alaska Federation of
    Natives (AFN), and the Alaska Inter-Tribal Council (AI-TC) recently
    completed negotiations on an umbrella ``Memorandum of Agreement for
    Negotiation of Marine Mammal Protection Act Section 119 Agreements'' to
    conserve marine mammals and provide co-management of subsistence use
    with the Department of the Interior--Fish and Wildlife Service. Final
    negotiations with the Department of Commerce--National Marine Fisheries
    Service (NMFS) are expected to be completed on March 20, 1997. This
    umbrella agreement between IPCoMM and NMFS will provide the foundation
    and direction for how individual co-management agreements will be
    negotiated between the federal agencies and Alaska Native Organizations
    for the nine (9) species under NMFS jurisdiction. The parties are in
    the process of planning a formal signing ceremony to commemorate the
    historic agreement which will enhance the conservation and
    utilization's of the marine mammal resources for subsistence uses
    consistent with the public policy embodied in Section 119 of MMPA. In
    addition to the successful negotiations with NMFS and USFWS on the
    umbrella agreement, three marine mammal Commissions (Eskimo Walrus
    Commission, the Alaska Nanuuq Commission and the Alaska Sea Otter
    Commission) recently signed individual co-management agreements with
    USFWS for specific co-management agreement activities involving three
    species used for subsistence purposes in Alaska (walrus, polar bear and
    sea otters). These Agreements were made possible due to the $250,000
    appropriation to the Department of the Interior for fiscal year 1997.
        Although significant progress has been made in implementing Section
    119 of the MMPA, it is imperative that Congress fully fund Section 119
    of the MMPA if this progress is to continue for the twelve (12) marine
    mammal species used by Alaska Natives. Congress has recognized that the
    best way to conserve and wisely utilize marine mammal resources used
    for subsistence purposes is to allow the full and equal participation
    by Alaska Natives in decisions affecting the management of marine
    mammals taken for subsistence. That can only happen if Congress
    provides adequate funding for co-management activities.
        Background.--Early in the discussions leading to the 1994
    reauthorization of the MMPA, a number of Alaska Native marine mammal
    groups banded together and formed IPCoMM to insure a united Native
    voice during the reauthorization process. As a result, the Native
    exemption for taking of marine mammals for subsistence uses was
    retained, and language was added in Section 119 to authorize the
    Secretaries of the Department of Commerce and Interior to enter into
    co-management agreements with Alaska Natives Organizations for the
    conservation and co-management of subsistence uses of marine mammals.
        In the spring of 1994, Congress enacted Public Law 103-238, the
    1994 amendments to the MMPA. In doing so, Congress expressed its intent
    that the Secretary of Commerce and the Secretary of the Interior extend
    full cooperation as partners to Alaska Native Organizations in the
    development and implementation of marine mammal management plans. In
    order to insure proper implementation of Section 119, the Alaska Native
    Community requested that NMFS and USFWS work with IPCoMM in the
    development of an ``Umbrella'' Agreement with specific language that
    the federal agencies would consider when developing individual co-
    management agreements with Alaska Native Tribes and organizations
    pursuant to Section 119. The purpose of the umbrella agreement is to
    provide the direction and foundation for individual co-management
    Agreements. It will serve as a guide to USFWS, NMFS and Biological
    Resources Division, Geological Survey when these federal agencies enter
    into individual agreements with Alaska Native Organizations or Alaska
    Native Tribes for the co-management of subsistence use of marine
    mammals.
        At this time, IPCoMM is concerned about all marine mammals which
    are utilized by Alaska Natives; however, harvest limitations are
    allowed and discussions have taken place concerning three listed
    species for which we have grave concern: bowhead whale (endangered);
    North Pacific Fur Seal (threatened); Steller Sea Lion (threatened).
        The Alaska Native Community stands ready to work with NMFS and
    USFWS in implementing Section 119 of Public Law 103-238 to its fullest
    extent. It has already made significant progress toward that end. While
    Section 119 provides an effective way for Alaska Natives to participate
    in decisions affecting the management of marine mammals taken for
    subsistence, full realization of that goal will not be possible unless
    Congress provides adequate funding for co-management agreements. For
    that reason, we urge this Committee to appropriate the full $1.5
    million to the Department of Commerce to enable it to enter into
    individual co-management agreements pursuant to Section 119 of the
    MMPA. We trust that our request will be given due consideration during
    the deliberations of the Committee.

           LIST OF WITNESSES, COMMUNICATIONS, AND PREPARED STATEMENTS

                                  ----------
                                                                       Page
    Albright, Hon. Madeleine K., Secretary of State, Department of
      State..........................................................     1
        Prepared statement...........................................     7
    Alvarez, Aida, Administrator, Small Business Administration......    57
        Biographical sketch..........................................    68
        Prepared statement...........................................    57
    Archer, Glenn L., Jr., Chief Judge, U.S. Court of Appeals for the
      Federal Circuit, U.S. courts, the judiciary, prepared statement   407

    Baker, D. James, Under Secretary, Oceans and Atmosphere, National
      Oceanic and Atmospheric Administration, Department of Commerce.   417
        Biographical sketch..........................................   429
        Prepared statement...........................................   420
    Bosley, Dale, Marshal, Supreme Court of the United States, the
      judiciary......................................................   383
    Bossler, John D., Rear Admiral (retired), director, Center for
      Mapping, Ohio State University, prepared statement.............   490
    Brown, Mark E., Director, Office of Budget, Secretary of
      Commerce, Department of Commerce...............................   151
    Burns, Hon. Conrad, U.S. Senator from Montana, questions
      submitted by...................................................
      139, 378.......................................................

    Campbell, Hon. Ben Nighthorse, U.S. Senator from Colorado,
      questions submitted by.........................................
      43, 133, 221, 330..............................................
    Carman, Gregory W., Chief Judge, U.S. Court of International
      Trade, U.S. courts, the judiciary, prepared statement..........   407
    Center for Marine Conservation, prepared statement...............   469
    Clark, Beth Marks, director, The Antarctica Project, prepared
      statement......................................................   494
    Clarke, Judy, president, National Association of Criminal Defense
      Lawyers, prepared statement....................................   477
    Colgate, Stephen R., Assistant Attorney General for
      Administration, Office of the Attorney General, Department of
      Justice........................................................    91
    Constantine, Thomas A., Administrator, Drug Enforcement
      Administration, Department of Justice..........................   247
        Prepared statement...........................................   258
    Curtis, Adrian A., Director, Budget Staff, Office of the Attorney
      General, Department of Justice.................................    91

    Daley, Hon. William M., Secretary of Commerce, Department of
      Commerce.......................................................   151
        Biographical sketch..........................................   162
        Prepared statement...........................................   154
    Domenici, Hon. Pete V., U.S. Senator from New Mexico, questions
      submitted by...................................................
      35, 75, 125, 178, 219, 322, 362................................
    Donnelly, Tony, Director of Budget and Personnel, Supreme Court
      of the United States, the judiciary............................   383
    Dowdell, Lloyd Q., president, Advanced Telecomm. Tech., Inc.,
      prepared statement.............................................   474
    Duff, James C., Administrative Assistant to the Chief Justice,
      Supreme Court of the United States, the judiciary..............   383

    Faircloth, Hon. Lauch, U.S. Senator from North Carolina,
      questions submitted by.........................................   459
    Fishel, Andrew S., Managing Director, Federal Communications
      Commis- sion...................................................   347
    Freeh, Louis J., Director, Federal Bureau of Investigation,
      Department of Justice..........................................   247
        Prepared statement...........................................   252

    Gregg, Hon. Judd, U.S. Senator from New Hampshire, questions
      submitted by...................................................   303

    Harris, F.A. (Tex), president, American Foreign Service
      Association, prepared statement................................   467
    Heyburn, Hon. John G., II, Chairman, Committee on the Budget,
      Judicial Conference of the United States, U.S. courts, the
      judiciary......................................................   389
        Biographical sketch..........................................   389
        Prepared statement...........................................   392
    Hollings, Hon. Ernest F., U.S. Senator from South Carlina,
      questions submitted by.........................................
      51, 86, 139, 190, 222, 331, 369, 454...........................
    Hout, Eldon, chairman, Coastal States Organization, Inc.,
      prepared statement.............................................   483
    Hufstedler, Shirley Mount, chair, U.S. Commission on Immigration
      Reform, prepared statement.....................................   465
    Hundt, Hon. Reed E., Chairman, Federal Communications Commission.   347
        Prepared statement...........................................   349
    Hutchison, Hon. Kay Bailey, U.S. Senator from Texas, questions
      submitted by...................................................
      41, 327, 453...................................................

    Indigenous People's Council for Marine Mammals, prepared
      statement......................................................   500
    Inouye, Hon. Daniel K., U.S. Senator from Hawaii, questions
      submitted by...................................................
      374, 456.......................................................

    Jollivette, Cyrus M., vice president for Government relations,
      University of Miami, prepared statement........................   487

    Kammer, Raymond G., Jr., Acting Chief Financial Officer/Assistant
      Secretary for Administration, Secretary of Commerce, Department
      of Commerce....................................................   151
    Kennedy, Hon. Anthony M., Associate Justice, Supreme Court of the
      United States, the judiciary...................................   383
        Prepared statement...........................................   384

    Lautenberg, Hon. Frank R., U.S. Senator from New Jersey:
        Prepared statement...........................................     3
        Questions submitted by.......................................
          343, 377, 458..............................................
    Leahy, Hon. Patrick J., U.S. Senator from Vermont, questions
      submitted by...................................................   209
    Levitt, Hon. Arthur, Chairman, Securities and Exchange Commission
        Biographical sketch..........................................   213
        Prepared statement...........................................   212
    Lyman, Princeton N., Assistant Secretary for the Bureau of
      International Organization Affairs, United Nations.............   229

    Mecham, Leonidas Ralph, Director, Administrative Office of the
      U.S. Courts, the judiciary, prepared statement.................   400
    Meissner, Doris, Commissioner, Immigration and Naturalization
      Service, Department of Justice.................................   247
        Prepared statement...........................................   271
    Mikulski, Hon. Barbara A., U.S. Senator from Maryland:
        Questions submitted by.......................................
          55, 346....................................................
        Prepared statement...........................................   431
    Moxam, Andrew, Deputy Chief Financial Officer, Chief
      Administrative Officer, National Oceanic and Atmospheric
      Administration, Department of Commerce.........................   417

    Reno, Janet, Attorney General, Office of the Attorney General,
      Department of Justice..........................................    91
        Prepared statement...........................................    92
    Richardson, Ambassador Bill, U.S. Permanent Representative to the
      United Nations.................................................   229
        Biographical sketch..........................................   235
        Prepared statement...........................................   232
    Roper, Michael J., Deputy Assistant Attorney General, Controller,
      Office of the Attorney General, Department of Justice..........    91

    Scalet, Charles G., president, National Association of University
      Fisheries and Wildlife Programs, prepared statement............   486
    Souter, Hon. David H., Associate Justice, Supreme Court of the
      United States, the judiciary...................................   383
    Suter, Bill, Clerk, Supreme Court of the United States, the
      judiciary......................................................   383

    Walter, Greg, Deputy Chief Financial Officer, Small Business
      Administra- tion...............................................    57

    Zobel, Hon. Rya W., Director, Federal Judicial Center, U.S.
      courts, the judiciary, prepared statement......................   405

                                 SUBJECT INDEX

                                  ----------

                             DEPARTMENT OF COMMERCE

                National Oceanic and Atmospheric Administration

                                                                       Page
    Account structure changes........................................   422
    Additional committee questions...................................   453
    Advanced weather interactive processing system...................   444
        Status on....................................................   444
    Aeronautical charting transfer to the FAA........................   445
    Aquaculture......................................................   456
    Budget, fiscal year 1998:
        Highlights of the............................................   421
        Review.......................................................   417
    Capital assets acquisition.......................................   444
    Charleston laboratory staffing...................................   446
    Chesapeake Bay blue crab stock assessment........................   433
    Clean water initiative...........................................   451
    Coastal monitoring...............................................   436
    Committee on Environment and Natural Resources...................   427
    Community right to know..........................................   435
    Corps............................................................   437
        Disestablishment.............................................
          437, 454...................................................
    DOD polar orbiting satellite convergence.........................   448
    East coast flounder and striped bass catch quota.................   430
    Ecosystem fisheries management...................................   458
    Endangered Species Act [ESA].....................................   453
    Environmental assessment and prediction..........................   422
    Environmental stewardship........................................   425
    Facilities maintenance requirements..............................   440
    Fisheries stock assessment accuracy..............................   435
    Fleet............................................................   450
        Maintenance..................................................   442
        Modernization................................................   455
    Goddard Space Flight Center, NOAA facility at....................   433
    GOES follow-on program...........................................   450
    Halibut and sable fish individual fishing quotas.................   440
    Highly migratory species.........................................   459
    National Hurricane Center staffing...............................   432
    National Marine Fisheries Service:
        Charleston laboratory staffing...............................   446
        Reorganization of regions....................................   457
    National Ocean Service...........................................   443
    National ocean survey............................................   450
    ``National Performance Review'' and streamlining.................   427
    National Undersea Research Program [NURP]........................   456
    Nautical charting activity in Alaska.............................   439
    Oceanic research.................................................   443
    Pacific area office..............................................   457
    Pacific insular area fisheries agreement.........................   457
    Partnership, benefits of.........................................   429
    Portland, ME, data buoys.........................................   447
    Reducing costs and improving effectiveness.......................   427
    Right whale rulings..............................................   451
    Role: Doing what's needed........................................   420
        Lack of increased tempo off of Alaska compared to the rest of
          the coun- try..............................................   439
    Satellite funding requirements...................................   449
    Species recovery.................................................   454
    Stock assessment, status of......................................   436
    Striped bass.....................................................   462
    Summer flounder..................................................   459
    Turtle excluder devices..........................................   446
    United States-Japan common agenda global observation information
      network [GOIN] initiative......................................   458

                             Secretary of Commerce

    Additional committee questions...................................   177
    Advanced Technology Program......................................
      165, 207.......................................................
    AWIPS program, status of.........................................   165
    Budget restraints................................................   171
    BXA encryption...................................................   172
    Census budget....................................................   190
    Circulation and subscriber figures...............................   209
    Committee allocation.............................................   163
    Economic statistics initiative...................................   180
    Encryption.......................................................   178
    Management issues................................................   175
    Manufacturing extension partnership [MEP]........................   208
    MBDA/SBA collaboration...........................................   204
    Minority Business Development Agency [MBDA] effectiveness........   202
    National Weather Service southern region headquarters, closure of
      the............................................................   185
    NOAA--Satellites.................................................   205
    Patent and trademark.............................................   167
        Fees.........................................................   174
            Increases in.............................................   185
        Revenue diversion............................................   166
    Performance-based organization...................................   206
    Political appointees, reducing...................................   164
    Public broadcasting facilities, planning, and construction.......   170
    Public Telecommunications Facilities Program [PTFP]..............   187
        Effect of in Arkansas........................................   176
        Grants, awarding 1997........................................   170
        Proposed termination of......................................   173
    Sampling.........................................................   191
    Statistical agencies, consolidation of...........................   179
    Summary statement................................................   151
    Survey of minority-owned business enterprises [SMOBE] and survey
      of women-owned business enterprises [SWOBE]....................   179
    Tourism..........................................................   169
    Trade Compliance Center..........................................   183
        And IA's Office of Agreements Compliance, difference between.   197
        Status of the initiative.....................................   173
    Trade missions...................................................   163
    Translation costs................................................   210
    2000 census......................................................   166
    U.S. and Foreign Commercial Service [US&FCS].....................   192
    U.S. innovation partnership......................................   188
    Weather station closings.........................................   176
    WNC:
        Budget.......................................................   209
        Marketing....................................................   210
        Vs. sources in ``FBIS Daily Report'', sources in.............   210

                             DEPARTMENT OF JUSTICE

                        Drug Enforcement Administration

    Additional committee questions...................................
      303, 310, 334..................................................
    And FBI training at Quantico.....................................   281
    Colombia.........................................................   318
    Director for Investigative Agency Policy [DIAP]..................   335
    Drugs:
        Emerging problems............................................   264
        Entering through the port of entry...........................   295
        War on.......................................................   310
    Fenfluramine descheduling........................................   343
    Fight against global drug trafficking: Lessons learned...........   266
    Fiscal year 1998 budget: Equipping the agency for the future.....   267
    Heroin use in Baltimore..........................................   291
    HIDTA funding....................................................   287
    Illegal immigration and drug enforcement in Texas................   296
    Infrastructure...................................................   258
    International organized crime....................................
      256, 259.......................................................
    Methamphetamine:
        Labs.........................................................   316
        Strategy.....................................................   288
    Mexico...........................................................   312
        Certification of.............................................   286
        Colombia.....................................................   341
        Trafficking organizations from...............................   260
    National drug trafficking problems...............................   257
    Puerto Rico......................................................   321
    Station, permanent change of.....................................   334
    United States:
        Law enforcement response to organized crime..................   265
        Organized crime's surrogates in the..........................   262
        Violent drug trafficking organizations in the................   263

                        Federal Bureau of Investigation

    Additional committee questions...................................
      303, 331.......................................................
    Agents in Maryland...............................................   290
    And DEA:
        Cooperation between..........................................   280
        Laboratories for.............................................   304
    Construction.....................................................
      251, 255.......................................................
        Of facilities................................................   284
    Director Freeh's opening statement...............................   248
    Disciplinary office..............................................   306
    Employees, investigating misconduct of...........................   339
    Fingerprint card backlog.........................................   331
    Fingerprints/immigration.........................................   331
    Freedom of Information Act.......................................   255
    Infrastructure...................................................   255
        Initiative...................................................   251
    Integrated automated fingerprint identification system [IAFIS]...   303
    International law enforcement....................................
      250, 254.......................................................
    La Cosa Nostra...................................................   254
    Laboratory.......................................................   285
        Investigation................................................   303
        Management...................................................   337
    Mt. Pleasant illegal aliens......................................   333
    National Crime Information Center................................   303
    1998:
        Budget request...............................................   252
        Initiatives..................................................   252
    Southwest border.................................................   254
        Initiative...................................................   250
    Technology crimes................................................   253
        Initiative...................................................   249
    Telecommunications carrier compliance............................
      248, 253, 307, 338.............................................

                     Immigration and Naturalization Service

    Achievements.....................................................   271
    Additional committee questions...................................
                                    303, 308, 322, 327, 331, 340, 343
    Affidavits of support and public charge bonds....................   322
    Aliens:
        Initiative, remove criminal and other deportable.............   278
        Removal of illegal...........................................   272
        Sponsorships of legal........................................   293
    Bars to reentry..................................................   327
    Border control...................................................
      282, 302.......................................................
        Achievements.................................................   271
        Crossings, number of.........................................   300
        Facilitation and control initiative..........................   277
    Border Patrol:
        Agent increases..............................................   327
        Request for agents...........................................   299
    Budget, fiscal year 1998.........................................   276
    Challenges, facing...............................................   269
    Charleston Border Patrol.........................................   340
    Citizenship USA..................................................   308
    Citizenship, requirements for....................................   294
    Colorado, illegal immigration in.................................   289
    Concerns and issues..............................................   275
    Consolidation....................................................   309
    Detention representation project.................................   343
    Drug investigations, major.......................................   346
    Drug trafficking by gangs........................................   344
    Facilities, construction of......................................   284
    Federal Law Enforcement Training Center, consolidation of the....   330
    Fingerprint card backlog.........................................   331
    Fingerprints/immigration.........................................   331
    Illegal workers, policy on.......................................   290
    Immigration services.............................................   274
    INS and FBI, coordination between................................   283
    Interagency cooperation..........................................   282
    Interior deterrence initiative...................................   278
    Juveniles, special immigrant status for certain..................   322
    Law enforcement, funds for local.................................   290
    Management reforms...............................................   270
    Mt. Pleasant illegal aliens......................................   333
    Naturalization application increase--interaction with welfare
      reform.........................................................   322
    Naturalization:
        Backlogs.....................................................
          295, 323...................................................
        Efforts......................................................   284
        Of immigrants................................................   292
        Process......................................................   341
    Other accomplishments............................................   274
    Police, INS coordination with....................................   302
    Professionalism initiative.......................................   276
    Section 245(i)...................................................   340
        Extension of.................................................   330
    Services and benefits initiative, improving......................   279
    States, assistance to............................................   274
    Technology improvements..........................................   273
    Welfare Act, effect of...........................................   294
    Worksite enforcement.............................................   272

                         Office of the Attorney General

    Additional committee questions...................................   124
    Attorney General Reno's opening remarks..........................    91
    Baltimore-Washington corridor....................................   114
    Border Patrol....................................................   104
    Campaign finance.................................................   103
    Charleston Border Patrol training facility.......................   139
    Citizenship USA..................................................   109
    Community-oriented policing services [COPS]......................
      93, 113, 145...................................................
    Counterterrorism.................................................   123
    Crime:
        Assisting other countries fight..............................   135
        Laboratories.................................................   115
        Prevention...................................................    98
    Criminals, keeping off the street................................    94
    DEA and Mexico...................................................   138
    DIAP, effectiveness of the.......................................   145
    District of Columbia:
        Prosecutions in the..........................................    93
        Situation....................................................   147
    Division of the Ninth Circuit....................................   139
    Drug trafficking and drug abuse, fighting........................    94
    FBI:
        Fingerprint issue............................................   121
        Laboratory...................................................   122
    FBI/White House:
        Confrontation................................................
          99, 101....................................................
        Issue........................................................   120
    Federal prison system............................................   124
    Fighting crime and youth violence................................    93
    Fingerprints/immigration.........................................   141
    Fiscal year 1998 request.........................................    93
    Fundraising......................................................   100
    G-7 summit in Denver, security for the...........................   137
    General legal activities.........................................    96
    Hepatitis C in prisons...........................................   144
    Immigration......................................................   120
        Fighting illegal.............................................    95
    Information technology...........................................   115
    Information, exchange of.........................................   116
    International crime, impact of on the United States..............   133
    Investigations...................................................   118
    Justice Department programs, out-year needs of...................   131
    Juvenile crime...................................................
      97, 130........................................................
        Prevention...................................................   117
            Programs, successful.....................................    98
    Juveniles, special immigrant status for certain..................   111
    Laboratory consolidation.........................................   122
    Lorton...........................................................   149
    Management initiatives...........................................    92
    McAllen, TX/Mexico border........................................   106
    Mexico and extradition of drug traffickers.......................   132
    Mount Pleasant illegal aliens....................................   140
    National Advocacy Center.........................................
      104, 146.......................................................
    New initiatives..................................................    93
    New State and local assistance programs..........................   143
    Restoring critical infrastructure................................    96
    Rocky Mountain HIDTA.............................................   136
    Southwest border staffing........................................   125
    Special immigrant status.........................................   129
    Staffing.........................................................   105
    Terrorism and international crime, fighting......................    95
    Val Verde County military voting issue...........................   110
    Victim witness assistance........................................    94
    Women, violence against..........................................    94

                       Violent Crime Reduction Trust Fund

    Additional committee question....................................   326
    $1.4 billion cut in VCRTF after 1999 proposed by the President...   326

                              DEPARTMENT OF STATE

                               Secretary of State

    Additional committee questions...................................    35
    Ambassadors and foreign service officers, U.S. treatment of......    26
    Arrearages, advance appropriation for............................    33
    Budget request...................................................
      21, 22.........................................................
        Percent increase of..........................................    26
    Bulgaria.........................................................    50
    Capital improvement funding......................................    51
        Germany......................................................    52
    Capital investment fund..........................................    34
    China, funding request for.......................................    30
    Consolidation of the.............................................    31
    Crime:
        Assisting other countries fight..............................    46
        Coordination of programs.....................................    47
    Denmark/biker gangs..............................................    45
    Diplomatic readiness, tools to maintain our......................    10
    Drug enforcement:
        Certification of Mexico as cooperating in....................    14
        Sincerity of President Zedillo to cooperate in...............    26
    Economic officers, importance of.................................    34
    Fees.............................................................    53
        Retention of proposal........................................
          31, 32.....................................................
    Function 150 priorities..........................................    53
    ICASS reform.....................................................    51
    Illegal immigration..............................................    49
    International crime..............................................    18
        Impact of on the United States...............................    44
    International drug trafficking/HIDTA.............................    43
    International organizations supplemental.........................    54
    Latin American arms sales policy.................................    41
    Leadership through international organizations, tools for........    11
    Mexican progress.................................................    21
    Mexico:
        Benefits to the United States of certification of............    25
        Evidence to support certification of.........................    20
        Senator Hollings' comments on certification of...............    29
    Microcredit......................................................    50
    Middle East peace process........................................    47
    NATO:
        Enlargement..................................................    42
        Expansion....................................................    55
        Russian disquiet with the enlargement of.....................    19
    Position on importation of U.S. military weapons that are
      considered relics..............................................    24
    Reorganization...................................................    35
    Secretary Albright's opening statement...........................     3
    621 provision, current position on the proposed..................    50
    State and FCS, duplication between...............................    54
    Technology, outdated.............................................    55
    Terrorism........................................................    48
        Coordination of efforts to fight.............................    27
    United Nations...................................................    40
        Arrearages...................................................
          21, 22.....................................................
        Budget for the...............................................    26
    USIA and ACDA....................................................    13
    Vietnam, new post in.............................................    52
    War Crimes Tribunal:
        Croatian cooperation with....................................    23
        Foreign assistance for cooperation with......................    23
        U.S. support of..............................................    24

                       FEDERAL COMMUNICATIONS COMMISSION

    Access charges...................................................   362
    Additional committee questions...................................   361
    Alcohol advertisements...........................................   360
    Appropriation request............................................   361
    Auction debt, shifting management responsibility for.............   354
    Budget request, overview of fiscal year 1998.....................   350
    Cable rates......................................................   356
        Increases....................................................   369
    Census, mandated PSA time to encourage response to the...........   377
    Consumer education and outreach..................................   352
    Digital television...............................................   365
        Conversion to................................................   359
    Direct appropriations increase...................................   361
    Electronic licensing.............................................   353
    Operations, improving............................................   352
    Personnel reduction..............................................   356
    Portals lease....................................................   360
    Public safety spectrum...........................................   351
    Radio channel licenses...........................................   357
    Relocation cost..................................................   356
    Spectrum:
        Auctions.....................................................   358
        Cost for public safety entities..............................   358
        Technology to use............................................   358
        Transition to digital TV.....................................   367
    Subscriber line charges..........................................   355
    Telecommunications Act implementation............................   350
    Universal service................................................
      364, 370, 378..................................................
        Funding for..................................................   354

                       SECURITIES AND EXCHANGE COMMISSION

    Additional committee questions...................................   219
    Carryover funds..................................................   219
    Electric industry restructuring..................................   222
    Electronic data gathering analysis and retrieval [EDGAR] system..   227
    Electronic markets...............................................   213
    Federal/State regulatory responsibilities........................   217
    Investment advisers..............................................   227
    Market:
        Enforcing and regulating the.................................   223
        Event, preparation for a.....................................   217
        Growth.......................................................   224
    Mutual fund:
        Fees.........................................................   215
        Industry.....................................................   226
        Problems.....................................................   215
    National Securities Markets Improvement Act of 1996..............   216
    National standards and Federal securities litigation reform......   219
    Offsetting collection fees.......................................   222
    Organized crime..................................................   214
    Public Utility Holding Company Act...............................
      218, 222.......................................................
    Stock market infiltration........................................   216
    Streamlining initiatives.........................................   221
    Summary statement................................................   211

                         SMALL BUSINESS ADMINISTRATION

    Additional committee questions...................................    75
    Budget request, fiscal year 1998.................................    59
    Business loans (credit reform), subsidy rate on..................    84
    Disaster funding.................................................    71
    Disaster Loan Program............................................
      85, 88.........................................................
    Field structure..................................................    90
    Loan guarantee volume............................................    90
    Loans............................................................    69
    MBDA/SBA minority assistance.....................................    89
    Microloan program................................................    74
    New Administrator's goals........................................    87
    Office of Women's Business Ownership.............................    76
    Paperwork reduction within the...................................    80
    Programs, review of..............................................    69
    Reauthorization of the...........................................    81
    Recent accomplishments of the....................................
      58, 65.........................................................
    SBA 2000.........................................................    74
    Section 8(a), the Minority Small Business Program and 8(d), the
      Small and Disadvantaged Business Program.......................    83
        Reauthorization..............................................    83
        Streamlining.................................................    84
    7(a) program.....................................................    71
    Small business:
        Development centers..........................................
          81, 90.....................................................
        Development councils.........................................    73
        In the U.S. economy..........................................    58
        OSHA's definition of.........................................    86
    Small Business Regulatory Enforcement Fairness Act advisory
      panels.........................................................    75
    Summary statement................................................    68
    Training programs................................................    70

                                 THE JUDICIARY

                       Supreme Court of the United States

    Ninth circuit split..............................................   386

                                  U.S. Courts

    Administrative Office:
        Achievements.................................................   402
        Funding......................................................   402
        Plays a unique role..........................................   401
        Staff contributions..........................................   397
        Support of economy and efficiency efforts....................   404
    Automation and technology........................................   396
    Budget request, restrained.......................................   393
    Capital cases....................................................   410
        Cost information.............................................   413
        Increase defender services costs.............................   395
    Cost containment.................................................   411
    Cost-of-living adjustment........................................   414
    Court security...................................................   400
    Courts, applying technology in the...............................   403
    Defender services................................................
      400, 408.......................................................
    Federal Judicial Center support..................................   398
    Future, looking to the...........................................   398
    Judicial compensation............................................   394
    Judiciary's role in society......................................   393
    Jurors and commissioners, fees and expenses of...................   400
    Legislative initiatives..........................................   395
    Salaries and Expenses............................................   399
    Space............................................................   396
    Staffing.........................................................   395
    Videoconferencing................................................
      397, 414.......................................................
    Violent crime reduction trust fund...............................   400
    Working more efficiently.........................................   395
    Workload, uncontrollable.........................................   394

                                 UNITED NATIONS

    Arrears..........................................................
      230, 238.......................................................
        Offsets for..................................................   243
    Credit...........................................................   235
    DOD's resources..................................................   240
    International police task force..................................   238
    Israeli housing issue............................................   239
    Office of Internal Oversight Services............................   243
    Opening statement of Ambassador Richardson.......................   230
    Peacekeeping.....................................................   231
    Reforms..........................................................
      230, 241.......................................................
    Unencumbered balances............................................   236
    War crimes tribunals.............................................   240
    Withdrawal from organizations....................................   243