[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.
---------------------------------------------------------------------------
    \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