[Senate Hearing 106-182]
[From the U.S. Government Publishing Office]
S. Hrg. 106-182
NOMINATION OF SALLY KATZEN
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HEARING
BEFORE THE
COMMITTEE ON
GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
ON THE
NOMINATION OF SALLY KATZEN, TO BE DEPUTY DIRECTOR FOR MANAGEMENT,
OFFICE OF MANAGEMENT AND BUDGET
__________
SEPTEMBER 15, 1999
__________
Printed for the use of the Committee on Governmental Affairs
U.S. GOVERNMENT PRINTING OFFICE
59-591 CC WASHINGTON : 1999
_______________________________________________________________________
For sale by the Superintendent of Documents, Congressional Sales Office
U.S. Government Printing Office, Washington, DC 20402
COMMITTEE ON GOVERNMENTAL AFFAIRS
FRED THOMPSON, Tennessee, Chairman
WILLIAM V. ROTH, Jr., Delaware JOSEPH I. LIEBERMAN, Connecticut
TED STEVENS, Alaska CARL LEVIN, Michigan
SUSAN M. COLLINS, Maine DANIEL K. AKAKA, Hawaii
GEORGE V. VOINOVICH, Ohio RICHARD J. DURBIN, Illinois
PETE V. DOMENICI, New Mexico ROBERT G. TORRICELLI, New Jersey
THAD COCHRAN, Mississippi MAX CLELAND, Georgia
ARLEN SPECTER, Pennsylvania JOHN EDWARDS, North Carolina
JUDD GREGG, New Hampshire
Hannah S. Sistare, Staff Director and Counsel
Paul R. Noe, Senior Counsel
Joyce A. Rechtschaffen, Minority Staff Director and Counsel
Peter A. Ludgin, Minority Professional Staff Member
Darla D. Cassell, Administrative Clerk
C O N T E N T S
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Opening statements:
Page
Senator Thompson............................................. 1
Senator Levin................................................ 2
Senator Voinovich............................................ 12
WITNESS
Wednesday, September 15, 1999
Sally Katzen, to be Deputy Director for Management, Office of
Management and Budget.......................................... 4
APPENDIX
Biographical and financial information........................... 39
Pre-hearing questionnaire from Senator Thompson with responses
from Sally Katzen.............................................. 49
Letter to Senator Thompson, dated September 17, 1999, from Sally
Katzen with an attachment...................................... 86
NOMINATION OF SALLY KATZEN TO BE DEPUTY DIRECTOR FOR MANAGEMENT, OFFICE
OF MANAGEMENT AND BUDGET
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WEDNESDAY, SEPTEMBER 15, 1999
U.S. Senate,
Committee on Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:04 a.m., in
room SD-628, Dirksen Senate Office Building, Hon. Fred
Thompson, Chairman of the Committee, presiding.
Present: Senators Thompson, Voinovich, and Levin.
OPENING STATEMENT OF CHAIRMAN THOMPSON
Chairman Thompson. The Committee will come to order,
please.
This morning the Governmental Affairs Committee is holding
a hearing to consider the nomination of Sally Katzen to be the
Deputy Director for Management at the Office of Management and
Budget. The Deputy Director for Management at OMB has two
roles:
The first is external, by providing government-wide
leadership to Executive Branch agencies to improve program
performance. This role involves working with the departments
and agencies as well as the President's Management Council,
Chief Financial Officers Council, and other management and
financial groups.
The second role is internal to OMB. As a member of OMB
senior staff, the Deputy Director for Management participates
fully with the Director, the Deputy Director and other
appointees in determining how OMB will carry out its duties.
By virtue of the Chief Financial Officers Act of 1990, the
three statutory offices of OIRA, OFPP, and OFM report to the
Deputy Director for Management.
Ms. Katzen has filed responses to a biographical and
financial questionnaire, answered pre-hearing questions
submitted by the Committee, and had her financial statements
reviewed by the Office of Government Ethics. Without objection,
this information will be made a part of the hearing record,
with the exception of the financial data, which is on file in
the Committee offices.\1\
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\1\ The biographical and professional information appears in the
Appendix on page 39.
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In addition, the hearing record will be open for 2 weeks.
Our Committee rules require that all witnesses at
nomination hearings give their testimony under oath. Ms.
Katzen, would you please stand and raise your right hand? Do
you solemnly swear to tell the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Katzen. I do.
Chairman Thompson. Please be seated.
I want to yield to Senator Levin so that he can introduce
Ms. Katzen to the Committee. Senator Levin.
OPENING STATEMENT OF SENATOR LEVIN
Senator Levin. Mr. Chairman, thank you, and I am very
pleased indeed to be introducing Sally Katzen to the Committee
this morning. She has been before us many times, so in a sense
she needs no introduction. But I am delighted to say a few
words.
Sally lives in Washington, so she doesn't have a home State
Senator to sit next to her there. I think the reason that I was
selected for what I consider to be a treat and an honor is that
she is a graduate of the University of Michigan Law School, the
connection that we are relying on here for this pleasure.
We have a number of things in common, actually, Mr.
Chairman. We both went to small schools. She graduated magna
cum laude at her small liberal arts college--I graduated. We
both went to prestigious law schools, where she was the editor-
in-chief of her law review. That is where the similarity stops.
I remember reading a law review article once, but that is about
it.
As a matter of fact, I believe, although I am not certain
of this, that not only was she the editor-in-chief at the
Michigan Law Review, but she, I think, was the first woman to
serve in the capacity of editor-in-chief at any major law
school in the United States. She has been a pioneer in many
ways.
After she finished law school, her career turned into a
wonderful blend of private practice and devotion to public
service. She has balanced being a partner at a leading law firm
with a number of tours of duty in the Executive Branch. From
1979 to 1981, Sally served as the General Counsel and Deputy
Director for the Program on the Council of Wage and Price
Stability under President Carter. And from 1993 to 1998, she
served in one of the most difficult positions in any
administration, which is the Administrator of the Office of
Information and Regulatory Affairs of the OMB. Then from
February 1998 to June 1999, she served as Deputy Director of
the National Economic Council.
I am most familiar with her work, and I believe probably
most of us are most familiar with her work as the Administrator
of OIRA. And at the center of a myriad of competing interests
and concerns with consequences involving millions of lives and
billions of dollars, she carried out her responsibilities there
with intelligence and aplomb.
She brings to her work not only a tremendous intellectual
capacity, but a real passion for issues which make a big
difference in the lives of people, but they are too often
ignored by people because these issues can be dry ones. These
are the ways to make government work better. It is what this
Committee, led by our Chairman, spends so much time trying to
achieve. Sally has devoted a good part of her life to trying to
achieve common-sense government, government that cares,
government that is working well, but government that is cost-
effective, that doesn't squander resources, that tries to
assure that benefits of regulation justify costs of regulation.
I know both of us, Mr. Chairman, were particularly grateful
for the work that she did working with you and me on making the
Regulatory Improvement Act, Senate bill S. 746, a bill which
the administration said the President could sign into law if we
could get it to him intact. That took a lot of work on your
part, Mr. Chairman, and a number of us on the Committee working
on that bill, but Sally Katzen played an integral part in
making that happen.
And now she is up, as you pointed out, Mr. Chairman, for
the Deputy Director for Management position at OMB. Few people
come before us who are so well prepared for the position to
which she has been nominated. She has worked in her OIRA
capacity with every Executive Branch agency. She has worked
with us here on the Hill. She has worked with the people at the
White House. And, of course, her main goal has been public
service so that the public gets their dollar's worth out of our
efforts here in Washington.
I don't know of any public servant who has got a greater,
deeper respect for the institution of government, for the
offices with which she has worked, for the people with whom she
has worked. Sally Katzen is as bright as they come. She is a
top-notch lawyer. She is a stickler for detail. She is an
expert in the administrative process. As I indicated, she is
dedicated to a government that works better, costs less, and
delivers it services efficiently and effectively.
Beyond that, she is a loving wife and mother. Her husband
is with us this morning, and we welcome him. Sally Katzen
brings a special love for life, for people. She has a very
strong moral character. She has an extraordinary inner
strength, which has been tested in recent years. And if I can
add a personal note, she has a love for opera, which also makes
her special in my book.
Chairman Thompson. The Grand Ole Opry? [Laughter.]
Senator Levin. I was just going to say it, Mr. Chairman.
You beat me to the punch. I was going to say, I think at least
for this morning's purposes, that includes the Grand Ole Opry.
I think it may anyway include the Grand Ole Opry. But I am
delighted to present Sally Katzen to the Committee. We know her
well, so it is really, I guess, on behalf of many of us that I
am introducing her to our Committee this morning.
Chairman Thompson. Thank you very much for that wonderful
introduction.
At this point I would like to give Ms. Katzen an
opportunity to introduce anyone that she might care to
introduce who is with her here today.
Ms. Katzen. Thank you, Mr. Chairman. I would like to
introduce my husband, Timothy Dyk, who is a lawyer in private
practice and who has been supportive of me during my tenure in
this administration and encouraging me in this role as well;
and next to him, our son, Abraham B. Dyk, who I see got here
from school this morning and will be going directly back. He is
a senior in high school and thinking about his future full-
time.
Chairman Thompson. Wonderful. We welcome them here this
morning.
Senator Levin, do you have any further opening comments to
make?
Senator Levin. No.
Chairman Thompson. Ms. Katzen, do you have a statement that
you would like to make at this time?
TESTIMONY OF SALLY KATZEN, TO BE DEPUTY DIRECTOR FOR
MANAGEMENT, OFFICE OF MANAGEMENT AND BUDGET
Ms. Katzen. If I may, Mr. Chairman, a very short statement,
because I wanted to thank you and the Members of the Committee
for providing me this opportunity and for being so responsive,
graciously and with courtesy throughout this process. I am
truly appreciative of that.
I am particularly appreciative of the comments that Senator
Levin made on my behalf. It was indeed a glowing statement. I
am going to remember it for a long time. Thank you.
As both of you noted, this is the second time that I come
before this Committee asking for favorable consideration on my
nomination. Having reported me favorably for Administrator of
OIRA in May 1993, I served in that capacity until February
1998, and during that time I had a number of opportunities to
work closely with the staff and with the Members of this
Committee. I think I testified about 10 times.
I was always impressed by the quality of the discussion,
the seriousness of the questions, and the understanding and
insight that the Chairman and Members of this Committee brought
to the various policy issues. And I also know how much time and
attention this Committee has spent on the management, the ``M''
in OMB.
I share your view of the importance of improving management
of the Federal Government, and it is because I believe that
these issues are so critically important that I was deeply
honored to be nominated for this position of Deputy Director of
Management. And, again, thank you very much for this
opportunity.
Chairman Thompson. Thank you. As indicated earlier, the
Committee submitted some substantive pre-hearing questions to
the nominee, and the nominee has also met with Committee staff
to discuss a variety of issues of congressional concern
regarding the Office of Management at OMB. Your written
responses to these questions will be placed in the record.\1\
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\1\ The questionnaire appears in the Appendix on page 49.
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I will start my questioning with these three questions that
we ask of all nominees.
Ms. Katzen, is there anything that you are aware of in your
background which might present a conflict of interest with the
duties of the office to which you have been nominated?
Ms. Katzen. Not at all, sir. I have recused myself from
those matters that have been a subject that my husband has
worked on or that I have had a financial interest in. My assets
are in a blind trust, which has remained intact since it was
approved by OGE in 1993. And I will follow diligently and
completely any advice I get from the OMB ethics officer for
particular matters as we proceed.
Chairman Thompson. As I recall, the so-called blacklisting
issue was one that you had recused yourself on.
Ms. Katzen. I have recused myself.
Chairman Thompson. Could you tell us what the line of
responsibility then will be on that issue within OMB?
Ms. Katzen. This is actually a matter within the Office of
Procurement, OFPP, and there is a confirmed administrator of
OFPP, Deidre Lee, who will be maintaining the responsibility
for that. She is, until I am confirmed, the Acting DDM as well.
So she has combined in single-stop shopping management
responsibility for that issue.
Chairman Thompson. And who will supervise, who will be----
Ms. Katzen. The Director of OMB would ultimately be
responsible for any actions emerging from OMB.
Chairman Thompson. Do you know of anything, personal or
otherwise, that would in any way prevent you from fully and
honorably discharging responsibilities as Deputy Director for
Management at the Office of Management and Budget?
Ms. Katzen. No, sir.
Chairman Thompson. Do you agree without reservation to
respond to any reasonable summons to appear and testify before
any duly constituted committee of Congress if you are
confirmed?
Ms. Katzen. Yes, I do.
Chairman Thompson. All right. Thank you for those answers.
Ms. Katzen, I want to lay out some areas of concern here
this morning because this is one of the few opportunities that
Congress has to do that, that means anything. It has nothing to
do with your personal history or background. You have been an
exemplary public servant in many respects over the years, and I
have a great deal of personal admiration for you. But I am
increasingly concerned about the way our government operates
and how many of these agencies have operated and do operate. We
don't seem to be making any progress, and you are going to be
in a position to make a difference. And, frankly, I am not sure
that you agree with me that there is that much of a problem,
and I want to engage with you this morning on those issues.
It seems to me we can start out on the basis of agreement
on some things, and that is the ultimate responsibility of the
government to be as free as practically possible of waste,
fraud, abuse, and inefficiencies, and that agencies should
always be trying and striving certainly to fulfill their
obligations under the law and to do the best they can with
regard to those matters.
I think we can also agree that it is the responsibility of
the Office of Management and Budget to manage, and that has to
do with making these agencies do the right thing and making
them try, making them attempt to do the best that they can do
as far as saving the government money, not being inefficient.
All the surveys we see now that come from the Pugh
Institute and other national polling firms show, even in these
good times, a falling respect for our government among people,
especially among our young people. And so much of that,
according to them, has to do with their perception that
government is full of waste and fraud and abuse and
inefficiencies, and it has done really for those who are in the
business of governing instead of the public at large. I think
that there is a basis for that concern.
Then there is the responsibility of Congress, and
particularly this Committee, and in response to all that,
Congress has passed a series of statutes, financial management
statutes such as the Chief Financial Officers Act, information
management statutes such as the Clinger-Cohen Act, GPRA--the
Government Performance Results Act that you are so familiar
with--all in an attempt--recognizing this problem that we have
and in an attempt to do something about it.
So most recently I asked the GAO to do reports on the
performance plans that these agencies have. As you know, under
GPRA these agencies are supposed to come up with performance
plans. How do they plan to do their job? And how do they plan
to do their job better? And how are they going to address some
of these, in many cases, long-term systemic problems that these
agencies have?
Once we get those plans done, we evaluate them, see if they
are any good and how useful they are, and then the agencies
have to come back later and give us an accounting as to whether
or not they have met their goals and to what extent they have
met their goals. And you have got your plan, and then you have
got your results. It is called the Government Performance
Results Act. So all that is now in the works.
So we asked the GAO to take a look at these plans now that
have been submitted. The second go-round of plans now have been
submitted for fiscal year 2000. We had plans submitted for
fiscal year 1999, and they were pretty inadequate, to say the
least, for 1999. So we said let's take a look at them for 2000.
We have had IG reports along the same lines with regard to
some of these systemic problems.
So now we have got the results back in from the GAO, and
although there has been some marginal improvement in many of
the plans from 1999, that is not saying very much. We see the
same kinds of problems, and most disturbing to me with regard
to so many of these systemic problems, most of these agencies
don't even address in many cases up to half of the high-risk
list problems that they have had on their books for a long,
long time. They don't even set out goals for how they might try
to go about changing them. It is like they don't have any fear
that anything is going to happen if they don't.
I get the impression that it is basically thumbing their
nose at the Legislative Branch in not trying to at least come
up with some kind of a plan or some kind of a goal to solve
some of these problems.
So I can't emphasize my concerns strongly enough. The
conclusion is that OMB has not been doing its job. The
management part of OMB has in many cases been ignored. And this
leaves it up to Congress. What is our responsibility? And,
again, this is nothing obviously personal towards you. We all
have the greatest respect for you. But Congress, when it comes
right down to it, only has two powers, and one is the power of
the purse and the other one is the power of appointment. And
the power of appointment is what we are dealing with here
today.
Despite your admirable public record, when I read your
answers to questions--and I know you may have had some help
with this, maybe more help than you wanted or maybe should have
had. But I asked the question here: We appear to be making
little progress in resolving mission-critical management
problems that impede--I am reading from page 6 and 7 from your
answers, our questions and your answers--problems that impede
program performance, waste countless billions of dollars
annually, and undermine public confidence in the Federal
Government. The General Accounting Office and the inspectors
general tend to report on the same seemingly intractable
programs year after year. What changes do occur are mostly
adding rather than subtracting problems. The most obvious
example is GAO's high-risk list, which grows each time it is
updated and now stands at 26 problem areas. In your view, what
will it take to generate real movement on these problems?
And your response indicates there really is no problem.
Your response, you say: I am encouraged, rather than
discouraged, by the progress that has occurred over the last
few years. As noted above, the administration has identified 24
priority management objectives (PMOs). These are areas that are
in need of real change and which receive ongoing attention from
OMB's senior officials. The PMOs are published annually in the
President's budget, and OMB staff reports monthly to the
director regarding ongoing efforts. I have been advised that
most of the 26 mission-critical management problems discussed
in GAO's high-risk list are addressed in the PMOs. Resolving
each of the PMO objectives will require sustained commitment
over many years. Nonetheless, I believe OMB has developed an
effective approach to ensuring that senior officials remain
focused on these objectives.
So, I read this, and you looked at everything that causes
me so much concern--and you are encouraged by it, and the
administration has identified the problem. We publish it
annually. We report monthly. We are focused. And OMB has
developed an effective approach for ensuring that we remain
focused.
I wish you would let the rest of America know what this
effective approach is that OMB has developed that is addressing
these problems. So with all of that rather long-winded preface,
Ms. Katzen, I think you see the overall nature of my concern. I
want to talk to you in more specifics. But would you care to
respond at this point?
Ms. Katzen. Well, I am sorry that the impression from the
answer has apparently led to a misunderstanding. I did not in
any way, shape, or form intend to say that there is no problem
and that we have got it all well in hand. What I was saying was
simply starting as the optimistic cheerleader, I am encouraged
by what has happened in the last several years.
I have been living in this city now for almost 30 years and
have seen a lot of different attempts to try to get better
management of the Federal Government. And what I am encouraged
by is that it seems to be taking hold now. When the GPRA was
passed, it could have been just another law that was never paid
attention to. I think it is taking roots. Instead I think it is
actually going to have some results. But, it is going to take
some time.
And what I am encouraged by is that the agencies and
departments do seem to be paying more attention to this than
some of the other experiments in management that have happened
during the 1970's, during the 1980's, and in previous times.
I agree with you that there are serious management problems
that need to be addressed. The PMOs, the priority management
objectives, are exactly that. Twelve of them are cross-cutting
across the government, government-wide. First, is managing the
Y2K experience. There is nothing that was a greater management
challenge, to this administration or to any administration,
both in the private sector and State and local governments that
had to wrestle with getting ready for Y2K. That was something
that was a real challenge that needed to be wrestled with. That
is the No. 1 PMO.
The second one is using results to improve program
management. That is GPRA in all of its beauty and all of its
potential. And what I was trying to communicate here is that we
have structured our review of this in a way that provides, I
think, leadership. Can it be more focused? Yes. Can more be
done? Yes. Does more need to be done? Absolutely yes. But it
can't be a fiat from above. It has to be the agencies
themselves institutionalizing these types of approaches, or it
too will pass in the night. And for that reason, it seems to me
that it is essential to work with the agencies to understand
the different issues that have been raised.
I understand that you recently sent letters to all the
departments and agencies highlighting items on the high-risk
list, items from IG reports, items from GAO, and asking for a
status report. I think that is terrific, and there was a
discussion of this at the last PMC meeting. Agencies and
departments are expecting to be responsive and to let you know
which of those problems have, in fact, been corrected, which of
those remain a problem and why, and what they expect to do
about them.
So I think that we are heading in the right direction, and
that is why I was emphasizing the positive and not in any way
trying to disparage the job. That is one of the reasons I am
interested in having this position as DDM--to be able to work
on these kinds of issues--because I think more progress needs
to be made. And I share your commitment to do that.
Chairman Thompson. Well, I am interested in specifically
what you plan to do to make change, and if you send out word to
these agencies, if your appointment is a message to these
agencies that I am looking forward to working with you or
making progress and we need to partnership this thing on
through the process for another couple, 3 decades--because
people in the past have not done very well, either--then that
is very troubling to me.
Many of these things--you point out some of the things on
the high-risk list are government-wide, which it is still under
your purview. Then some are not. The high-risk list has
included some HUD programs since 1994, student financial aid
programs since 1990, farm loan programs since 1990, asset
forfeiture programs since 1990, DOD inventory management since
1990, DOD weapons system acquisition since 1990, DOD contract
management since 1992, Department of Energy contract management
since 1990, Superfund contract management since 1990, and NASA
contract management since 1990.
So these agencies continue year after year--since 1990, the
year the list came into existence, the high-risk list has grown
from 14 serious management problems to 26. And in the history
of the list, only six areas have come off because either agency
management was serious enough about solving the problem or the
problem just went away, like the savings and loan crisis. But
many of the original problems, 14, as a matter of fact, remain
on the list today, almost a decade later, such as IRS
receivables, student financial aid programs, DOD inventory,
management I mentioned, and NASA I mentioned. Only one area has
been removed in the last 5 years while seven have been added.
Ms. Katzen. Well, the fact that they are still on the list
means that they are getting and will continue to get attention.
There has been some progress. There is the Department of
Education's student financial area; with Congress' help this
has become a PBO, a performance-based organization, where they
are redoing the whole way that they are structuring that
operation. And I think we are seeing preliminarily very
positive results.
There are certain remaining issues, and you are correct to
point them out. My message to the agencies is not come let us
reason together or be sweetness and light and all is well and I
will just keep holding your hand. It is: I am here to support
you, but we also have very high expectations. And when budget
requests are submitted for the 2001 budget, we are taking, I
think, another step forward in integrating performance measures
and results----
Chairman Thompson. Well, I think Congress and the OMB have
both been derelict in that respect. There has been absolutely
no response from anybody from a budgetary standpoint to any of
these problems. You keep submitting the same thing, the same
monies, or increased monies for the same programs year after
year. We keep giving it year after year after year. So I am
encouraged to hear you say that. We all need to do a better job
there.
But let me just quickly--and then I will relent here for a
few minutes, but the next question then becomes: What are these
agencies doing? Are they making an attempt? And you look at
that and you get an even bleaker picture.
Of the 24 agencies, GAO has identified 300 major management
problems. GAO and the inspectors general, they have made
hundreds of recommendations to these agencies which remain
open. That means unresolved. That means nothing has been done
on them.
On the high-risk list alone, there are 26 major management
problems. There have been over 700 recommendations by the GAO
that remain open today. In total, there are over a thousand
open, unresolved recommendations. Many of them are years old.
And so we asked the GAO to go and look at their performance
plans, and they come back and so many of these areas, in agency
after agency after agency after agency, the agencies or the
departments don't even address the problem areas.
The Treasury, for example, there are five high-risk areas
that are there. Treasury in its performance plan addresses one
out of five. It doesn't even address goals for the other four.
The IRS is zero out of four. They don't even address--and I
could go on and on, and I think when it comes back around to
me, I will--on some of these other departments. Many of them,
in just thumbing through there, half of the problem areas, many
of which have been there for years, their plans don't even
address ways in which they plan to do anything about it. This
is going to require more than working together. This is going
to require leadership from the top. This is going to require
consequences. That is all I am saying.
It is imperative that the next person that holds this
position understand that.
I am going to relent now and call on Senator Levin.
Senator Levin. Thank you, Mr. Chairman.
I am looking at the high-risk list, and I am curious about
one thing. By the way, I basically agree that failure to comply
with requirements of law or internal requirements should have
consequences. I agree with the Chairman on that. But I am
curious about the high-risk list.
For instance, I am very much familiar with DOD inventory
management, DOD contract management, DOD weapons systems
acquisition. They are on the high-risk list. Does this list
show progress? Because I know for a fact there has been
progress in inventory management at the DOD. There are still
problems. I have no doubt it still belongs on the high-risk
list. It is here. But there has been significant progress
there.
Just taking that one issue, does this list reflect any
progress, or is it still on the list because there is a ways to
go?
Ms. Katzen. It remains on the list until it is resolved to
GAO's satisfaction, whether or not there has been progress. And
that was why I was referring to the Chairman's letters to the
departments and agencies in which he has asked for progress
reports, and DOD, among others, will be talking about the
progress that they have made and the distance they have to go
on inventory management, financial management, a number of
other areas in which they have taken giant steps, but there was
a very, very long way to go. And I think the responses to the
Chairman's letter will show that because, otherwise, as you
indicate, they are on the list and they stay on the list
without any indications that we are working on them or have
made any real progress.
And it is quite varied throughout the government. Some
agencies have made a lot of progress. Some have not made as
much as we would hope that they will soon make.
Senator Levin. And maybe some have made none. And so I
think it is useful----
Ms. Katzen. To review.
Senator Levin [continuing]. The Chairman's effort here, to
try to identify more detail. His letter I think is a very
useful effort.
Ms. Katzen. And we supported that--I am sorry.
Senator Levin. I say I very much support it, but I do think
it would be useful also if we could find a way maybe in our
annual listing to indicate if there has been some progress,
even though something is still on the list.
I would treat a situation very differently if half the
problems had been solved than if none of the problems had been
solved. It would give us a fuller picture.
By the way, Senator Lieberman--who is the Ranking Member of
the Committee here--regrets that he cannot be here this morning
because of a longstanding conflict. But he does extend his
support for and his confidence in our nominee here, Mr.
Chairman. I just wanted to mention that because I know he did
look forward to this hearing but he had this other commitment.
Can you tell us the relationship between your office and
the National Performance Review, which has been established by
the Vice President's office, which is outside of OMB? How do
these two offices or your future office relate--assuming you
are confirmed--how do they relate to each other?
Ms. Katzen. Historically, and I believe for the future, we
have worked very closely together. The NPR was originally
designed to be a vehicle for bringing in front-line government
employees from all the departments and agencies to talk about
how to deliver services better to the American taxpayer. And it
was a large group made up of detailees that was organized under
the Vice President's office but worked through and closely with
OMB, through the DDM's office and some of the other OMB
offices.
On regulatory issues, for example, I worked very closely
with NPR when I was at OIRA. I know that others in the
procurement office, on procurement reform and simplification
which led to the legislation that this Committee enacted, they
worked very closely with the NPR folks on that.
It is an aspect of this administration that there are a
variety of interagency groups. The Chairman mentioned as part
of the responsibilities of the DDM that, if confirmed, I would
chair the President's Management Council. There is a CIO
Council. There is a CFO Council. We have been working in
interagency groups, and NPR is one of those and brings together
resources from a variety of agencies and experiences from a
variety of agencies who were temporarily banded together.
As their work has evolved, they have a smaller staff or
reduced their staff, and we now work with them even more
closely, both in close proximity and shared responsibility for
this, because one of the aspects that they are looking at--
indeed, several of the aspects of what they are looking at--
have to do directly with management and, therefore, are clearly
within the purview of OMB and its responsibility.
Senator Levin. I know you believe, as many of us do, that
agencies should do cost/benefit analyses before they select a
particular regulatory approach. It may not be a be-all and end-
all, but it is an important tool.
What progress, if any, do you think we have made in the
agencies in obtaining these, getting them done, and in the way
that they are done? Could you comment on where are we? We have
an Executive Order. We haven't yet passed the bill we hope to
pass, but can you comment on the progress, if any, both in the
number of--how often are they made and how well are they done?
Ms. Katzen. I think there is improvement--I might borrow
from GAO and say ``moderate improvement''--in the agencies' use
of these tools. I can think of particularly striking examples
where there was enormous resistance, and through working with
the agencies, we showed them that by doing cost/benefit
analyses it didn't mean that you don't pursue the regulation,
but rather that you get much more benefits for the same amount
of costs, or that you can achieve the same benefit that you
wanted to at much less cost and, therefore, much greater
credibility and much less opposition.
Some agencies have moved very well and are doing more of
them and are doing them better. Recent legislation has asked
OMB to provide guidelines for cost/benefit analyses. I think I
have seen those in draft form about to be circulated and to be
subject to peer review. I think that will provide some greater
commonality, more consistency, but it is like almost anything
in the government: Different departments and agencies react
differently.
I was actually quite gratified during my tenure at OIRA by
the number of instances where I heard from senior officials as
well as staff people from the agencies saying, ``You know,
considering alternatives really works. We came up with this
interesting approach or this better way of doing it, and we
thank you for helping us.''
That reflects that they are now prepared to
institutionalize it for themselves and to try it again and
again and again. And that I think is the only way we are going
to get progress.
Senator Levin. I agree with the Chairman it is useful to
get agencies to institutionalize and to see the value on their
own. But it is also critically important that they do it. If an
Executive Order requires it or if a law requires it or a
regulation, it sometimes takes hitting someone with a two-by-
four or having consequences. Hopefully people will see the
value of it, but if not, there has got to be an effect of not
following what either an Executive Order or a directive
requires or a law requires.
And I do agree with the Chairman that I think your instinct
to try to show people the way and tell them it is really in
their interest to do so and do it on a cooperative basis is
fine, up to a point, but they have got to know that at the end
of that approach they really have no alternative when they
don't, when they should. So I will leave that, unless you would
like to comment.
Ms. Katzen. OMB's review under Executive Order 12866 will
not clear a regulation for publication unless the agency has
done a cost/benefit analysis. The most striking example during
my tenure was the PM/Ozone rules where the statute precluded
consideration of cost, but EPA nonetheless did a very
reputable, very credible, thoroughly complete analysis of the
costs and benefits. You can differ with EPA as to some of the
specifics of the analysis, but they went through the exercise
and they did that analysis, and that analysis was used both in
congressional hearings and in court litigation on the issue.
And that was because of the Executive Order and our insistence
that the analysis be prepared.
So I think there are, in fact, consequences, and the
Executive Order is being adhered to in that respect.
Senator Levin. My time is up. Thank you.
Chairman Thompson. Thank you very much. Senator Voinovich.
OPENING STATEMENT OF SENATOR VOINOVICH
Senator Voinovich. Good morning. First of all, I would like
to start out and say that your credentials are very impressive.
You certainly have had a great deal of experience at OMB. The
real question that I have from my experience with your office
and with you and my staff is whether or not you fit into, from
a public policy point of view, the approach or attitude that I
believe that someone should have at the Office of Management
and Budget.
According to my definition of the job, part of the
responsibility is to work with State and local government
organizations to improve and strengthen intergovernmental
relations and provide assistance to such governments with
respect to intergovernmental programs.
We have had a chance to deal with your office and with you
in your capacity with OIRA, and I have some very, very serious
concerns about your attitude in terms of intergovernmental
relationships and some of the responsibilities that you have
had with OIRA.
To begin with, the unfunded mandates reform legislation,
which I was intimately connected with and lobbied for with
Senator Glenn and with Chairman Roth at the time to get that
legislation passed, I really feel that your input into that,
for example, with Senator Glenn's staff in negotiating the
judicial review during the conference committee to the point
that UMRA's judicial review really is kind of toothless.
And it is the same kind of thing, Mr. Chairman, that we are
running into with the legislation that we are promoting right
now. The attitude there is they don't want the judicial review.
Just stay out of it, we don't need judicial review. And that is
an attitude and that is your point of view, but it is one that
I don't agree with.
Implementation of Title II of UMRA, which required agencies
to assess the impact of regulatory mandates on State and local
governments and the private sector, GAO prepared a report for
Senator Thompson that found that UMRA was not improving the way
agencies made rulemaking decisions. As a matter of fact, the
study examined 110 major regulations and found no risk
assessment or cost/benefit analysis were conducted in 80 of
these very, very important regulations. I think that was a
responsibility of your office to make sure that that was done.
In addition, I felt very strongly at the time that we ought
to set up a commission to look at areas where the Federal
Government could improve their relationship in terms of
unfunded mandates, areas where they were reaching way out more
than what they should. And I was finally convinced--and it was
the administration's point of view--that we ought not to set up
a separate commission. I don't remember if you were on the
committee or not, Chairman Thompson.
So we went along with the ACIR, and the ACIR did their
study, and they came back and they had some very specific
things that they thought the Federal Government had overreached
and that needed to be looked at. And the bottom line was that
that report was quashed by the administration and watered down,
and now, of course, we don't have any ACIR. But the attitude
seemed to reflect one of--it is none of their business. You
know, I am interested in federalism. I am interested in moving
more responsibility back to State and local government. I am
for looking at cost/benefit and risk assessment. And, quite
frankly, from my point of view, it hasn't happened.
The same way with the Federalism Accountability Act, that
is another area where cost/benefit was supposed to be looked
at. And you mentioned Executive Order 12612 on federalism, the
Reagan Executive Order. GAO released a report early this year
that found that out of 11,000 rules studied, only 5 were
accompanied by a federalism assessment as required by the
Executive Order.
That is one of the reasons why, Senator Levin, we are
talking about putting this in statute because it wasn't done by
the administration. And, quite frankly, I think it could have
been done by the administration.
And then the administration came up with a brand new
federalism order, and instead of sitting down and meeting with
the governors and the Big 7, they went ahead and did it. The
President was off someplace else, and they released it. And we
went berserk.
And it would seem to me that somebody in your
responsibility should have thought enough of the people in
State and local government to sit down and not just drop a bomb
on us. And, of course, we went to town to try to change this
issue. And I was there with Governor Carper back in Milwaukee
last year, and we kind of watered things down so we didn't have
a major confrontation. And since that time, some of the
problems have been reconciled.
But I must tell you, from my perspective and what I
consider from a public policy point of view, I don't think you
are aggressive enough. I don't think that you have the right
kind of approach and attitude that we need in someone in your
position.
I am being very candid with you. I am not for your
nomination. From all the experience that I have had with you
and your people, and my people have had, I don't believe--and I
say it in all due respect, not in terms of integrity, and I
hate to say this in front of your husband and your son. But I
just disagree with your approach as I have seen it in many,
many instances.
Now, you talked about NAAQS. I spent 100 hours trying to
get Congress and Carol Browner and the EPA and the
administration to really look at the new ambient air standards
for ozone and particulate matter. And OMB was supposed to look
at that, and you just talked about the big stack of things that
you did. But when OMB did their impartial, objective review of
that, they came back and said that EPA hadn't done some things
that they should have done and pointed out that there were some
problems in terms of the cost versus the risk. And when it came
time to submit that report by OMB, it was watered down because
some people in EPA felt that it would hurt them in terms of
their proposed ambient air rules--it wasn't supportive of what
they were doing.
Now, I consider OMB to be an independent agency and that
they should have expressed their concern about this and the
fact that there were some problems with it. And, quite frankly,
I think if OMB had done their job and had been more aggressive
within the administration, perhaps we wouldn't have had those
ambient air standards for particulate matter and for ozone. And
now we have had a lawsuit filed, and we have been successful,
and now we are trying to negotiate some more. But the job of
that office should be more aggressive. We are talking about the
Government Performance Results Act today.
From what I can see--I have looked at the Government
Performance Results Act. I have looked at some of the things
that--I have had two hearings with Health and Human Services
and the Department of Education. There was a requirement there
that there be some coordination when they are putting their
performance plans together. It wasn't done. And finally
Secretary Riley said to me, ``Well, I am glad you pointed this
out, I am going to bring this into my office.''
It just seems that we need to have some agency around
here--and I think it is the Office of Management and Budget--
that ought to be more aggressive in following through on some
of these things and be very independent and not get rolled by
agencies that say, what you are doing is interfering with what
we are supposed to be--what we want to do. That is part of what
the job is.
I have had hearings and started hearings on quality
management. I think the A-team, the culture of the A-team in
the Federal Government is abominable. I have met with the
presidents of the two largest labor unions. No quality
management, no money for retraining, no incentive package. And
then we have written to OMB, their attitude was we are not
involved in quality, that is not our responsibility.
And so I just have some real serious problems, not with you
personally. You are a fine woman. You are qualified and so
forth. But your attitude--your approach to it is not the
approach that I believe that we need to have at the Office of
Management and Budget. I think that it is very frustrating to
see what is going on around this place. Report after report,
and nobody seems to be following up and staying on top of it. I
think that is the role that OMB--I want somebody in there that
is aggressive, that is going to go after it and say the
Executive Order says do risk assessment, by golly, you ought
to--we are going to make sure you do it. And we are going to
question it. You have the Government Performance Results Act.
We want to make sure that you do that.
So I just am very, very concerned, and I wanted to say this
publicly so that you would have a chance, because I am going to
continue to repeat it to my colleagues, and I am going to do
what I can to make sure, very honestly, that you are not
appointed to this position. And I think it is fair for me to
lay it out for you today so that at least your side of it can
come out.
Ms. Katzen. Well, I appreciate your giving me an
opportunity to respond because there are some aspects of your
comments that I would like to address, whether or not it
convinces you that my nomination should go forward.
On the issue of federalism, part of my responsibility at
OIRA was to enhance the relationships between the State and
local governments. When we drafted Executive Order 12866, which
is the regulatory review Executive Order, we crafted a
particular section, which had never been in any of the Reagan
orders at all, that said we would meet quarterly with State and
local governments to find out what was on their mind, what
their concerns are, what their thoughts were, and how best to
proceed. That was a process that we set up. We set it up not
just because I think it is important but also the President,
having been a former governor and been very active in NGA, was
very dedicated to strengthening the relationship between the
Federal Government and our partners in State and local
governments.
Right after the President signed Executive Order 12866, we
presented for him an Executive Order 12875. I remember these
numbers because I spent hours and hours negotiating them with
the agencies and I think being fairly aggressive in shoving
down their throats some things that they were not particularly
interested in that would require them to consult with State and
local governments whenever there was any allegation of an
unfunded mandate being imposed upon them. And it was Executive
Order 12875 that was codified in the Unfunded Mandates Reform
Act, which the President supported and which he signed. They
had tried to get that through the Congress for a while, and it
was not successful.
We were able to have it enacted into law, and my office and
I personally spent a substantial amount of time to make sure
that it would happen and that we would have that kind of
legislation.
With respect to the failure to consult with the State and
local officials before the promulgation of the revised
Executive Order last summer, I have said that it was a mistake,
a terrible mistake, a regrettable mistake, which I have spent
the last year trying to rectify. And I think if you talk with
the representatives of the Big 7, they will talk about the
number of hours, the amount of effort, and somewhat of the
passion that I have devoted to ensuring that we could produce a
viable, good, solid, strong federalism order. And when we
released the new Executive Order a couple of weeks ago or a
couple of months ago, we had a letter in hand as well as
statements from all of the Big 7 organizations, including the
NGA, with Governor Leavitt and Governor Carper signing, saying
that we had met with them, that we had proceeded in good faith,
that we had been responsive to their concerns, that the order
that we produced was stronger than the previous order, that it
was more protective, that it was more in favor of a strong
partnership.
That was the work that I was trying to accomplish, and
whether I was sufficiently aggressive at all of the different
stages I will leave for others to judge rather than for myself.
Senator Voinovich. May I respond to that?
Ms. Katzen. Certainly.
Senator Voinovich. Because I know I am the Leader's liaison
between the Senate and the Big 7, and I spend a lot of time
with them. They really weren't that happy, but they felt that
it got--it was fine. It was just let's let it go, it is the end
of the administration, fine, we worked it out. And I would like
to say to you that they were not as enthusiastic as you have
portrayed here today.
I think the real issue here is that you have a former
governor who is the President of the United States, who is the
former chairman of the National Governors' Association, and
within his own house, no consultation. In fact, the Big 7
people who were there quoted you as saying there will be no
Reagan Executive Order on federalism by the time this
administration leaves office.
In other words, from a governmental point of view, in terms
of where your heart is, I am not sure it is where it ought to
be in terms of the things that I think are important for that
office.
Ms. Katzen. Senator, I say to you under oath that I have
been and will remain supportive of strong relations and
partnerships with the State and local governments. When I said
``no Reagan Executive Order will be in place,'' I was
responding to what the President had said in the East Room of
the White House when he spoke to the NGA because he said it
wasn't followed by the Reagan administration, it wasn't
followed by the Bush administration. He wanted one that the
agencies will follow.
And so when I say we didn't want the Reagan order, it was
that we didn't want one that was just a piece of paper. As you
indicated, GAO found that there were 11,000-some regs that had
never cited it. If GAO had done the exact same study 10 years
previously, 5 years previously, they would have found the exact
same thing because nobody had been following it.
What we have in place now is, I trust, I hope, I pray, an
order that can, in fact, will, in fact, live up to the
expectations that we have because I do not disagree with you on
the objective. And when I said no Reagan order, it is because I
want one that will work. And President Clinton said he wanted
to sign one that would make a difference. And that is what I
think we produced.
Now, one of the things, again, that we built into this
Executive Order that was not in previous Executive Orders is
that 180 days from the effective date, the Director of OMB, and
the head of Intergovernmental Affairs, will sit down with the
principals and the executive directors of the Big 7 to make
sure that our expectations are being fulfilled, that we are not
just on a paper process. That provision was put in the new
Executive Order specifically to make sure that we got results,
that we were able to live up to the expectations.
If I am coming on a little bit stronger than I should, it
is just because I believe our objectives here are the same. And
what we wanted to do was have something that the agencies would
follow that they could be held accountable for. There were a
variety of areas in which we strengthened the Executive Order
beyond the Reagan Executive Order, so that it would, in fact,
work.
Senator Voinovich. Well, see, from my perspective, in terms
of what that required, that could have been handled from a
management point of view. If the State of Ohio--I had an
Executive Order, and it required our agencies to look at cost/
benefit assessment, we would have had our people in. We would
have talked to them. We would have had a program to follow up
on it. I wouldn't have cared too much about what the language
is. The purpose of it was to try and get--and I would have laid
out a little plan for it, and I think that could have happened
in this administration.
Here we are at the end of the administration, and we
finally got it, in 180 days you will be gone, and then we will
have a new administration. And I am just saying that a lot of
this--it is the aggressiveness that I am talking about. We have
an Executive Order. Somebody should have--and OMB, that is
their responsibility, should have taken hold and ran with it.
The unfunded mandates legislation that also required review
of things in terms of cost, was not done.
Ms. Katzen. With respect to implementation of Title II of
UMRA, the Unfunded Mandates Act, it talks about significant
regulations, and we use the definition of economically
significant--$100 million in costs. There is no finding that
any of those that were within that framework that had any
impact on State or local governments were not correctly
analyzed. GAO was talking about all regulations, and not all
regulations are subject to UMRA.
There is a statutory dollar cutoff for legislation. There
was a dollar cutoff for regulations. And OMB has submitted once
a year a list of the regulations and the portions of the
preamble where alternative approaches are considered, where
there is a recitation of the amount of consultation that has
taken place with State and local government officials, a
summary of their concerns, a summary of what, if anything, was
done to respond to their concerns, and, where their concerns
were not responded to, why they were not responded to. Those
are all in the preamble of the regulations which have been sent
here to this Committee and to the Congress under UMRA.
And so on that particular issue, I would have to, I am
afraid, somewhat aggressively say that I think we have actually
implemented the law as the law was written and as the Executive
Order was written. But I will follow up on some of these other
issues if you wish.
Senator Voinovich. You disagree with the GAO report that
said the study examined 110 major regulations and found that no
risk assessment or cost/benefit analysis was conducted in 80 of
these regulations as required by UMRA?
Ms. Katzen. Because of the dollar cutoff that is set forth
in the Executive Order and in the legislation, and that was the
reason why.
Senator Voinovich. We will follow up on that.
Ms. Katzen. Thank you very much.
Chairman Thompson. Thank you.
The federalism issue, of course, is one that is of concern
to me also, and I think all of us here this morning, we have
worked on this issue. You can see the concern as we go forward
as indicated by what has happened in the past. It is always
difficult to confront an argument that prior administrations
did these various things, so we are going to do the same thing.
All I know is that my recollection is that President Bush
directed, as the President of the United States, directed that
these departments follow the Reagan Executive Order. Jim
Miller, as head of OMB, directed that they be followed.
When you all passed, in the dead of night over here this--
abrogated the Reagan Executive Order and came up with something
else, as Senator Voinovich said, the Big 7 went wild. I mean,
there was some reason why they thought that was a worse thing
for them than had been previously the case.
I introduced a resolution that passed unanimously in the
Senate calling for repeal of what you had done, and the White
House suspended it and started working with the Big 7 to draft
a new order. So that was all the background coming up to this
resolution that came about. As the Senator pointed out, 11,000
rules or regulations, 5 federalism assessments, over 1,900
regulations that EPA issued between 1996 and 1998. GAO found
that EPA had not prepared a single federalism assessment. It
never even mentioned Executive Order 12612 in any of the 1,900
final regulations issued.
So the question of where you heart is a valid one as we go
forward, especially when we look at the language. I don't know
whether the Big 7 is delighted or just got tired and said we
have fought this long enough, it is not going to last that much
longer or what. But when I look at the language of the new
Executive Order, it says, ``I am concerned that there are some
weakening changes made to the Reagan order that would lead to
the opposite result that you intend.''
For example, the new Executive Order requires three hurdles
to be crossed before a federalism summary impact statement is
required. The regulation, first, must have federalism
implications; second, must impose substantial direct compliance
costs on State and local government; and third, this is not
required by statute.
It seems to me that this third condition, that the rule
must not be required by statute, raises a high hurdle for the
requirement for a federalism impact statement, because
presumably most of the major rules that concern State and local
governments are required by statute. I mean, what you have done
here by setting out your criteria for when an impact statement
is required, you have set the hurdle so high, you have exempted
all of the stuff that really counts.
So that is kind of the coup de grace, it looks to me like
when you look at this, in terms of what State and local
governments can expect in terms of consultation.
And on the consultation issue, Senator Levin--and I just
spoke with him about this. He asked the GAO to find out--you
say you told him, consult and you are committed to
consultation. Well, let's look at the results. The proof is in
the pudding. Senator Levin asked GAO to find out how many major
rules involved consultation with State and local governments,
setting aside the issue of whether or not a federalism
assessment was done.
GAO reported to Senator Levin that based on a quick review
of the 117 major rules issued between 1996 and 1998, December
1998, 96 of those rules did not mention intergovernmental
consultation, despite the fact that 32 of those 96 rules had a
federalism impact. In fact, 15 of the 32 rules said that they
were going to preempt State law.
So, I must say when it comes to the issue of federalism and
the history of the administration and your personal history in
shepherding all this thing through, I think there is great
cause for concern on the part of State and local governments.
Ms. Katzen. If I could just make two modest points, the
section that you were reading from is, I believe, subsection B,
which was specifically an embodiment of the unfunded mandates
legislation. It said that where there are unfunded mandates
imposed by statute, that is a congressional decision that has
been made.
If Congress says you must do A, and the agency then does A,
that would not trigger the full round of consultations because
whatever consultations may take place are not going to affect
the end result since the agency will do what Congress has told
it to do.
There is also subsection B in the Executive Order which
does not have any statutory language. It says that if you have
federalism implication and you preempt, you are to do the
consultation. There is no limitation in any way, shape, or form
about a statutory bar. That was what we added to this Executive
Order to solve, I think, that problem.
Second, with respect to whether or not the Reagan Executive
Order was actually cited, I think Senator Levin's follow-up
helped get us some part of the way to what types of
consultation took place, whether or not they cited the
Executive Order as such. And there are a number of different
types of regulations which may have a federalism impact in some
way, shape, or form that would be unaffected: Where you have
something like auto safety standards, or where you have the Med
fly attacks the peach crop in California and USDA has to issue
a quarantine, that is done through regulation, and that would
be done on an emergency basis. There are a variety of different
explanations.
I would be very interested and indeed most eager to sit
down and look at the 36 instances where there is a federalism
impact and no consultation took place and see what went wrong,
because that shouldn't be happening.
But I tell you that there probably are instances where the
agency did not do what the agency should have done, and that is
why I would like to know. We did this early on after the
Congressional Review Act was passed, which requires that all
regulations, once issued by the Executive Branch, come and sit
before Congress. GAO did a study and said that there were 1,000
regs that had never been sent to Congress, and I said I want
the list. I want to go through these. I want to know which
agency did not do what it should, who was responsible, and why.
And it turned out that there were a couple of instances of
good faith misunderstanding. But there were a number of
instances where, in fact, they had been sent to the Congress
but, they had been sent to the wrong committee. There were a
number of different explanations.
But I asked my staff and I personally got involved in
reviewing that list, so that if an agency was not doing what it
was supposed to do, we took them to task. And if I had to go to
the Secretary of the Department I did that, and in one instance
I did and said we are not getting the cooperation we need.
So that is the kind of follow-up that I would take--when I
said to Senator Voinovich that I would like to proceed in this
area. If the agencies are not doing what they are supposed to
do, I am happy to spend my time and my effort to make sure that
they do what they are supposed to do and I would work with this
Committee, as I have in the past, to make sure that they are
following the rules.
Chairman Thompson. Thank you. Senator Levin.
Senator Levin. I want to go back to the federalism
assessments for a moment. There have been previous Executive
Orders on that subject which had been ignored, as I understand
it. Is that correct?
Ms. Katzen. Yes, it is.
Senator Levin. This is under President Reagan and President
Bush. Is that correct?
Ms. Katzen. That is correct. That is my understanding. I
was not there at the time, but this is what my staff, who was
there, informed me.
Senator Levin. So you came along or the President came
along and attempted a new Executive Order which has been
ignored in part, ignored mainly, complied with? How would you
summarize it, on the federalism assessment question?
Ms. Katzen. That was the order that was issued last summer
which met with such scorn and derision that it was immediately
suspended.
Senator Levin. OK.
Ms. Katzen. And so we have now issued a revised Executive
Order, and I believe its effective date is within the next few
weeks--if it hasn't been the last couple of weeks. So there has
been no Executive Order signed by this President that would
have required a federalism assessment during this period.
Senator Levin. Does the order on consultation?
Ms. Katzen. The order on consultation, Executive Order
12875, that I believe was followed, was not applicable in areas
of preemption, and that was why I wanted to look at the list.
What Executive Order 12875 referred to was the unfunded
mandates issue.
When we first arrived in 1993-94, the issue we heard about
constantly was unfunded mandates. No one was talking about
preemption at that point. They were talking about unfunded
mandates and the gross unfairness of having the Federal
Government tell a State or local body: You must do something,
but we are not giving you the funds to carry it out. And they
were legitimately concerned about that, and that was the origin
of Executive Order 12875 consultations.
Senator Levin. A number of questions have been raised by
Senator Voinovich, and one of those has to do with that GAO
study about what percentage--in what percentage of cases has
the unfunded mandates requirement been ignored. And you are
going to submit that to us for the record, or we are going to
double-check that, I think Senator Voinovich said, because what
you have told us here this morning is that where it has not
been complied with is where the law said it was not in effect.
Is that correct?
Ms. Katzen. My understanding is that under Title II the
obligations to undertake the analysis were tied to the
economically significant regulations, and that in those
instances it was carried out. In other instances, it would have
not been required to be carried out.
Senator Levin. All right. I think it is a very important
point. I think it is a fairness point, too. And Senator
Voinovich is a very fair person. I think we all know him and
admire him for both his directness but also for his fairness.
And I would hope that at least on that point that we would
withhold final judgment until we can get the clarification of
that.
Senator Voinovich. I am--that is why I brought it up now.
Senator Levin. And so I do think it would be useful for
whoever does that review, if I could ask my good friend,
Senator Voinovich, whether you do the review or both do it,
that it be shared with the Members of the Committee. Perhaps we
could directly ask Ms. Katzen to also submit for the record her
review when she goes back and looks at it. I think it would be
useful to all of us.
Chairman Thompson. Is that agreeable?
Ms. Katzen. That is fine. Thank you.\1\
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\1\ The information appears in the Appendix on page 86.
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Senator Levin. We have recently approved in this Committee
a bill which our Chairman and others of us have introduced. We
have supported the Chairman on a Federalism Accountability Act.
It is a very important bill. I think the vote was something
like 12-2 in the Committee supporting this bill, and you have
worked with us in creating this bill. But now apparently it is
running into some other difficulties, including opposition from
both the Chamber of Commerce and the environmental community.
They are now apparently in league and opposed to our Federalism
Accountability Act.
One of the reasons for the act is that the requirement in
the Executive Order that there be a federalism assessment has
been ignored over the last decade, or however long that
Executive Order of President Reagan was in effect. And we are
trying to put into law something so that it can't be ignored by
the agencies. When the agencies ignore an Executive Order, too
often there are no consequences. If they ignore a law, it is at
their peril. So one of the purposes of the bill is that we put
into law the federalism assessment.
I think we have worked out at least most of the problems.
The administration hasn't signed off on it, apparently, but at
least a number of the problems have been addressed in this
bill. If we can get it to the floor, we will then run into
opposition from a number of sources, including apparently,
again, the Chamber of Commerce, environmental groups and so
forth, but at least this Committee is trying very hard to get
to the floor and get passed a bill which will put into law a
federalism assessment so we don't rely on Executive Branch
enforcement of an Executive Order, but we have a statutory
requirement.
Can you tell us as to whether or not in your judgment that
requirement that there be an assessment should be in law given
the history of ignoring an Executive Order on this point? Do
you have any problem with our putting that into law, just that
part that there be an assessment? Not the specifics on
presumption and judicial review. I am just talking about that
part of the bill.
Ms. Katzen. My initial response would be that the agencies,
when they know that the President is supportive of something,
do what he has asked them to do, and that whether to codify it
or not would depend on whether, once it takes effect, the
agencies are following it.
But on the substance, it seems to me to pass a law when
there is no need is not all that productive. On the other hand,
if we have----
Senator Levin. Isn't there a proven need here if we had
agencies ignoring an Executive Order?
Ms. Katzen. It is my view that they have not been ignoring
the Executive Orders that the President has, in fact, issued in
this area, Executive Order 12875 I think being the principal
one.
If there is a pattern of disregard or if there is now so
much suspicion that it is impossible to have any trust in the
agencies, then on the policy I think that the provisions of the
bill--it is S. 1214, I believe--as to what would be the content
of a federalism assessment I think are responsible and
represent what the agencies should be doing.
Senator Levin. One last question. What would you estimate
are the top, say, two areas with respect to management that you
think need the greatest focus right now?
Ms. Katzen. If I were confirmed as DDM, I have a top-three
list. The first is better integration of the ``M'' and the
``B.'' I think that the management and the budget go hand in
hand, and I think it is what the Government Performance Results
Act is all about, trying to put together management and
budgeting. OMB has taken a number of steps in getting ready for
the better merger of management and budget, and this is
something which I would like to see take a dramatic step
forward.
Second are the PMOs, the priority management objectives,
from Y2K to agency specific issues, such as the HUD housing and
the DOD inventory management. These are the issues which have
been identified time and again as demanding heightened
attention and aggressive behavior, and these are areas in which
some progress has been made in some and not nearly enough in
others. And they run the gamut, but they all bring efficient,
effective government for the American people for the money that
they spend.
And I guess the third area is one that is not on this list
now, and it is one that we have not really talked about, except
it was touched on a little bit in the Chairman's opening
comments, and that is the issue of human resources, the human
capital issue. Do we have the right skill sets? Do we have the
right training? Do we have the right incentives for the right
people to come and serve in the government at all levels?
I think that the human capital dimension is one that has
too long been overlooked by everyone and that serious work can
and should be done in that area. And that would be the third of
my top three.
Senator Levin. Thank you, Mr. Chairman.
Chairman Thompson. Did you have a comment, Senator
Voinovich?
Senator Voinovich. I just had one comment, and it refers to
approaches and attitude.
We have been working on the Federalism Accountability Act,
and we know that the administration has had some problems with
judicial review. We thought that we accommodated the
administration's concern when we removed part of the rule of
construction.
According to my staff, your staffers came in on Monday with
a new list of changes and concerns that they have with respect
to the federalism bill. And we were also told that this list
was not exhaustive and there could be other suggested changes
on the way.
Now, we thought we had worked things out, and then, well,
no, you haven't.
Senator Levin. Would you yield on that?
Senator Voinovich. Sure.
Senator Levin. Just on that point, because my understanding
is that we requested whether or not there were issues in
addition to the ones which had been worked out, and I don't
think it was ever represented to us that everything had been
worked out. But our recollections may be a little different on
that, but I thought I would at least say that we requested that
list. That was for our purposes; we want to know whether or not
the President would sign it, veto it, or what.
Thank you for yielding.
Ms. Katzen. My understanding is that when we were
originally shown the bill, we indicated that there were two or
three areas that it seemed to us were just non-starters and
that we needed to really work through. And on those three
areas, the amendments that were reported by this Committee were
responsive to our concerns, thus sort of wiping out the veto
threat hanging over the whole bill, as these changes were, in
fact, responsive.
We had identified a number of other things, and some of
them are very trivial. For example, remember in the very first
meeting I had, I noted that the definition of ``State''
included territories. And I said, there is a very different
constitutional relationship between Maine and the United States
and between the Marianas and the United States. And there are
certain things that we can do or should be doing with the
Marianas that shouldn't be judged by what we can do or
shouldn't do with Maine.
And I said there are a host of these things. One of the
issues that I understand raised a lot of concern was the
definition of ``rule.'' Instead of using Section 553 from the
APA, the bill uses Section 551, which includes policy
statements. The Secretary of the Treasury has informed us that
this would cover every time there is a request for a revenue
ruling from any individual or any corporation to not have to
pay a tax. Also, this will have federalism implications for
those States that use the Federal base for calculating income
taxes. As a result, the IRS cannot issue any revenue rulings
without doing a federalism assessment; and that since revenue
rulings come not just from headquarters here in D.C. but from
regional offices throughout the country. They would have to
shut down their entire declaratory judgment rulings process.
Now, this came to me, and I said, that this is a problem.
Let's take this up to the Committee staff. We got that comment
by sending the bill around to all of the agencies. They came
back with a whole host of things. We winnowed out the comments
that we thought didn't make a whole lot of sense. But on
something like that, I said, yes, go up and explain to them
this is the problem and see if there is a response. I have to
be able, when we go to the President and say he should sign the
bill, not say, ``And the Secretary of the Treasury is going to
shut down the IRS.'' So we need to have some discussion on
these points.
I don't know what the reaction was to the list. I am
surprised that it was represented that it is either the
beginning or the middle and not the end, because we did do what
I understood Senator Levin had wanted us to do. We asked the
agencies, ``Give us your problems,'' and we only presented
those that struck us as reasonable, rational, and at least the
subject of appropriate discussion. I don't know what the
disposition of that would be, but we thought it important to
raise it now rather than sandbag somebody afterwards and say,
``oh, here is this problem.''
So, again, our staff was trying to be helpful in raising
issues that the agencies had raised, and it is not my
understanding that there is another list lying in wait or
anything of that ilk.
Senator Voinovich. So there wasn't any representation that
it wasn't exhaustive and that there were no----
Ms. Katzen. I don't know. I was not at the meeting. But I
am surprised to hear that somebody would say it was not
exhaustive, because it was intended to be a complete and
comprehensive list. But I was not at the meeting, and I do not
know. There was only one person from OMB that was there. We
also invited members from the different departments and
agencies who could speak firsthand. There was someone from the
Treasury Department who could talk about this issue rather than
having someone from OMB be the spokesperson. I don't know who
may have made this representation or on what authority. But it
didn't come from me. I do not believe it came from the OMB
individual, but I will find out.
Senator Voinovich. Thank you.
Chairman Thompson. I would think the legislative language
would be broad enough that by regulation you could exempt some
of these things. I mean, when you throw out to all the agencies
any theoretical possibility of any problem they might have, you
know what results you are going to get. We are looking at it--
for years the requirement has been ignored, and then we come up
with some statutory language, and then, the world is going to
come to an end because every time you turn around you are going
to have to do an assessment. There has to be some reasonable
middle ground here.
Ms. Katzen. Yes.
Chairman Thompson. But I want to talk about another subject
that is under your jurisdiction, or was. As OIRA Administrator,
you were responsible for, among other things, reviewing
regulations to ensure that they comply with Executive Order
12866, which requires a cost/benefit analysis on these rules
and so forth.
The GAO report and testimony show that the quality of
agency cost/benefit analysis sometimes is very poor. Would you
agree with that?
Ms. Katzen. Yes.
Chairman Thompson. Moreover, a study of Bob Hahn of the
American Enterprise Institute shows that about half of the
major rules he studied between 1990 and 1995, the benefits did
not justify the cost. Finally, a Harvard study indicates that
we could save 60,000 more lives per year at no additional cost
by setting smarter priorities.
That is in kind of background to the point I want to
discuss, with you, and that is, the EPA PM/Ozone Rule that I
think you referred to, and I think you used that as an example
of where cost/benefit analysis was thick, anyway. And I assume
you think it was well done. But apparently the court did not.
OIRA staff, I think, originally raised problems with the
EPA's cost/benefit analysis on particulate matter in ozone
under the Clean Air Act. I think the OMB staff and other
officials raised concern that EPA was not complying with the
administration's guidelines for cost/benefit analysis and risk
assessment and was grossly underestimating the cost of the
proposed regulations. But EPA went forward anyway.
In fact, the President announced this policy even before
the final rule was reviewed by OMB, as I understand it, which
raises real questions about how he views the role of OIRA and
OMB and the administration's regulatory policy.
But be that as it may, the D.C. court remanded the rule,
EPA's rule, because, first, EPA failed to even consider the
potential substitution risk of the ozone standard. For example,
in reducing ozone to protect against asthma, EPA might be
creating new risk from skin cancer and cataracts since ozone
can shield people from the sun's ultraviolet rays.
Second, the court held that EPA's interpretation of the
Clean Air Act violated the non-delegation doctrine because EPA
failed to establish any intelligible principles that would
limit its discretion in implementing the act. Apparently, EPA
was taking the position it could do anything it wanted to. And,
ironically, applying the principles of our Regulatory
Improvement Act arguably might have saved the largest
regulatory initiative of this administration because EPA would
have been required to consider substitution risk and could have
used the risk assessment and substitution risk principles to
guide this discretion in implementation of the Clean Air Act.
So basically EPA was deficient, according to the court, in
all these different respects, and the OMB staff in their
analysis in their draft response, original OMB draft response
of January 8, 1997, they said, ``While these analyses''--
talking about the EPA analyses--``produce much useful
information, there were several areas in which they did not
fully conform to the principles discussed in the best practices
document.'' That has to do with cost/benefit analysis and these
other things we mentioned.
But by the time it got to be the final OMB response,
submitted to the Commerce Committee on January 15, you
concluded that these analyses were consistent with the best
practices document. So it looks to me like you had your
professionals inside the OMB over there doing their job, and
they saw what the court saw early on. And by the time it got up
to official OMB response, their minds had been changed and they
were consistent with best practices after all.
To me, these things--if it is a policy matter, we can
disagree on policy matters. But if it is a management matter
and an objective professional analysis, that is something else.
We really should not let pressure come to bear with regard to
those matters. If we can't have an agreement as to sound
management policies, then that doesn't leave us with very much
to work with.
So I must say that your statement earlier about EPA's cost/
benefit analysis and all, I don't understand where you--how you
feel comfortable with that and doing what the court did.
Ms. Katzen. It has been several years since I taught
administrative law, but I remember vaguely that the non-
delegation doctrine, which had last been heard from in the
early 1930's as a concern about some of the New Deal
legislation and had not been heard of again except in dissents,
goes to the question of whether there is ample guidelines given
by the Legislative Branch to the Executive Branch agency to
carry out a function or whether the agency has exceeded the
delegation from the Legislative Branch. And the court here said
that in the Clean Air Act there wasn't the kind of criteria
that would enable the agency to proceed.
As I understand it, this decision is not yet final. There
has either been a request for rehearing or for rehearing en
banc by the court on that particular point. But that does not
go to whether or not they accurately did an analysis of the
costs and the benefits.
The correspondence that you are referring to was one that
apparently a series of questions was asked. Staff drafted some
answers. They were then reviewed by staff, as well as by policy
people, who thought that the initial draft was, as initial
drafts sometimes are, a little too strident, a little too
critical, when it was not appropriate to do so. And this
happens almost in any organization where the draft starts at
the bottom and it gets drafted and as it gets----
Chairman Thompson. At the bottom it says it is black and at
the top it says it is white. That is a little more than
stridency, I think.
Ms. Katzen. But I think, that in terms of the ultimate
objective, the thing that we care about is are people doing the
analysis? Are agencies thinking about the alternatives?
I was pleasantly surprised during my consultations with the
NGA that they said that EPA was one of the best agencies, that
EPA had one of the better State and local federalism officers,
and that consultation on some of the regulations had been among
the best that they had seen in the Federal Government. I
thought that that was very important because so much of what
EPA does impacts the States directly.
That may have been one person's view, and it is not shared
by others, and it may have only been in the case of one or two
rules, which does not apply to other rules. But I am suggesting
that the experiences of the agencies are quite varied. What I
was talking about, the PM/Ozone rules, is that EPA was not
required to do a cost-benefit analysis under the law. The Clean
Air Act specifically says, ``without consideration of cost.''
It is health-based standard.
And yet because of the executive order, EPA did put
together a very comprehensive, some might say flawed, in part,
but they did do a very comprehensive cost-benefit analysis, and
I thought that was something worth commending them for and
encouraging even greater dedication.
Chairman Thompson. Well, your original, your OMB staff said
it was flawed originally.
Ms. Katzen. And changes were made in the cost-benefit
analysis during the review process.
Chairman Thompson. Consider the thing in context. The GAO
reports, and you agree, that a cost-benefit analysis sometimes
is very poor. OMB's own people said that it did not conform
with the best practices document. And then, at my request, the
GAO reviewed OMB's two previous regulatory accounting reports
under the Stevens Amendment and found much room for
improvement.
But relevant to this point, the GAO interviewed seven
expert economists about the reports, and they criticized OMB on
a number of points. For example, these experts criticized OMB
for acting as, in their words, a mere clerk in taking wholesale
agency estimates of benefits and costs without exercising any
independent judgment on their plausibility and reliability.
So a lot of problems with cost-benefit analysis. You are
right, some of these statutes do not require it. But you have
an executive order, and you get the best of both worlds. You
put all of this stuff in the executive order, and you say it is
all there, and we believe in it and so forth. But in
practicality, whether it is issues of federalism, whether or
not it is doing a decent cost-benefit analysis or any of these
other things that make a difference in the real world,
according to expert, after expert that has looked at it, it
leaves a lot to be desired.
I am going to change subjects again, Senator Levin, but I
will bow to you for----
Senator Levin. I just wanted to clarify one thing. It was a
question that Senator Voinovich asked about representation of
completeness of problems. And I think there may have been a
disconnect, although I may be wrong, as to what meeting was
referred to. And I want to make sure that there is no
misunderstanding on that.
When you answered, you referred to a meeting, was that the
meeting this week that you were referring to in this list of--
--
Ms. Katzen. Yes. It was on Monday.
Senator Levin. I am not sure that that was the reference
that Senator Voinovich was making, and I may be wrong on this.
I thought that Senator Voinovich was referring way back to
whether or not there was a representation that problems that
were identified were the only ones. But I just want to make
sure, for the record, that the record is clear. The meeting you
were referring to, where you laid out this list of things that
you would like to see clarified or improved or whatever, that
meeting was a meeting----
Senator Voinovich. No. I am talking about, I know that that
meeting went on, and I know that they tried to accommodate us--
--
Senator Levin. It was just this week, though.
Senator Voinovich. This was just this week.
Senator Levin. OK.
Senator Voinovich. I think the explanation was that they
went out and did a larger networking and came back with some
ideas.
Senator Levin. I was confused then because I thought that
there was a reference to an earlier meeting.
Senator Voinovich. No. There was a meeting this week and
then the answer was, well, we are trying to get this bill ready
to go.
Senator Levin. Right.
Senator Voinovich. Well, no, we have not given--we may have
some other problems with it.
Senator Levin. I wish our problems were mainly the problems
of some parts the administration might have with it. I think we
have got problems outside that are going to be our biggest
hurdles, frankly. But any rate, it is important that we clarify
what the problems are internal to the administration, and I
just wanted to clarify as to what that reference was to. For my
own purposes, I was confused on it, and that helps, that
clarification. Thank you.
Chairman Thompson. Let us go back to some of the concerns
that I originally expressed this morning. First of all, I want
to hit on a couple of areas, and this is just a matter of
refocusing. Because I brought up some of these matters, for
example, when Secretary Summers was confirmed, of some of the
high-risk list items and so forth. He was obviously not even
aware of what I was talking about.
And I guess, in a way, it was unfair to hit him with that,
considering all of the things that he probably had on his mind
at that time. But, clearly, in the briefing to that point, they
were not a matter of sufficient concern to his people. I was on
the Finance Committee, so I had a chance to try to bring these
to his attention.
I want to re-emphasize a couple of things that I am sure
that you already know. One has to do with these governmentwide,
systemic problems that cause other kinds of problems. We are
talking about the Government Performance Results Act and
performance plans and so forth. In order for any of this to
result in anything, you have to have reliable data. Although we
have stated the importance of setting specific measurable goals
for management, agencies do not have the systems in place to
manage their performance. According to GAO's most recent
analysis, few agencies appear capable of producing reliable
performance data to provide a credible basis for their
performance goals and measure their performance.
According to GAO, none of the 24 agency plans analyzed
provide full confidence that their performance data will be
credible. Twenty of the 24 agency plans provide only limited
confidence that their performance data will be credible. On the
issue of information management, the deputy director for
management is the chairman of the Chief Information Officer's
Council, as you well know. And people ask what the ``I'' stands
for in OIRA. Well, that is ``information.'' And that position
should have the ability to effect change in the management of
major information technology acquisition in the Federal
Government.
GAO calls information technology management one of the
government's major management challenges for the 21st Century.
In a recent report, GAO wrote, ``Billions of dollars have been
wasted for computer systems that fail to deliver expected
results. To the extent that billions in planned obligations for
information technology is going to be spent more wisely,
Federal programs will operate more efficiently with less
costs.''
Just a couple of underlying problems that have been there
for a while that continue to haunt us. If we are going to have
any good out of the Government Performance Results Act, we have
got to do better.
I am going to go through, again, just from the standpoint
of highlighting and bringing together in one place a few of the
things that the GAO has found with regard to some of these
departments that we have been working with for so long. We get
them up here one at a time and talk to them, and criticize
them, and they plan to do better and say they are on the case,
and come back next year and nothing has changed for a decade,
in some cases.
But I wrote to each of these departments and gave them
GAO's assessment on their performance plans, and I have got
some notes here from my letters I wrote them, which
incorporates the GAO findings in many cases.
Let us take the Department for Defense. GAO found that the
fiscal year 2000 plan for the Department of Defense had several
key weaknesses. It seems that, more than any other agency in
the government, DOD has been plagued by mismanagement. The GAO
identified six high-risk areas that are specific to DOD:
Inventory management, for example. GAO reports that ``Of the
$65 billion of secondary inventory on hand, more than half is
not needed to support DOD war reserve or current operating
requirements. In fact, DOD has no demand for about $11 billion
of this inventory and continues to purchase inventory for which
it retains a more than adequate supply. As mentioned above,
financial management problems continue to plague DOD.
Weaknesses in DOD's financial management operations continue to
hinder its ability to effectively manage its $250 billion
budget.''
GAO recently wrote that ``DOD's biennial financial
management improvement plan lacks critical elements necessary
for producing sustainable financial management improvement over
the long term.''
There are about 50 open GAO recommendations made to improve
the credibility of DOD's financial reporting. GAO evaluated the
extent to which the plan contains specific performance goals to
address the ten high-risk areas. DOD's plan contains such
performance goals for five of the ten problem areas. So in half
of the real problem areas, DOD's plan does not even address it.
Contract management at DOE. I am sorry. I have switched
departments here. This is the Department of Energy. Contract
management at Department of Energy has been on GAO's high-risk
list since the inception of the list in 1990, almost a decade
ago. DOE relies on contractors to perform about 90 percent of
its work. Recently, the Department significantly increased its
use of competition in selecting contractors to manage and
operate its major facilities, but it should do more. In
addition, DOE is still not competitively awarding contracts for
environmental restoration work at its national laboratories,
even though it does at other facilities. GAO has made 11
recommendations to DOE to improve its contract management. Four
of those recommendations date back to 1994 and nothing has been
done on them.
According to information provided to the Committee by the
DOE's inspector general and GAO, there are a number of audit
recommendations outstanding, 30 unresolved recommendations.
Over at HHS, the estimated annual error rate for Medicare
fee-for-service payments has dropped dramatically over the last
few years. But the error rate remains equally dramatic,
amounting to $12 billion or over 7 percent of the total annual
budget for fiscal 1998, as Medicare remains one of the single
largest documented sources of waste and error in the Federal
program.
Medicare fraud and error was included in the GAO's original
1990 high-risk list problem areas most vulnerable to waste,
fraud, and abuse and mismanagement and has remained a high-risk
program to the present. Since the beginning of fiscal year
1997, GAO has issued more than 50 reports and testimonies
relating to different aspects of the Medicare program. There
are about 50 open GAO recommendations that HHS has yet to fully
implement. There are a number of open audit recommendations
addressing other major management problems at HHS as well, 79
additional GAO recommendations on HHS major management
problems, 26 of which are described in an enclosure that we
sent over to HHS.
Over at HUD, there are a number of open recommendations by
the inspector general. Many of these recommendations date back
to 1992. It points out that the annual audit of HUD's financial
statements has identified eight material control weaknesses,
most of which have been reported consistently for 6 or more
years. For example, the IG reported HUD's control structure
does not provide reasonable assurance that funding for rent and
operating subsidies to housing authorities and multi-family
project owners has been in compliance with applicable laws and
regulations. Indeed, HUD itself estimates that excess rent
subsidy payments totaled about $857 million in calendar year
1997.
GAO recently evaluated the extent to which HUD's fiscal
year 2000 performance plans contain specific performance goals
to address the 11 high-risk and other more serious management
problems confronting the Department, the GAO and the IG for HUD
has identified. According to the GAO evaluation, HUD's plan
contains performance goals for only 3 of the 11 high-problem
areas.
Department of Justice. GAO review of Drug Enforcement
Administration strategies and operations in the 1990's, GAO
findings indicate that while DEA's funding almost doubled and
its staffing increased substantially over the past decade, the
Agency achieved no demonstrable results. The supply and use of
illegal drugs remains largely unchanged during the decade and
persisted at very high levels. GAO said, ``DEA has not
developed measurable performance targets for disrupting and
dismantling drug trafficking operations/organizations. Without
such performance targets, it is difficult for DEA, the
Department of Justice, Congress and the public to
quantitatively assess, one, how effective the DEA has been
using resources provided by Congress to achieve its strategic
goals, and, two, the extent to which DEA's programs and
initiatives have contributed to reducing the illegal drug
supply.''
It says, ``Justice must develop good performance data,
since, according to the GAO, there is little confidence that
its current performance information is credible.'' GAO notes
that ``Justice has a strategy to deter illegal crossing at the
southwest border, but lacks specific data and indicators to
systematically evaluate the success of this strategy.''
So I guess the best interpretation of this is that we have
no idea whether or not this program is working. That is the
best characterization you can put on it, I think. A problem
area of particular concern is the management of forfeited
assets by the Department of Justice and the Treasury
Department. GAO designated forfeited asset management at both
departments as a high-risk area in its original 1990 high-risk
list. This problem has languished on the high-risk list ever
since. Although it should have been resolved long ago.
According to GAO, there is no acceptable reason for the
long delays in completing the actions necessary to remove this
high-risk designation. Furthermore, Justice and Treasury
Departments have refused to implement a GAO recommendation
dating back to 1991 to consolidate the management and
disposition of properties. Indeed, Justice and Treasury
Departments maintain separate contractors to handle seized
assets at some of the same locations. GAO found in 1991 and
continues to believe that consolidation of asset management and
disposition function could reduce programs' administrative
costs and area duplication.
Fifty-seven unresolved recommendations by the IG, 28
additional open GAO recommendations. Only half of the IG open
audit recommendations are addressed to computer security
problems. I am sorry. Almost half of the IG's open audit
recommendations are addressed to computer security problems.
Computer security is a governmentwide high-risk problem area.
It poses particularly serious potential risk at the Justice
Department, in view of its many highly sensitive information
systems.
An additional seven IG recommendations with regard to
mismanagement and abuses of the naturalization process by the
INS. All of the 28 GAO's audit recommendations relate to INS
problem areas. Indeed, GAO recently testified that most of the
Department's major management problems are found in INS. Many
have persisted for years, and these problems are in need of
what they call ``urgent attention.'' Sixteen high-risk list
areas. Justice's plan to do something about it addresses 8 of
16.
Department of Labor. With regard to their high-risk and
other most serious management problems, Labor has no specific
goals for measuring 12 of 13 problem areas. One area without
specific goals or measures is the year 2000 problem. It is also
on the GAO's high-risk list. Absence of goals for nearly all
major problem areas.
Department of State. Like many other agencies in the
Federal Government, the Department of State has been plagued by
mismanagement. GAO and the IG's have identified major
management challenges in numerous programs that are at high
risk to loss from waste, fraud and abuse which apply to State.
They are particularly concerned about outstanding
recommendations in the area of information security, personnel
operation and financial management.
Department of Transportation. The Department of
Transportation did have a pretty good plan, I must say,
according to GAO, as far as their plan. I think it was probably
the best in terms of their intention. But as far as the
systemic problems, there are still problems.
There are 22 open GAO recommendations related to systems
architecture. FAA financial management was added to the high-
risk list this year. According to the GAO and the inspector
general, financial management weaknesses render FAA vulnerable
to waste, fraud and abuse, undermine FAA's ability to manage
its operations and limit the reliability of financial
information provided to the decision-makers. FAA has been
unable to pass financial audits, in part because property and
equipment valued at almost $12 billion and inventory reported
at $764--I believe that is million dollars--cannot be verified.
Another area of concern is failure to fully implement IG's
recommendation to improve inspection of trucks entering the
United States, something the IG has been onto them for a while
now. According to the IG, only 1 percent of trucks entering the
United States from Mexico were inspected, and 44 percent of
those that were inspected, did not meet U.S. safety standards.
Secretary of Treasury. GAO found, ``real progress is not
evident'' in correcting the weaknesses of the 1999 plan.
Treasury is one of the three agencies that received the lowest
quality ranking from GAO in all three core GPRA evaluation
questions. On the high-risk list, Treasury's plan has no
specific goals for 12 of these 21 problems.
EPA. GAO found that the 2000 plan had no performance goals
for mission-critical challenge of improving data management.
GAO said the EPA needs to add goals for implementing the
Clinger-Cohen Act. Now another year has passed, and the EPA's
failure to include in its fiscal year 2000 plan any goals or
time frames for the processes needed to make sound information
technology investment decisions is a serious omission.
One problem area of particular concern at EPA is the
Superfund program management. EPA has yet to fully implement
several GAO recommendations related to this high-risk problem
area that are detailed in the enclosure. One example is a GAO
recommendation from September 1994 that EPA expedite the
issuance of the regulation on indirect costs. The proportion of
Superfund dollars devoted to administrative support, as opposed
to actual clean-up activities, remains a problem and one that
is growing worse. GAO recently reported that the share of total
Superfund expenditures for contractor clean-up work declined
from about 48 percent in fiscal 1996 to about 42 percent. At
the same period, spending for ``support activities'' increased
from about 51 percent to 54 percent of total Superfund
expenditures. Nonsite-specific expenditures also increased from
about 36 percent to over 39 percent. EPA officials could not
explain these changes in detail because they had not analyzed
Superfund costs in this manner and were unaware of this decline
until GAO presented their findings.
NRC. NRC has been plagued by mismanagement. GAO has
recommended that NRC develop strategies to act more
aggressively on safety deficiencies when they are discovered.
I am skipping over a bunch of this. SBA, there are a number
of open audit recommendations addressing major management
problems at SBA. According to GAO evaluation, which is detailed
in the enclosure that I sent them, SBA's plan has no specific
goals for any of the ten problem areas.
So, Ms. Katzen, this is just, going through the highlights,
do you come away from that with a feeling of optimism or does
that concern you? I mean, what is your----
Ms. Katzen. Do I still want the job? Is that what you are
asking?
Chairman Thompson. I beg your pardon? Do you still want the
job? [Laughter.]
Well, I guess that is a good question.
Obviously, it is a big government, and there are a lot of
problems out there. And I know it is easy to highlight things.
Some of these reports, by the way, some were better than
others. And I did not do full justice to some of them. Some of
them are making progress in terms of better reports in 2000
than in 1999.
But, obviously, governmentwide there are systemic problems
that are costing billions of dollars that are threatening our
national security, in terms of vulnerability in some of these
information systems especially, becoming bigger, and bigger and
bigger. The IRS alone has spent billions of dollars trying to
get its computers to talk to one another. That is one thing.
But when you see the departments and agencies doing very little
or making just slight incremental changes so that we have got
20 massive problem areas, and we addressed two in 1999, and
this year we are going to address four, that is not good
enough.
So you see, and I am sure you do not need to be told this.
But I cannot emphasize too much that if you are confirmed, this
is going to be an ongoing thing. I know you feel like we are
being intrusive. We have not done, I do not think, a good
enough job in overseeing a lot of this and bringing these
things to bear. But I am telling you that this is viewed as a
serious problem. And if you do not view it as a very serious
problem and you are not willing to go in there and knock some
heads together, then you are not the right person for this job.
And I just need to tell you that and let you make any response
that you want to.
Ms. Katzen. I listened with interest. Many of the items
that you had mentioned I have heard about, as I have been
preparing for this. I am not in a position to do or say very
much until I am confirmed. But I have been getting up to speed
and learning a lot about these problems, reviewing the GAO
reports, many of which I agree with completely.
I think there has been some progress made. I mean, there
was a reference to a department's Y2K problems. OMB filed a
report, I believe, yesterday with the Congress saying that 97
percent of mission critical systems are going to be Y2K
compliant, something that nobody thought we would ever get
close to a year ago. And this is, I think, some progress. Is
there a lot more to be done? Yes, a great deal more has to be
done.
Each year OMB has revised the GPRA guidance. I was there
when they were preparing this year's guidance, particularly on
identification of management issues. Mission-critical
management issues should be a part of the agency's performance
plans. The reliability of the data, we have not yet seen the
first performance reports to see what kind of data will be
presented. We know the data they are relying on for their
performance plans, and we have specified in our guidance that
we want to know exactly where, how, when and from whom they are
getting their data and what testing they are doing to ensure
them. Also, we have worked with the IG community to try to have
the IG community help us in validating and verifying
performance data for some of these agencies.
There is an enormous amount of work to be done. This is a
very large enterprise, and the challenges are enormous. They
are not, I do not think, overwhelming in the sense that we
cannot make significant progress. And whether it is beating
heads together, or trying to persuade, or a combination of the
two, there should be some consequences.
And as I indicated in the answer to some of the questions
that had been submitted, I look forward to--and I would hope
that I could be confirmed to participate in this year's budget
review for the 2001 budget--at which all of these issues will
be at the table. I would like to be at the table to speak to
these issues to make sure that we are not spending money in
ways that do not make sense or that do not have the management
structure that they need to have. For that reason, I have
continued to study, and I have continued to look through these
areas and make modest recommendations for approaches. I would
welcome working with you, with the other Members of the
Committee, with the staff of this Committee, to bring forward
some of the shared objectives that we have.
Chairman Thompson. Thank you. Senator Levin.
Senator Levin. Mr. Chairman, I would like to read from the
GAO report to us on their high-risk analysis because it gives a
somewhat different flavor than is projected by the focus just
on the problems, which is accurate, by the way; the Chairman's
reading of those problems is surely accurate.
But I think the GAO report gives a different flavor and a
different balance to it, and I want to read from it. This is a
January 1999 letter from the Comptroller General, David Walker,
and this is what he says in his letter to the president of the
Senate, Speaker of the House. ``Since 1990, the GAO has
periodically reported on government operations that we have
identified as high risk because of their greater
vulnerabilities to waste, fraud, abuse and mismanagement. This
effort, which was supported by the Senate Committee on
Governmental Affairs and the House Committee on Government
Reform, brought a much needed focus on problems that are
costing the government billions of dollars. To help, GAO has
made hundreds of recommendations to improve these high-risk
operations.''
And then comes the next sentence, which surely gives a very
different impression, I think, than what has been given in the
report by the Chair this morning. Although, again, I have no
quarrel with the accuracy of what the Chairman's statements
were because they are, indeed, accurate. But here is what the
GAO says: ``Overall, agencies are taking these problems
seriously and making progress in trying to correct them.''
Now, I do not know how they can say that, given the litany
of problems that remain. That is my first impression. Well, how
do you say that? Well, I have not read the whole book yet, but
that is their conclusion. That is the very same GAO which has
identified the problems, that has told us, in their report to
us, that, overall, agencies are taking these problems seriously
and making progress in trying to correct them.
They also say, ``While progress has been made in correcting
high-risk problems, sustained attention by the Congress in
overseeing agency efforts is needed to make further headway in
producing lasting solutions. Overall,'' Mr. Walker told us,
``as high-risk operations have been corrected and other risks
have emerged, we have removed areas from the list and added new
ones to keep the Congress current on areas needing attention.''
And then the Executive Summary says this: ``In our 1997
update to the 105th Congress, we reported that progress had
been made in addressing the 20 high-risk areas being tracked at
that time. We cautioned, however, that much more effort was
needed to fully implement real solutions to these serious and
longstanding problems.''
``Also, in 1997, we added five areas: The Year 2000
computing challenge and information securities' governmentwide
risks, the Supplemental Security Income program, Defense
infrastructure, and the 2000 Decennial Census. Since 1997,
agencies have focused on developing action plans and are trying
to resolve weaknesses. The Congress has heightened its
attention by reviewing agencies' progress and taking
legislative action. Because of sustained tangible improvement
in one area, the U.S. Custom Service's financial management, we
are removing its high-risk designation, making this the sixth
area to come off the high-risk list since the GAO began this
effort in 1990.''
``In remaining areas, more needs to be done to achieve real
and sustained improvements. In many cases, agencies have agreed
with GAO recommendations, but have not yet fully implemented
them. Also, many good plans have been conceived, but the more
difficult implementation task of successfully translating those
plans into day-to-day management reality lies ahead. It will
take time to fully resolve most risk areas, most high-risk
areas, because they are deep-rooted, difficult problems and
very large problems in very large programs and organizations.''
``Continued perseverance in addressing the 26 areas that
are the current focus of our high-risk initiative will
ultimately yield significant benefits.''
Now, one of the ironies here is that I think the nominee is
one of the persons, in the agencies' view, as being the head
knocker. I think when you talk to agencies, some of whom come
to us, going around OMB at times, and going around folks like
Sally Katzen, come to us seeking relief, I have gotten the
flavor pretty strongly that the nominee who is in front of us
is the person who has aggressively been pursuing things like
cost-benefit analysis. And she has, of course, as is probably
endemic, run into resistance at the agencies, which she has had
some success at least, I believe, in overcoming.
So it is kind of an irony here that Ms. Katzen, Sally
Katzen here, has really, I believe, been a very strong advocate
for some of the very approaches to government administration
that we have so strongly been promoting in the Congress and has
had, I believe, some very strong positive results. Will there
always be resistance in the agencies? I think so. But it is
surely better to have somebody who is strongly supportive of
cost-benefit analyses, or risk assessment, as Sally Katzen is,
at that table rather than to have somebody who is less strongly
inclined in that same direction.
So I would hope that we would be able to confirm Sally
Katzen. I hope that the material she will supply for the record
and other material that will be gathered will be able to allow
us to vote on her nomination one way or the other. But in any
event, I want to, again, express my belief that she has indeed
shown that she is willing to address issues that are important
to us, maybe not as effectively as some of us would like in the
federalism area, but I think that is an area which is going to
require our continuing attention, as well as the attention of
people inside of the OMB.
And I just hope that we can get our current federalism
agenda adopted by our own Congress. That is going to require
our continuing attention, and I hope we can do it because I
think it is necessary that we have a federalism assessment, not
just required by executive order. But given the history of the
response of the agencies to those executive orders, at least in
prior years, I think it is essential that we put that
requirement into law, that is our responsibility.
So I would look forward to any additional responses or
materials, that our nominee can submit and other materials
which Members here would put into the record. And hopefully we
could have a decision made on this nominee as to whether we
want it to go forward at the Senate or not. But we need
somebody at that table in this position whom I think has proven
to be the kind of experienced person and supporter of at least
most of the issues that we have fought so hard for on this
Committee.
Chairman Thompson. Thank you very much. Senator Voinovich,
do you want----
Senator Voinovich. I have nothing more to say, except to
say thank you very much. We put you through a pretty grilling
experience, and I think you have handled yourself quite well.
As I say, we just have a difference of opinion in terms of
approach.
Ms. Katzen. I hope we find some common ground. And I
appreciate your indicating the areas, so that I can possibly
address them to your satisfaction. So thank you very much for
that, sir.
Chairman Thompson. I think you call it a frank and open
discussion of the issues, as they say in diplomatic circles.
[Laughter.]
But you are more than equal to the task of dealing with us,
Ms. Katzen. And I compliment you on your many years of public
service. And I think everyone on this Committee has the highest
respect for you personally. Although we do disagree on some of
the issues. But thank you for your being here today.
Ms. Katzen. Thank you. Thank you, Mr. Chairman.
Chairman Thompson. The record will remain open for 5 days
after the conclusion of the hearing. We will be in recess.
[Whereupon, at 12:20 p.m., the Committee was adjourned.]
A P P E N D I X
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